In the past 40 years, China's parts industry has developed driven by the growth of downstream automobile production and sales. However, compared with overseas mature markets, the total output value is still relatively low, the lack of leading enterprises, and the core components are highly dependent on imports.
However, at present, electrification and intelligence are reshaping the global automotive market pattern. The market share of China's own brand new energy vehicles continues to increase, and the head effect is beginning to appear, which has more opportunities to drive the growth of related first-chain enterprises. If China's parts companies can seize the structural opportunities under the changing situation, they are expected to rise in a new round of competition.
So, how do you find the best of them?
Jiuding Investment, a well-known PE institution, pointed out in a recent internal analysis article that more growing companies can be selected mainly from the dimensions of industry scale growth, technical barriers, product quality and delivery capabilities, and cost control capabilities. Since 2010, JD Capital has been focusing on investment opportunities in the upstream of the automotive industry chain, investing in companies such as Dongguan Hongtu and Chengzhu Baoma in the field of body bodies, and investing in companies such as beiteri (835185) and Anda Technology (830809) in the power battery industry chain.
Below, we will break down these dimensions:
1. The growth rate of industry scale.
First of all, the size of the parts industry depends on the demand of downstream car companies. Only when the downstream demand is clear, the market is large or the growth rate is obvious, parts and components enterprises have the opportunity to concentrate production, improve production efficiency and profit margins.
Therefore, in investment, JD Investment's primary focus is on the scale and growth rate of the industry. For example, if a company's market share of a single product can reach 5%, taking China's passenger car market of more than 20 million units (23.56 million units in 2022) as a reference, the installed volume of its products may reach 1 million units, which also means that the company will have the opportunity to have more say in the industrial chain.
In fact, in 2015, one of the important judgments of Jiuding Investment when investing in Dongguan Hongtu, a precision die-casting company, is that under the trend of automobile lightweight, the market size of aluminum alloy die-casting will continue to grow. At that time, JD Capital had seen a large number of car companies use more aluminum alloy parts instead of steel parts in order to reduce fuel consumption and reduce the weight of the whole vehicle. More importantly, around 2010, JD Capital began to pay attention to the trend of vehicle electrification, and believed that in the face of the gradually coming era of electric vehicles, in order to improve the range of this demand, this demand will be more obvious.
2. Technical barriers.
When the growth rate of industry scale reaches a certain level, how to find more competitive enterprises in it?
Among them, the most critical are technical barriers, which can be manifested in production process breakthroughs, collaborative design capabilities, R&D efficiency, etc.
Taking a precision machinery parts company that Jiuding Investment has invested in as an example, in the field of rotor compressor (which can be used for automotive air conditioning), through a breakthrough in the production process, it has replaced the original Japanese and Korean first-class businessmen and realized localized substitution. At the same time, through the integrated production capacity, better control the quality and reduce the production cost. Another investee company, body system integrator Cheng Weld Baoma, has made the system to the extreme, and can switch flexible production lines for 6 models.
In addition, collaborative design capability is also one of the manifestations of technical strength, which is one of the new requirements put forward by car companies at this stage. Taking Dongguan Hongtu as an example, because the standards and patterns of the current automotive industry are changing dynamically every day, car companies need to collaborate with leading companies for collaborative design. Dongguan Hongtu has accumulated decades of experience and has the ability to cooperate with car companies to innovate in the design drawing stage, providing the possibility for the performance improvement of the whole vehicle.
At the same time, in the era of smart electric vehicles, R&D efficiency has become more important than in the past. The time from design to mass production of a car is greatly shortened, which puts forward higher requirements for the response speed of leading companies, and requires enterprises to improve R&D efficiency on the basis of ensuring quality.
3. Product quality and delivery ability.
Due to the safety involved, car companies have always had strict requirements for the product quality of parts and components enterprises, and they often need to go through a long time and long process verification before a parts company can truly enter the first-class business system of car companies.
In the era of electrification, car companies have put forward new requirements for the product delivery capabilities of parts and components companies.
In the face of more fierce competition, electric vehicle companies further pursue zero inventory management in order to control costs and achieve faster iteration. Thousands of parts and components are required to be delivered every few hours, and they must be delivered on time. Behind this, it is the hard work of parts and components enterprises.
At the same time, compared with fuel vehicles, new energy vehicles are more likely to have "explosive models", but there are uncertainties before they are introduced to the market. Therefore, if there is a spike in sales, the production of parts must keep up. This has led to increased requirements for the mass production capacity of parts and components, and the production capacity must give priority to meet the existing models, but also have the ability to undertake new demand.
4. Cost control ability.
After a hundred years of development, what remains unchanged today is the ability to control costs, which has always been a key factor to measure the competitiveness of a parts company.
Taking a factory visited by Jiuding Investment as an example, the company's main products are relatively mature auto parts, and the company is extremely strict with material management, and enters the ERP management system from the moment employees purchase materials to implement whole-process control. At the same time, the company follows industry standards and realizes the ultimate material utilization rate in multiple aspects of production through strict reuse of some waste materials. Through such refined management, the company's costs have been reduced, and the gross profit margin has been higher than the industry average for a long time.
Overall, under the wave of intelligent electrification, China's new energy vehicle brands are standing in the window period from big to strong, and the "new forces" behind the parts have also ushered in a breakthrough moment. In the process of restructuring the industrial structure, JD Capital will continue to pay attention to Chinese enterprises with growth value.
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Original text**: Xianning News Network.