The Pain Of China's Electromechanical OEM Export

- Dec 04, 2018-

China's electromechanical industry suffers from the pain of “exclusive export”. What is the “outlet” for 100,000 SMEs?

After two consecutive years of stagflation and decline, in 2017, the export volume of mechanical and electrical products occupying “the majority of China’s exports” is expected to achieve “recovery growth” of around 8%.

Export is one of the "three troikas" of the Chinese economy. Electromechanical products account for nearly 60% of China's exports. Moreover, the electromechanical industry is highly dependent on foreign countries. The electromechanical export situation is for the entire Chinese economy, especially those The influence of the "heavy town" can be imagined.

Although the "state" of China's exports of mechanical and electrical products has temporarily recovered, it must be clearly realized that as the world's largest "exporter of electromechanical products", China's electromechanical foreign trade has inevitably entered a "low growth cycle", which is quite long in the future. In the time, transformation and upgrading, structural optimization will be the main theme of China's electromechanical industry.

"In the low growth cycle, China's electromechanical industry must be transformed and upgraded. China's electromechanical enterprises must extend to both ends of the industrial chain and value chain. This is an undisputed consensus." Industrial equipment vertical cross-border e-commerce platform Tuolaisi founder CEO Fu Yufeng said, "The real problem is how to find a practical solution."

Tuolaisi is positioned in the “Eco-industry platform for cross-border sales and service of industrial equipment”. In 2017, it completed the US$10 million Pre-A round of financing. At present, it is mainly dedicated to exporting China's mechanical and electrical products and industrial equipment to the United States. Global expansion.

In Fu Yufeng's view, compared with the “R&D innovation” at the front end of the industry chain, it is likely to be faster and more effective in seeking breakthroughs in the “brand marketing” segment of the back-end. “If Chinese electromechanical companies can control 'overseas brands, marketing channels and user feedback loops' independently, they can create more new possibilities in overseas markets: bigger sales, higher profits, faster innovation, more flexible produce……"

The pain of China's electromechanical "OEM export"

The rapid development of China's mechanical and electrical products exports began in 1985, "the state will expand the export of mechanical and electrical products as a strategic guideline for foreign trade development." In that year, China's exports of mechanical and electrical products was only 1.68 billion US dollars. In 2016, this figure has been Soaring to 1.2 trillion US dollars.

In 30 years, the growth rate is 720 times. It is not surprising. But behind the rapid growth, structural problems have always existed.

The absolute main force of China's mechanical and electrical products exports in the past 30 years, mainly foreign-invested enterprises exporting by means of "processing trade", almost completely rely on foreign brands in the "research and development, design, raw material procurement" and "brand, marketing" links, and almost all products. It is an "exclusive export".

However, private electromechanical enterprises that have risen rapidly since 2000, although mainly exported in the form of “general trade”, are theoretically more “independent”. However, due to their lack of R&D, design, marketing and brand capabilities, they also focus on “exclusive exports”. .

In 2016, among the total export volume of China's mechanical and electrical products of 1.2 trillion US dollars, foreign-funded electromechanical enterprises and private electromechanical enterprises, which are mainly based on “ex-branded exports”, accounted for a total share of 91.4%. Products, the proportion may be less than 10%.

In the "OEM" mode, Chinese manufacturing companies are almost completely isolated from overseas markets and end users. On the one hand, they have been unable to control overseas marketing channels, and it is difficult to obtain direct orders from overseas, let alone build overseas independent brands. On the other hand, due to the increase in the price of middlemen, the price of Chinese mechanical and electrical products and industrial equipment in overseas terminals. (Overseas customer procurement costs) is high, but Chinese manufacturing companies have very low profits.

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