"The pancake-selling aunties are talking about cross-border e-commerce", China's auto aftermarket exports are booming
2024-08-18
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"Now the pancake-selling ladies in Xiaohe Town are all talking about cross-border e-commerce!" Foreign trade trader Ye Junhong's feelings this year reveal the current enthusiasm of the auto and motorcycle parts supply chain to switch to cross-border e-commerce. His factory is built in Menghe Town, an auto and motorcycle parts cluster in Changzhou, Jiangsu Province. More than 95% of the import and export trade of this town is auto and motorcycle parts products.
Song Lei, founder of Shanghai Yinshi Network Technology Co., Ltd., who is also a foreign trade person in the automotive aftermarket, told Caixin that the more economically depressed the times, the stronger the demand for products such as auto repair or replacement parts among consumers, which also contributed to the counter-cyclical growth of automotive aftermarket exports.
Compared with the decline in the export growth of complete vehicles and spare parts in the front market, the automotive aftermarket has a more stable growth trend due to its 6-7 year lag and the continued accumulation of ownership. This year, this sub-sector with supply chain advantages has also significantly accelerated its "going overseas" speed under the penetration of cross-border e-commerce.
High growth rate continues
eBay, an international cross-border e-commerce platform, considers auto and motorcycle parts as strategic categories, and China's supply chain's position in the global market has increased rather than decreased.
Lin Wenkui, General Manager of eBay International Cross-Border Trade Division in Greater China, said that the auto parts industry on the platform has maintained rapid growth in the past few years, and this year is even stronger. The sales volume of Chinese sellers has increased significantly.
As the world's largest car ownership country, the US market is a market that all auto parts companies pay close attention to. He took the US market as an example, saying that the average age of cars in the US market has reached 12.6 years and is still growing. "We boldly predict that in the next few years, vehicles in the US market with an age range of 6 to 14 years will become the golden customer group in the auto aftermarket, and this part of vehicles accounts for nearly 40% of the US car ownership, and is still expanding."
On the basis of the expansion of the market pie, the proportion of online sales is increasing rapidly. Taking the United States as an example, its current online sales account for about 16%, which is still a lot of room compared with the proportion of more than 30% of Chinese retail e-commerce. "The superposition of the two main factors makes us think that this is a market with very large space, and it is also a long and healthy track for the platform." Lin Wenkui said. This year, eBay chose Changzhou and Shenzhen for the first time in China, and specially convened a conference for Chinese auto parts sellers to invest in the construction of supply chain and ecosystem.
Customs data show that in the first seven months of this year, China's automobile (including chassis) exports increased by 18.1% year-on-year, and auto parts exports increased by 5.6% year-on-year, measured in US dollars. Compared with the growth rate for the whole year of 2023, the growth of automobile exports fell by 56.9 percentage points, and that of auto parts fell by 3.4 percentage points. At a time when the export growth of complete vehicles and the automotive front-end market has declined, the automotive aftermarket has shown a more lasting growth trend with the help of cross-border e-commerce.
Data shows that compared with 2015, in 2024, the exports of headlights and taillight assemblies by Chinese auto parts sellers on the eBay platform increased by nearly 20 times year-on-year, bumpers increased by 60 times year-on-year, steering gears increased by nearly 200 times year-on-year, air-conditioning compressors and clutches increased by nearly 300 times year-on-year, and three-way catalytic converters increased by more than 1,000 times year-on-year.
Ye Junhong, the head of Jiangsu Dacheng Optoelectronics Technology Co., Ltd., told Caixin that their auto parts exports are mainly to the US market and mainly exported through cross-border e-commerce platforms, with annual business volume growing by more than 30%. In fact, this year, we can clearly feel the strong demand in the automotive aftermarket, but the growth rate is basically the same as in previous years, which is due to the fact that China's supply chain has been significantly "rolled" into cross-border e-commerce this year.
Song Lei's situation is similar. Their company's exports have maintained a high growth rate of 40% to 50% in recent years, but this year's strong market demand and the increasing number of Chinese supply chains directly transforming to cross-border e-commerce offset each other.
Changzhou Lingyue Equipment Co., Ltd. (hereinafter referred to as "Lingyue Equipment") is a supply chain company in Menghe Town that started to deploy cross-border e-commerce earlier. "Competition has intensified significantly this year, and the competition mainly comes from Chinese peers." Lingyue Equipment's Secretary Chao Kang told Caixin that although the overall foreign trade situation is grim, cross-border e-commerce has grown particularly fast. At the same time, rigid demand in the United States, the main market, has not shrunk but has continued to grow, which has allowed their total revenue to continue to expand.
China's supply chain trend
For China's supply chain, this year's overseas expansion is gaining momentum, thanks to the continued growth of cross-border e-commerce.
"The most competitive sellers on the platform are still Chinese sellers, because they control the supply chain." Chao Kang said that since the industrial chain of auto parts is highly concentrated in China, they have a strong supply capacity. With the continuous improvement of cross-border e-commerce and overseas warehouse layout in recent years, they have also changed the original model of relying on traditional channel merchants, and have a stronger voice in the market. The short-chain model directly facing C-end consumers has also enhanced the cost advantage of products. He believes: "Choosing high-quality and low-priced products is everyone's instinct."
Under the background of escalating trade frictions, unlike the vehicle and parts manufacturing industries facing B-end customers, which have to flow to emerging markets such as Southeast Asia to retain orders, cross-border e-commerce companies facing the C-end are relatively less affected by geopolitics or lag behind. "Online prices are transparent, and we can also use big data to directly decide which categories to make, and directly connect the supply chain advantages with US demand, thereby greatly optimizing operational capabilities." Chao Kang said that in order to continuously expand market growth, in addition to continuing to focus on marketing and overseas warehouses to reduce costs and improve fulfillment capabilities, they will continue to invest in the supply chain and expand categories. "Old cars will continue to run, and there will always be demand for accessories. The SKUs in this industry are also massive. The range of products we can supply will also become larger and larger."
Faced with the uncertainty of global logistics, he pointed out that although the United States is not directly affected by the detour, its profits are inevitably affected by the increase in freight rates. This impact is universal and applies to all foreign trade people. In today's market, companies are competing on quality and service while competing on prices. For them, the overseas warehousing and last-mile transportation layout that has been accumulated for many years based on market demand has made them more competitive at the moment, and will continue to expand as the production capacity scale increases. "Last year, the area of overseas warehouses was 30,000 square meters, which has doubled this year and can meet the needs of the next 2 to 3 years."
Not only China's foreign trade people and cross-border e-commerce platforms, but also service providers who have mastered technological advantages around the world are providing acceleration for China's supply chain to "go overseas".
"The logistics costs of cross-border e-commerce in China's auto parts industry basically account for 20% to 45% of the total costs." Kang Yong, Chief Commercial Officer of Orange Union, said that they have built a cross-border direct delivery network and overseas warehouse system, mainly to help Chinese sellers improve inventory response time and last-mile service. "In the fulfillment stage, we have increased the rate of goods delivery from 50% to 87% on the same day." In addition, they have also launched multi-warehouse stocking and intelligent warehouse distribution systems in the United States and other places, using digitalization to select the "nearest overseas warehouse" and the best delivery route for customers, indirectly increasing sales and reducing costs on the basis of improving timeliness.
Wang Sijie, vice president of Wanyitong Group, which focuses on providing overseas warehouse services, pointed out that in general, the overall logistics cost structure of cross-border e-commerce accounts for 20% to 25% of the international transportation segment, the end or the last leg accounts for 65% to 70%, and the intermediate warehousing accounts for about 5% to 10%. In the international transportation segment, they will work with customers to design space optimization solutions. "Different loading methods can hold different numbers of bumpers in a container. For example, compared with 100 bumpers, the average first-leg logistics cost of one bumper is reduced by 80% when 500 bumpers are loaded." In the terminal delivery part, one of their practices is to find ways to optimize the overall packaging neatness to reduce costs while ensuring that the goods are delivered intact.
Since the beginning of this year, China's exports have generally been better than expected, and the driving effect of cross-border e-commerce cannot be underestimated.
"From the perspective of the cross-border e-commerce industry, market demand this year is still very strong." However, Kang Yong said that this is also closely related to the rise of Chinese e-commerce platforms such as TikTok and TEMU overseas. "The overall consumption level in the European and American markets is declining, and these platforms have seized the market through low-price models, resulting in a significant increase in performance in the short term." How long this trend can last is a question mark.
Wang Sijie also pointed out that the overall growth trend of cross-border e-commerce this year is very good. Although it is not as crazy as during the epidemic, it is significantly higher than last year. Unlike previous peak seasons, today's peak season has become shorter and more concentrated. "This is related to the fact that the European and American economies are not so good, and consumers wait until the discount season to place orders. From this perspective, it cannot be said to be a particularly good trend."
(This article comes from China Business Network)
