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What is the turbulence that influence Chinese motor market?

Date:2022-06-16   Author:XINDA MOTOR

 In fact, all machines that use electricity, as long as they can move, are inseparable from the motor. The quality of the motor is a contest at the industrial level. In the future industrial process, the motor is still a basic and core component. However, in today's Chinese motor market, many manufacturers are beginning to feel uneasy, and even a little anxious. Some Chinese domestic motor manufacturers said that the current competition in the Chinese motor industry is too fierce and disorderly, and the profit margin has been compressed all the way to the extreme.

       Why is it that industrial components with a certain technical content are sold at a price like "scrap iron" in the market? After visiting a number of Chinese domestic motor manufacturers, it was found that the turbulence in the motor market was influenced by both external market factors and internal reasons in the industry. To blame, it is the result of the "two wars", namely the trade war and the price war.

Less cake, more people eating cake

       In recent years, the rise of AI and Internet of Things technologies has brought about a boom in the transformation and upgrading of the manufacturing industry, and industries such as industrial robots, new energy vehicles, and drones have developed rapidly. Based on the importance and rigid demand of motors in the industrial field, people entering the motor industry come one after another.

       However, China's manufacturing industry turned sharply in the second half of 2018, and the related motor industry, the market share gradually decreased . We can partly blame the trade war for this, but it is essentially the result of the global recession .

       Looking at the world, in 2018, the only countries with GDP growth of more than 5% are China, India, and Vietnam, and the United States has only 2.86%. In 2019, Germany's GDP growth rate in the first quarter was only 0.7%, and it is expected to be only 0.5% for the whole year. Turkey, which is between the Eurasian continent, may only be 0.6 this year (Turkish Central Bank forecast data), and Singapore is expected to be only 0.1%. In view of the global economic downturn, the overseas market of motor manufacturers has been greatly reduced, and the corresponding domestic market has also experienced a chain reaction.

       From the specific market performance, the first is the textile industry, which is experiencing the worst year in ten years. The textile industry is a field with a large amount of servo products, which has a great impact on the manufacturers of servo motors. Secondly, under the background of the trade war, domestic manufacturing orders have decreased, and the demand for automation equipment has shrunk.

       When I visited a number of motor manufacturers, the author found that due to their small size, the overall business of small and medium-sized motor manufacturers is basically stable, and they can basically achieve an increase of about 20%. However, compared with the past few years, the growth rate is still very strong. The real decline is mainly concentrated in large motor manufacturers, first of all large manufacturers such as Jiangte, Dayang, and Founder. Due to the large market volume and the continuous influence of the overall downturn of the global economy, the growth rate of business volume has declined seriously; secondly, large manufacturers The general-purpose motor is facing many new competitions. On the contrary, most of those small and medium-sized manufacturers tend to customize products, and the customer base is relatively stable.

The price fights, the motor turns into cabbage

       Regardless of any industry, price wars make customers profit in a short period of time, and also make merchants with insufficient financial strength feel "disgusting". Perhaps the most profound price war experienced by the whole people was the battle between Didi and Uber a few years ago, but the good thing about "1 yuan" taxis no longer exists in a few months.

As mentioned above, the "cake" of the motor industry has become less and more people are eating the cake. Some motor manufacturers use low-cost strategies to win over customer resources for the needs of strategic layout . In the market, a servo motor that originally cost 1,000 yuan can now be reduced to 800 yuan, and the brushless motor control scheme for power tools can be sold for 6, 7 yuan, or even 4, 5 yuan, which is really even a pack of cigarettes Not enough money.

       In this motor price war, some manufacturers are passively involved . These involved businesses also revealed very helpless. A person in charge of a motor manufacturer in Dongguan said: "If you don't participate in the price war, sales will not increase, but after a dozen, you find that the funds are not very sufficient, and you have no experience in fighting price wars. In addition, the company has no profit, and How can the product be done well?”

       Despite the current situation in the motor market, there are still some servo motor manufacturers who are still fighting for price, insist on selecting high-quality customers, and follow the customized route of market segments.

       Zhou Jianhua, general manager of Moen Motor, said that after a period of chaos, the motor industry will enter the stage of reshuffle. In the end, it is still the quality and service that test the quality of motor products. Whether it can provide customers with stable and superior performance is the foundation of the development of motor manufacturers.

       Sun Hanming, general manager of Servo Motor, said that for niche motor manufacturers, it is of little significance to put a lot of manpower and financial resources into the market at this stage, and now it is important to seek stability. Servo Motor is still targeting market segments due to its correct strategy. Although the batch size of the market segment is small, it has certain requirements for technology. It is a reliable development route for small and medium-sized motor manufacturers with R&D capabilities.

Rare earth raw materials rise, profits are further compressed

       If the overall global economic downturn is a natural disaster, trade wars and price wars are man-made disasters, and rare earth raw materials are rising, then it is really bad luck. Ten years ago, rare earths were illegally mined, and the market price fell all the way. Things have changed, and now it is no longer possible to buy rare earths at the "pork price".

       Entering 2019, the trade friction between China and the United States has escalated again, and rare earths have become a bargaining chip for my country to counter the United States. With the adjustment of rare earth policy, the material cost of motor manufacturers has risen. In particular, most permanent magnet motor manufacturers are small in scale, lack of financial strength and lack of material reserves, and appear helpless in the face of rising rare earth prices.

       According to industry sources, this year's motor raw materials are mainly affected by the price of rare earths. The rare earth policy began to adjust in March and has doubled several times in less than a month. Although the price of rare earth has been corrected at this stage, it is still more expensive than before. As a motor manufacturer, if the rare earth inventory is small, it will still face huge price pressure at this stage. It is worth mentioning that the era of low-cost motor manufacturing has become a thing of the past.

       Since the beginning of this year, many motor manufacturers have announced to increase the price of motors due to rising raw materials. However, some manufacturers have decided to solve the problem by internal digestion, and try not to transfer the cost to customers. Among these companies, there may be sufficient reserves of rare earths, and they may have strong confidence in the management and control of raw materials.

       Some people in the industry pointed out that at present, there are wolves in front of the motor industry and tigers in the back. Under the double attack of market shrinkage and rising raw materials, it is quite unfavorable for the survival of businesses. However, the fluctuation of rare earth prices is short-term and may be a bargaining chip in the country's foreign trade negotiations. While the government will not sell rare earths cheaply, it will also take care of the actual domestic industrial needs.