I. The desire of foreign investors is getting stronger, and the trend of sole proprietorship is increasingly evident
When the Shandong Tianrun Crankshaft Company and the German ThyssenKrupp M & A project drew the attention of the industry, the auto parts industry has in fact been mobilizing a trend dominated by foreign capital-led mergers and acquisitions.
The latest statistics show that in the first half of 2006, the total investment of multinational component companies in China reached 13 billion yuan, and the amount of each investment was mostly over 100 million yuan. And it has become more and more extensive, ranging from engines, chassis, gearboxes, electronic devices, to engine camshafts, brake pads, automotive electronic components, and interior trim parts.
At the same time, a more obvious phenomenon has exposed the ambitions of multinational component companies. That is, most investment projects involving key components and parts will take sole ownership. In 2005, about 4 billion U.S. dollars was invested in China’s parts and components industry, of which key assemblies such as engines, transmissions, chassis, and brake systems, and related project investments accounted for the bulk of the total investment last year. The author sees that in the foreign investment of spare parts in 2005, the share of wholly-owned enterprises accounted for nearly 70%. Among them, only 5 of Japan's 33 investment projects selected joint ventures, and the rest chose sole proprietorships, and the scope of investment is being driven by labor-intensive and lower-tech products. Parts change.
Not only that, but the scale of investment in China, such as Delphi, Denso, and Bosch, is also growing. Bosch invested 160 million euros to establish wholly-owned subsidiaries for the production of automotive components in Changsha and Suzhou. The company even said that by 2007, the company's investment in China will reach 650 million euros. Delphi has increased its stake in Shanghai Delphi Automotive Air Conditioning Systems, a joint venture in China.
In response to this, experts from the Investment and Market Research Office of the Institute of Industrial Economics of the Chinese Academy of Social Sciences analyzed: “The restrictions imposed by the auto industry on the proportion of shares held by automakers will prevent mergers and acquisitions of auto manufacturers from happening quickly. Component manufacturers will become hot spots for mergers and acquisitions. Upstream industries such as chassis and tires will become the focus, and more multinational companies will adopt wholly-owned companies."
Second, future mergers and acquisitions may adopt a "beheading" strategy
Statistics from relevant departments show that the proportion of total industrial output value of foreign-funded enterprises in the industry's output value has risen from 2.3% in 1990 to more than 35% currently, especially in machinery, electronics, light industry, and foreign-funded enterprises. Products have occupied a third of the domestic market share. According to the survey results, at present, China's automotive electronics market sales reached 70 billion yuan, of which nearly 80% were controlled by foreign brands. In the tire industry, foreign-funded enterprises also account for more than 70% of the market.
Industry experts pointed out that foreign companies must have control, the acquired company must be the leading company in the industry, and the future revenue must exceed 15%. These three points have already become the principle of multinational companies' current acquisition activities in China. In the future, M&As by multinational component companies will target the industry leaders, and then implement their M&A plans in the form of capital operations. This merger and acquisition model is known as the "dagger" type merger.
Tianrun crankshaft mergers and acquisitions have already shown such signs. Tianrun Crankshaft Co., Ltd. is currently a domestic manufacturer of large-scale internal combustion engine crankshafts. Germany ThyssenKrupp is a large foreign crankshaft manufacturer. According to media reports, the two companies signed a merger agreement earlier this year, with a total investment of 180 million U.S. dollars, registered capital of 72 million U.S. dollars, and ThyssenKrupp in Germany accounting for 80% of the shares.
The Tianrun crankshaft acquisition case has attracted so much attention because many people in the industry are concerned that if a leading company such as Tianrun is controlled by a foreign party, it may mean that China’s future engine crankshafts for automobile, construction machinery, military and other engines will be half. The above market share is controlled by the German side, which will make China's internal combustion engine industry and related auto, engineering machinery and other industries lose their own development space.
In fact, there are many similar situations currently occurring. It is reported that Germany’s ZF Company is seeking to acquire Hangzhou Advance Gearbox Group Co., Ltd. (hereinafter referred to as “Hangzhou Gearâ€). Hangfang is also an industry leader in gearboxes and engineering gearboxes in China.
Third, the country should be clear strategy to prevent potential risks
Foreign-funded enterprises gradually occupy the leading position in China's auto parts industry. This not only brings great pressure on the survival and development of local parts and components companies, but also poses new challenges to the development of China's parts industry and economic security.
Experts in this regard suggested that, first of all, the country must establish a clear strategy for industrial development. It is necessary to further create an investment environment conducive to foreign capital mergers and acquisitions, as well as to strengthen guidance on foreign mergers and acquisitions and standardize its development.
Secondly, for major mergers and acquisitions and restructuring activities, the state should create a multi-sector joint mergers and acquisitions review mechanism, and reorganization activities need to undergo special assessments and arguments. To prevent some local governments from considering the merits of attracting investment, they have taken a positive attitude toward the acquisition of leading companies by multinational corporations and forced them through administrative means.
In addition, China's spare parts enterprises should also maintain their independence and self-development in external cooperation. We should continue to seek development in self-innovation, improve the lack of core technologies as soon as possible, and win a place in the market.
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