Auto Service World
News   November 30, 2006   by Auto Service World

A Messy World Dominated by China

It’s a messy world with a lot of uncertainty for the aftermarket, says analyst Dean Mullett, but there if there is one certainty it is that China cannot be ignored.
“The world is a mess,” Mullett, PriceWaterhouseCoopers Corporate Finance, told attendees of the 11th Annual AIA Aftermarket Forum being held today in Toronto, Ont. “We don’t know where it is going. But I was with a bunch of fund managers than they were all pretty bullish on where things were going in the next 12 to 18 months.”
Yet, says Mullett, Thanksgiving in the U.S. was not as busy for retailers as it was previously and this may indicated that the shakiness in the U.S. economy might spread to Canada.
“So there is a lot of uncertainty out there.” More to the point of the aftermarket is the reality that much of the competing at the supplier level–as well as a growing part of the supply–is coming form so-called low cost countries.
“If you a parts manufacturer or remanufacturer, you are definitely being affected. If you are in the distribution marketed, you are being impacted.” No sector will be unmarked by the changes, he says.
“The Chinese people are motivated. They have moved into the real world and they want a piece of it. They are not going away.”
So the industry needs to embrace this change.
For warehouse distributors as well as jobbers, managing technology is the key. “When you recognize that your supplier is working as you’re sleeping, it becomes easy. And when you’re hammering out supply agreements you really need to do your homework. For every great company in China, there are probably five that you really don’t want to do business with.”
It is also important to recognize that China is no longer the lowest cost country; much manufacturing is already moving to other neighbouring countries.
“If you are a manufacturer or a remanufacturer, you can get cost out, and if you are better at managing that relationship, you can get an advantage; if you are a wholesaler and you can manage to get that relationship in place, you can knock out the competition.”
He did say that it there is a noticeable lack of Canadian presence in those markets. “We are probably a little more conservative than Americans. The Germans are used to dealing in a multicultural market. But we need to stand up and be counted.”

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