The auto market was surprisingly quiet in the first quarter. "Price wars at the beginning of the year" were replaced by "price increases." Car dealers are facing severe cost pressures. According to industry sources, at present, 98% of the raw materials used in domestically produced engines are steel. Because the price of iron ore has been rising all the way, the procurement costs of engine companies have been significantly affected.
The auto market was surprisingly quiet in the first quarter. "Price wars at the beginning of the year" were replaced by "price increases." Car dealers are facing severe cost pressures. According to reports, due to the impact of rising raw material prices, domestic mainstream automobile engine manufacturers are interested in increasing their ex-factory prices in the near future. The gross profit margin of vehicle manufacturers may therefore be reduced. Car dealers are using various methods to reduce costs and maintain profits. The car prices are in a delicate balance.
Engine prices are expected to rise
Affected by the increase in raw materials prices, a considerable part of the engine manufacturers have plans to increase prices. "Rising raw material prices have brought pressure to the engine companies," said industry insiders in the commercial vehicle industry. According to Liu Tie Zhuang, deputy general manager of Dalian Diesel Engine Sales Co., Ltd. of FAW Jiefang Automobile Co., Ltd., the price of Dachai’s engine products may increase by an average of 10%-15%. The relevant person of Dongfeng Chaoyang Diesel Engine Co., Ltd. said that the price increase is a chain reaction, and that the cost of the engine product can also rise after the purchase cost increases. From the perspective of the increase in the price of raw materials, the price of the engine must rise at least 10% to offset the impact of the price increase of raw materials on engine companies.
According to industry sources, at present, 98% of the raw materials used in domestic engines are steel. As the price of iron ore has been rising all the way, the cost of procurement for engine companies has been significantly affected.
Vehicle manufacturers may lose profits
The price of auto parts may affect the level of gross margin of automobile manufacturers in the second quarter. Although the profits of bicycles in the automotive industry rose slightly in the first quarter, the supply of spare parts suddenly became tense as the inventory of raw materials decreased and the quarterly supply prices were adjusted. This not only strengthens the expectation of further increase in automobile manufacturing costs, but also exerts greater pressure on the capital mobility of automobile manufacturers.
In the past May, no one mainstream carmaker voluntarily announced price cuts. Some auto makers have begun to quietly respond to the impact of rising prices of raw materials such as steel, and the price of cars “dark descent†has been replaced by “dark riseâ€. In the first quarter of this year, car dealers or promotional discounts have shrunk, or new cars have been priced too high, or they have reduced allocations or increased sales. Some of the car dealers' tens of millions of cash discounts have been replaced by gifts worth "ten thousand yuan." The shrinking of some vehicle configurations has been repeated. Some models have not changed their prices, but they have lost a lot of things, such as engine guards, compartments, etc., or they have changed the dual-stage airbags into single-stage airbags, replacing brand-name tires with ordinary tires. and many more.
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