New automobile manufacturers around the world are at the lowest point in history. No wonder an annual research of a commercial consulting firm, AlixPartners, also mentioned that about 40% of China’s automotive parts companies were faced with serious liquidity problems last year and some of these them would be bankrupt in the next 12-18 months. AlixPartners is not always providing gloomy forecasts. Last year, a similar research said that these parts companies would have an operating income growth of more than 30% and healthy profits between 2008 and 2010. However, we all know that, as a result of the financial crisis, this forecast has shattered.

The research was completed based on the interviews with 40 domestic and international senior managers in the field of automotive suppliers in China. The following conclusions have been achieved in the research: Although last year a lot of executives do not want to see the ill omen for the industry, this year most of them are now faced with the undeniable reality: the situation is very bad and will be even worse.

The research has concluded that: The place for parts manufacturers to make real money is rather the aftermarket than the OEM market. It is a gold mine. All you need to know is to dig gold at the right place and in the right way.

AlixPartners’ research believes that, for suppliers, aftermarket is more profitable than direct sales to automotive manufacturers. However, the research says: “This requires parts suppliers to change the business model. Different skills, new distribution channels and marketing strategies are needed. This is a challenge for many companies.”

The current downturn of the automobile market will also stimulate parts manufacturers to learn the professional knowledge for the access to the aftermarket.

The collapse of Chrysler was followed by the large-scale cessation of GM. GM planed to shut down 13 assembly plants in North America for nine weeks from mid-May. On 1^st June, it announced its bankruptcy reorganization which was followed by the large-scale cessation of production.

“Prior to this, the financial situation of about 30% to 40% of U.S. automotive parts companies was not good at all. I guess all these cessations will lead to poor financial situation of 50% of U.S. Auto parts companies”, said Anthony Faria, analyst of the Center for Automotive Research of University of Windsor, Ontario, Canada.

Standard & Poor’s warned the North American supply base off the interrelated systemic risk. It warned that this might reduce the rating of the 6 largest North American automotive suppliers including Harman International Industries, Johnson Controls and TRW. In addition, a few weeks ago, Grant Thornton issued 500 parts suppliers at high risk of bankruptcy.

Japan is an important market for China's parts industry. However, Japan's new automobile sale is at the historical lowest point of the past 41 years in record. According to the news report of Nikkei, in April, the Japanese bought only 284,035 cars, 23% lower than last year.

Moreover, the automobile sales situation in North America has still not changed. Reuters has just reported that “As the industry is at the lowest level of recent 30 years, the automobile sales volume fell by 34.4% in April. According to the information from Autodata, excluding seasonal factors, the automobile sales volume in the United States was 9.32 million in April, lower than the expected volume of 9.8 million. The annual growth rate of U.S. automobile sales volume is an important indicator for economic activities. In same period last year, the volume reached over 16 million.

The expectation for the upturn of the economic situation is a wishful thinking. “I don’t think there are now signs of economic recovery. People who have talked to me think that we still need to wait for the economic recovery until next year”, said Stephen Spivey, analyst of Frost & Sullivan.

At the time of crisis, the competition is intense. Just as what any hunter will tell you, the injured animal is most likely the world’s most dangerous thing, which can break away from the hunter before giving up or running away and create destructions as many as possible.

This year, there will be 40% (or more) of China's automotive parts companies faced with severe liquidity problems, the majority of which are contract manufacturers focusing on OEM sales or large-scale problem OEM supplier. Competition between them is fierce. Dead-end automotive manufacturers and those seeking to survive at all costs will also make one disaster after another for these companies.

On the contrary, those automotive parts companies in China focusing early on the aftermarket have now steady external demands. If you have not yet entered the aftermarket, you should adjust the direction as soon as possible. If you have had access to it, then you need to hone your skills and strategies, and find better ways of infiltration among distribution channels.