The wave of rising prices for automotive parts is spreading! Will it affect the entire vehicle?

The epidemic is fierce, and the automotive industry has not yet fully recovered, while a new wave of rising prices for automotive parts in Europe and America is spreading.

On May 4th, multinational car companies such as FCA, Volvo, Toyota, and BMW resumed production in some factories as planned. At this point, the new challenge they are facing together is not only that the epidemic has not yet dissipated, but also that component prices have started to rise, with various components such as chips, chassis, three electric vehicles, powertrain, automotive electronics, interior and exterior decorations, tires, etc. increasing in price.

The rise in component prices is due to various reasons, but the epidemic is one of the most direct influencing factors, "Cao He, President of Quanlian Automobile Investment Management (Beijing) Co., Ltd., told China Auto News.

The "Price Rising Tide" Attacks in Europe and America
Last year, the automotive industry pinned its hope for recovery on 2020. Unexpectedly, this year, the sudden outbreak of the epidemic swept the world, causing a shock in the world automotive industry. According to the WHO report, as of 16:00 on May 5, Beijing time, there were 3517345 confirmed cases of COVID-19 worldwide. Data shows that as of 8:00 am Beijing time on May 6th, there have been 1.203 million confirmed cases in the United States.

The impact of the epidemic has penetrated into the automotive parts industry. In the field of automotive chips, prices have increased significantly since the beginning of this year. For example, Western Data has seen a maximum increase of 42%, SK Hynix has seen a maximum increase of 30%, Micron has seen a maximum increase of 25%, South Asia Technology has seen a maximum increase of 24%, and Samsung Electronics has seen a maximum increase of 24%.

Behind this, more than 150 automobile factories in more than 20 countries around the world have been in a state of shutdown and production reduction since March. Among them, Europe, the United States, Japan, and South Korea, as important production bases for global automobiles and parts, have been greatly affected. Subsequently, at a time when the supply chain was facing severe challenges, component companies such as Valeo and Ampofo withdrew their 2020 full year plans, resulting in an increase in component prices.

In the field of automotive electronics, related multi-layer ceramic capacitors (MLCC), resistors, silicon wafers, crystal oscillators, storage, panels, LED chips, etc. are all exempt. Currently, electronic components such as microcontrollers (MCU) used in automobiles have generally increased in price by 20% to 30%, and some even doubled in price.

In the tire industry, several tire brands, including Sumitomo Rubber, Michelin, Goodyear, Pirelli, and others, have also issued price increases to try to reverse losses. Among them, Sumitomo Rubber has raised the tire prices in the North American market by 5% since March 1st; Michelin has increased its price by 7% in the US market and 5% in the Canadian market since March 16th; Starting from April 1st, Goodyear raised the selling price of passenger car tires in the North American market by 5%; Pirelli raised the prices of American sedan and light truck tires by 5% on April 6th.

The fluctuation of component prices is closely related to factors such as large-scale shutdown and production reduction in the European and American automotive industry due to the impact of the epidemic, as well as the supply of raw materials. The fluctuation of automotive component prices highlights the new challenges faced by the component supply chain. Currently, the most urgent problem for automotive companies and component companies is to find ways to digest the new challenges brought about by component price increases. "Xue Xu, Secretary General of the Marketing Expert Committee of the China Marketing Association, said in an interview with a reporter from China Automotive News.

Domestic component price fluctuations
On the global supply chain of the automotive industry, it has become a "driving force that moves the whole body". The "price surge" in the field of parts has also affected the domestic parts industry. In domestic enterprises, the situation also varies.
Among the companies that have raised prices, the domestic LiDAR start-up company Lashin Intelligence recently stated that due to the impact of the rampant foreign epidemic, the company has been affected by a reduction in raw material supply and a significant increase in prices of 20% -50%. Starting from April 1st, it will raise the prices of its entire line of LiDAR products by 20%. The main products of Ningbo Changyang Machinery Industry Co., Ltd. are car sunroof guides, windshield edge strips, handrails, rolling parts, aluminum/zinc die-casting, luggage racks, anti-collision beams, battery boxes, foot pedals, bright decorative strips, etc. Some products have increased in price. The reason for the price increase is due to the price increase of the main raw material aluminum ingot, which is at 3%, "said the relevant person in charge of the enterprise.

In the automotive parts industry, the "annual reduction" has become a common practice, which means that some car companies require parts companies to make a certain amount of price reduction every year. However, some domestic parts companies have stated that they will not accept the "annual reduction" this year. A person from Hangsheng Electronics Co., Ltd. stated in an interview with a reporter from China Automotive News that the prices of component products will not increase temporarily, but this year they will definitely not accept an "annual decrease". He explained that in addition to the impact of the epidemic and upstream raw materials, the research and development costs of intelligent automotive components have increased today, and a series of factors have led to an increase in component costs.

In addition to those who have already raised prices, some domestic component companies are also watching. There is currently no price increase, we are looking at the supply of upstream components before making a decision, "Huang Haiyang, General Manager of Shenzhen Feiyouque New Energy Technology Co., Ltd., told China Auto News.

In a market economy, whether the price of components increases or not is determined by the enterprise itself, but it is very difficult to fully internalize the factors of price increases, "Cao He believes.

Is the vehicle price affected?
Whether the price increase of components will lead to an increase in the price of automotive products is a concern for ordinary consumers.

Car companies themselves also have some concerns about this. A person in charge of a car company told reporters that currently, the company has cleared more than 100 suppliers and more than 3000 components in its supply chain, all of which are produced and manufactured overseas, involving 23 countries and regions, most of which are in key epidemic areas. The complexity and difficulty of ensuring supply far exceed that of domestic component supply.

Although there is no price increase for domestic vehicle companies, some engineering machinery products have experienced fluctuations. On April 11th, Sany Heavy Industry issued a price adjustment notice, stating that production costs have significantly increased due to the inability of supporting component manufacturers in the overseas component industry chain to guarantee supply. The price of small excavators has been increased by 10%, and the price of medium and large excavators has been increased by 5%. Although the excavator professional market is relatively narrow and the impact of price adjustments is not widespread, vehicle companies will also feel these pressures.

Some industry insiders believe that the pressure of component price increases is difficult to digest internally and may become a trend. Vehicle companies may choose to digest it themselves or transmit it downwards. But if we change suppliers, we still need to verify the cycle, which is also a challenge.

In the face of difficulties, the industry is also considering what to do. At present, the most crucial thing for car companies is to address the issue of component price increases and maximize the digestion of price factors through technological innovation and other means. At the same time, they also need to continuously strengthen technological research and development, strengthen industrial chain planning, and improve risk resistance. "Du Fangci, consultant of the China Association of Automobile Manufacturers, told China Automotive News.

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