- Published on Wednesday, 02 January 2013 12:01
The last installment of this three-part series discusses the problems faced by suppliers in Guangdong.
Makers of car DVD players in Guangdong province are generally optimistic of continued growth in coming years. They, however, are gearing up for challenges, foremost of which is escalating costs amid tightening competition.
Spending on raw materials, in particular metal and plastic, has increased by 10 to 20 percent since 2011. But it is labor expenses that are pushing overall outlay significantly higher. The average minimum wages in Guangdong key cities are expected to climb by more than 12 percent YoY. Shenzhen, for instance, has raised the minimum monthly wage to $237, a 14 percent jump YoY.
Efforts to manage manpower costs better include optimizing manufacturing lines. A growing number of companies are switching to automation to reduce dependence on human labor. This shift is also forecast to boost efficiency.
In addition, makers are emphasizing effective production evaluation, including HR and cost control management, in many cases involving third-party enterprise management organizations.
Another challenge to car DVD suppliers in Guangdong is the strengthening yuan. As most manufacturers are small and midsize operations, their export volumes are not very large and therefore feel the impact of currency’s appreciation. To cushion the negative effects, companies are turning to high-value devices to avoid competing based on price alone. Many are underscoring in-dash and headrest models.
As for large suppliers, they leverage better bargaining power with clients. Some work with local commercial banks and adopt forward exchange transactions.
Makers in Guangdong also express concerns about the predicted saturation of the global car automotive industry with sales in the US and the EU remaining sluggish. Data from OICA indicated production in the EU rose by only about 5 percent YoY last year, weaker than the 11 percent expansion rate posted in 2009-10. In the US, annual growth last year was at 12 percent as opposed to 36 percent in 2009-10.
While continuing to ship DVD players to these two key destinations, suppliers in Guangdong are bolstering their domestic market base, still the largest in the world. They are also setting their sights on other areas such as India, Mexico, Russia and Brazil.
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Note: This article "Rising costs, stronger yuan major concerns in Guangdong car DVD player line" was originally published by Global Sources, a leading business-to-business media company and a primary facilitator of trade with China manufacturers and India suppliers, providing essential sourcing information to volume buyers through e-magazines and trade shows
All price quotes in this report are in US dollars unless otherwise specified. FOB prices were provided by the companies interviewed only as reference prices at the time of interview and may have changed.
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