The mechanical and electrical enterprises that squeeze the profit space

As the star of China’s foreign trade, exports of electromechanical products have consistently accounted for half of China’s total export products. They have maintained the status of the largest category of export commodities for 16 years in a row, accounting for 60% of total foreign trade exports, an increase of more than 70%, and exports leaping to the top of the world. one.

However, the latest findings of the China Chamber of Commerce for Import and Export of Machinery and Electronic Products show that the international competitiveness of China's machinery and electronic products is not as good as before. The overall level of China's machinery and electronic products export profits is low, with an average of 3%-5%. The increase in operating costs has further squeezed the profit margins of enterprises in the electromechanical industry. 77% of the profits of enterprises have declined. Some home appliance companies have reported that most of the export orders that have already been received are on the verge of losses due to the increase in operating costs in the current round that exceeds expectations.

Production costs such as raw material costs, labor costs, freight costs, etc. have risen significantly, and profit margins have been gradually reduced. This is the current embarrassing situation for many electromechanical foreign trade enterprises.

All along, China’s machinery and electronics industry has won the market with higher product price/performance ratios, but many companies report that the price gap between their products and high-end products in Korea has further narrowed; while some low-end electromechanical products originally relied on low-cost orders. After the increase in costs, it began to suffer fierce competition from some products in Turkey, Southeast Asia, and South America.

"'Survive only, no profit' is our status quo. In order to cope with changes in the exchange rate and raw material prices, we intend to increase product prices by 5% to 10%, but we do not know whether foreign investors can accept." Now The only way out is to produce more new products. Li Jieqiang, head of Shanghai Huiying Electronics Co., Ltd., said in an interview with the China Economic News.

According to the electromechanical online editor, China's mechanical and electrical export enterprises are mainly fund-intensive and technology-intensive. Compared to labor-intensive industries, labor costs are relatively low in product costs. The increase in labor force has a weaker effect on it, and the important cost pressure comes from raw materials. The continuous rise in raw material prices has pushed up the cost of various types of mechanical and electrical components. This type of mechanical and electrical export enterprises lacks market bargaining power, and rising prices are often rejected by foreign buyers.

For this kind of situation, the electromechanical online editor recommends that the electromechanical industry chain change the existing development model. Since it cannot take the initiative in the market, it must change direction, adopt circuitous tactics, and expand its own profit space.

Nowadays, more and more companies are realizing that they cannot establish core competences solely because of price competition, and are not the direction of long-term development, so that they will strive to explore new development paths. Many hardware companies have increased their investment in technology, developed new products with high technology content, made product differentiation as a long-term plan for enterprise development, sought new market demand, and established new economic growth points (into small household appliances And other similar industries) to achieve the sustainable development of enterprises.

In the long run, we also need to upgrade from OEM (origin processing) to ODM (origin origin design and production) to brand marketing, and gradually enter high-profit links such as marketing channels and brand operations. However, based on the actual situation of the weak internationalization of our product brands and corporate brands, we should take the cultivation of industry brands and regional brands as the breakthrough point, and promote the brand building of the hardware industry with industry brands and regional brands.

In short, seeking profit growth in the era of meager profits, China's mechanical and electrical industry must accept the market reshuffle to meet the challenges of industrial upgrading, and kill a development road in the increasingly fierce market competition.