China’s Auto Price War Won’t Affect Parts Suppliers in Short Term, Firms Say
Zhang Yushuo
DATE:  Mar 24 2023
/ SOURCE:  Yicai
China’s Auto Price War Won’t Affect Parts Suppliers in Short Term, Firms Say China’s Auto Price War Won’t Affect Parts Suppliers in Short Term, Firms Say

(Yicai Global) March 24 -- A number of Chinese car parts suppliers recently said the price war waging in the world's biggest auto market will not affect them over the short term.

Cars with larger price cuts are mainly poor sellers, so the price competition has little impact on Hangzhou Zhengqiang’s after-sales service, the supplier of universal joints said on March 21. The firm usually signs deals with carmakers once a year, so new business will not be affected by the price reductions unless they continue for a long time or other unexpected factors come into play, it added.

Winstech Precision Holding has not been affected so far, China Securities Journal cited the stamping tool and auto plastic parts supplier as saying. According to metal parts maker Ningbo Yinbin Technology Supplier, clients have not adjusted their procurement prices, so there is no impact.

US electric vehicle giant Tesla sparked China's auto price war in January. Since then, more than 40 auto brands have followed suit with discounts and subsidies, Ries Positioning Strategy and Consulting said in a report on March 22.

This wave of price cuts may squeeze the high profits at upstream raw material suppliers, with the prices of copper and aluminum foil for lithium-ion batteries and lithium salts under downward pressure, according to a research note from Huatai Securities. But at the same time, higher auto sales will boost the demand for upstream materials, it added.

Carmakers may also have an urgent need to consume less materials, which may promote the use or further penetration of new technologies such as integrated die-casting, magnesium alloys, and composite materials, the brokerage noted.

“We’re researching and developing lightweight products to meet clients' needs to cut costs,” a source at a listed auto parts supplier told Securities News. “Lowering costs is a definite long-term trend for carmakers.

Hunan Yuneng New Energy Battery Material, which supplies cathode materials for lithium-ion batteries, said the price cuts will impact it operating performance to some extent, despite production remaining normal, as the decline in prices of fuel cars will hit new energy vehicle sales and lithium carbonate prices will continue to fall.

Editor: Futura Costaglione

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Keywords:   Supplier,Car,Price War