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Net profits of listed Chinese suppliers drop in H1 2012

BEIJING – Net profits at 41 of 67 public-listed Chinese automotive suppliers dropped in the first half of 2012, according to recent data compiled by

Data show the combined net profits of these 67 suppliers sharply fell 27.4 percent year-on-year to ¥7.89 billion ($1.25 billion), while their revenues decreased 5.3 percent to ¥142.67 billion.

The suppliers’ financial performance, like many OEMs, was also influenced by the slowdown of the vehicle market from January to June.

For example, Dongfeng Electronic Technology Co., Ltd. (DETC), a supplier affiliated with Dongfeng Motor Corp., saw a net income decline of 15.48 percent to ¥73 million, affected by the slowing vehicle sales in this period, the company said.

In addition, the net profit decline at four Chinese suppliers including VIE Science & Technology, Shunrong Auto Parts, Tianrun Crankshaft and Quanchai Engine surpassed 50 percent.

Moreover, six suppliers including Hengxing Science & Technology, Xiangyang Auto Bearing and Shanghai Aerospace Auto Electromechanical Co. even had losses during the period.

“Chinese local suppliers’ revenues and profits may continue to drop in the coming months or years, as independent automakers prefer foreign suppliers to improve their vehicle quality,” said Zhang Junyi, executive director of Roland Berger Strategy Consultants (Great China Office), in an interview with China Business News.

These independent automakers include Geely, Chery and Great Wall Motor.

Faced with expansion of foreign suppliers in China, local suppliers such as Sichuan Bohong and Ningbo Joyson Holding have started to enhance their strength by overseas acquisitions of advanced technologies.

The profit margin of Chinese local suppliers declined from 10.8 percent in 2010 to 7.5 percent in the first half of this year, according to a recent report by consulting firm Alix Partners.

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