*** Appreciation of automotive electronics companies hard to survive without brand

Core Tip: The U.S. House of Representatives' House of Representatives Fundraising Committee voted to pass a bill aimed at imposing special tariffs on countries that have undervalued the exchange rate of the local currency. According to the bill, if a country’s currency value is considered “artificially undervalued”, the U.S. government has the right to impose punitive tariffs on goods from that country.

In recent days, China and the United States have tit-for-tat relative to the appreciation of the renminbi. On September 24, United States local time, the House of Representatives of the U.S. House of Representatives Fundraising Committee voted to pass a bill aimed at imposing special tariffs on countries that have undervalued the exchange rate of the local currency. According to the bill, if a country’s currency value is considered “artificially undervalued”, the U.S. government has the right to impose punitive tariffs on goods from that country. At present, the bill must wait for the U.S. Senate and the House of Representatives to vote. In this context, the Chinese government has repeatedly demonstrated that China does not have a one-time, substantially-rising economic base at this stage.

The August trade figures released by the US Department of Commerce on Thursday may appear to be fueling the ongoing escalation of China-US monetary policy disputes. In August of this year, the overall trade deficit in the United States expanded by 8.8 percentage points from the adjusted July deficit, to US$46.3 billion. The publication of this data will undoubtedly increase the pressure for RMB appreciation. Now that the renminbi appreciation war is in full swing, no matter what the final result is, he will form a strong expectation of RMB appreciation. We cannot predict the short-term renminbi exchange rate, but in the long run, the renminbi must appreciate.

What is the direct impact of the appreciation of the renminbi? I think this is a more obvious problem, that is, the impact on the export processing industry will directly reduce the export value and profits of the products. In the automotive electronics industry in China, there are many export-oriented companies, especially in the coastal areas of Guangdong and Zhejiang. For example, the dependence of auto lighting components in Zhejiang on exports is very serious. However, the RMB has experienced a relatively large appreciation, or The United States passed the taxation bill. How should our export companies respond?

For a long time, China's automotive electronics exporters, especially small and medium-sized automotive electronics companies, are keen on OEM exports. Because such products are exported, companies do not need to establish their own service systems, thereby saving a lot of labor costs. In Yongfu Road in Guangzhou, such a group of small enterprises have gathered. Such business models have been developing well before the Sino-US exchange rate war and financial crisis. Although the profit of a single product is very low, it can be compensated for by the scale advantages. Although it has repeatedly learned to criticize such a business model, due to the relatively small burden on such a model, SMEs are particularly happy about it.

But now the situation seems to be getting worse and worse. Whenever the renminbi appreciates, the final result must be appreciation. The recent exchange rate of the renminbi against the US dollar has been rising slightly. The increase in exchange rates directly leads to the decline in the operating profits of enterprises. In fact, the global financial crisis in 2008 has made SMEs aware of their own survival crisis.

So, in the context of the expected increase in the appreciation of the renminbi, how should Chinese automotive electronics companies cope? I think through the above narrative, we should also know the way to deal with it, that is to build your own brand, rely on the brand's tension and influence to cope with the appreciation risk.

Looking ahead, the world-famous companies are using a strong brand as a support, in order to elicit wind and rain in the global market, I think this should be a good reference for China's automotive electronics companies, export-oriented automotive electronics companies should abandon The original idea should be to establish its own brand, not just to bow to the hard work, then spend a whole lot of hard money, leaving a lot of profits to others.

It can be said that in the future automotive electronics market pattern, both export-oriented and domestic-selling companies will face a high-cost business environment, labor costs, exchange-rate costs, and other costs. This requires that The company has enough brand influence, otherwise, the company's survival will become difficult.

In the short term, the appreciation of the renminbi is sure to go through a process. It is unlikely that the Chinese government will let the renminbi rise sharply at one time. However, how long is such a process of appreciation is unclear, but there is little that Chinese automotive electronics companies must Clear: The buffer period of appreciation will be the final opportunity for the brand construction of automotive electronics companies. Once the RMB appreciation process is over, it will also be the period for the disappearance of China's export OEM industry. No brand in China’s automotive electronics companies will not be able to escape the fate. .