Parts companies plug in the wings of capital


On December 9th, at the "2014 China Auto Parts Industry Finance Collaborative Innovation and Development Forum," auto parts companies, investment companies, and industry funds launched a lively discussion on how to improve the financing environment for parts and components companies. It is believed that the connection between external capital and the auto parts industry will enable component companies to become bigger and stronger and “plug in wings”. The basis for this leap is that the component companies should have clear strategies and standardized mechanisms.

Financial capital helps component companies become bigger and stronger

Chen Sheng, vice president of Hunan University, who has long been concerned about and committed to the development of auto parts industry funds, believes that the domestic automobile industry has not yet adopted the traditional model and a large number of market shares have been divided by international brands and joint ventures. The automobile industry value chain is a mixed value chain, and it is very complete from research and development to the after-sales system. It needs a strong component company to support it to truly ensure the rapid development of the automobile industry. "The Chinese auto industry and independent brands must have new developments. We must not only use the original traditional model. We must rely on the convergence of the industrial structure itself and external funds." Chen said, "We hope to promote zero by using capital and industry funds. As part companies grow, they are more adaptable, and they have a greater right to speak. While nurturing component companies, we also hope to form a platform on which all component companies will develop, manufacture, and Trading, etc., is not just a supporting role, it can even become a protagonist.”

Although some parts and components companies are still "green hands" in the introduction of external financial capital, there are still parts and components companies have tasted the sweetness of financial capital intervention. Huang Yi, deputy general manager of Guangxi Yuchai Machinery Co., Ltd., said: “Yuchai’s shares were listed in New York in 1994. Through many years of capital market operations, Yuchai’s operating costs have been significantly reduced. At present, many automotive parts have insufficient core technology capabilities. In particular, the engine post-processing system, electronically controlled high-pressure common rail, etc., will inject financial capital into the auto parts industry in the future, and should have a lot to do in promoting the core technology and talents introduction of independent brand parts. Yuchai proposed the idea of ​​'second entrepreneurship' last year. It intends to introduce some capital and technology partners to tackle these core technologies."

Nanjing Autotech New Energy Technology Co., Ltd. successfully achieved value-added through three capital operations, from 300 million to 1.2 billion. Its general manager Qian Yonggui stated that when selecting spare parts companies, parts and components companies must choose like-minded partners so that companies can go further. "I hope to reach a new height in the future. The goal is to enter the top three in the world," he said with confidence.

 


Strategies and mechanisms to control risk

If capital is compared to water, the parts and components industry is likened to a boat, and water can carry a boat and overturn it. "Once you step into the capital market, you will be tempted by the huge profitability of the capital market. If the business management mechanism is not perfect, it will easily lead to the collapse of the entire company." Zhang Xin, executive director of Guotai Junan expressed that "therefore, the spare parts companies are absorbing When investing in venture capital funds, it is necessary to have a prudent judgment when signing relevant exit clauses, taking into account that risks are inevitable."

In this regard, Chen Shou said that risk control is a problem that must be considered, but he believes that it is more important that the company's own development strategy should be clear. "A clear development strategy coupled with financial support can only achieve strategic development with the help of funds. Its own strategic choices, suitable business models, and a clear development orientation are key," Chen added. Construction Investment Co., Ltd. has been focusing on automobiles since 2011, mainly in terms of technology upgrades and corporate transformation. Its investment director Zhang Chi said: “We only look at prospects when we choose companies that do not look at history. The first concern is the company’s norms, standardized institutional structure, and standardized financial system to ensure long-term development. This is a must for any company to do capital markets. The second concern is the development model of the company, and we hope that the company will integrate capacity expansion and technology upgrade in the future development direction, and rely on innovation and technology to achieve development. We hope that the parts and components companies can put their own advantages. The industry will do well to avoid blindly expanding new directions; in addition, we will be able to use the tools of the capital market to find industrial investors who can invest in the company's long-term investment and use the strength of both parties to make the company bigger and stronger."



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