Small and medium-sized motor industry: strong production and sales, but declining profits

According to statistics from the Shanghai Electrical Machinery Industry Association on 56 small and medium-sized electrical machinery enterprises nationwide, the total output value in the first half of the year reached 15 billion yuan, a year-on-year increase of 21.2%; sales revenue reached 15.29 billion yuan, a year-on-year increase of 25.5%; and the export of motors increased by 34.8%, a year-on-year increase of 5.6 percentage points, while industry profits decreased by 13.4%.

Analysis of statistical data from the small and medium-sized motor industry in the first half of 2007 shows that output still maintained a 20% growth rate this year, but the industry's economic efficiency has declined by about 15 percentage points year-on-year due to rising prices of raw materials, fuel, and power. This presents a phenomenon of strong production and sales but declining profits.

Rapid development of output value in the first half of the year

Experts believe that the growth of exported motor production in the first half of the year is estimated to reach around 30%, a year-on-year increase of more than 10%. The main external reason is the stable growth of the world economy, which has promoted the growth of industry trade output. Internal factors include the reform of domestic export tax rebates, leading enterprises to accelerate their export pace, and the continuous expansion and rapid increase in the number of foreign-funded enterprises in China, increasing product competition, creating huge benefits domestically, and stimulating exports.

The rise in raw material prices has made an already marginally profitable industry even more difficult. Without sufficient volume, it is difficult to achieve overall return on investment, which in turn has stimulated an increase in enterprise output.

Multiple factors lead to decline in efficiency

Although motor production increased rapidly in the first half of the year, industry profits decreased, with a year-on-year decrease of about 15%.

Experts believe that, on the one hand, some enterprises are undergoing in-depth corporate restructuring and internal structural adjustments and are in the adjustment and operation phase. Some enterprises have seen their efficiency decline compared to last year due to their inability to keep up with market and industry developments, and some have even suffered losses.

On the other hand, due to the rise in raw material prices, the motor industry, while maintaining vitality, has been forced to raise some prices. The price increase is less than the cost increase. Last year, the entire industry lost several hundred million yuan in profits due to the rise in raw material prices.

In addition, some experts have analyzed that since the implementation of the "Opinions on Accelerating the Shutdown of Small Thermal Power Units" issued by the National Development and Reform Commission and the National Energy Administration, the "upgrading and downsizing" work has been carried out in full swing in various regions and departments. Affected by this policy, enterprises producing small units in the power generation equipment industry, including small power plant boilers, small power plant steam turbines, and generators, have shown signs of a significant decrease in orders.

At the same time, changes in major industrial sectors have impacted the motor market: the investment speed of the papermaking, steel rolling, rubber and plastics, and real estate industries has slowed down relatively, and insufficient market demand has led to a decrease in the demand for DC motors and some AC motors.

In addition, after the implementation of the two directives, the EU will monitor products exported to the EU region according to the directives. Enterprises that do not meet the standards will face the threat of being excluded from the EU market, and there may also be trade friction barriers in terms of actual property rights. In this regard, China's export enterprises have responded actively but progress has been slow.

Experts suggest that motor manufacturing enterprises should adjust their product structure as soon as possible, rapidly improve the technology of high-efficiency AC motor equipment, and strengthen industry self-discipline to guide enterprises to shift from pure price competition to quality competition and service competition.

Maintain stable state in the second half of the year

In the second half of 2007, the motor industry will face good development opportunities. Experts predict that China's motor industry will maintain a growth momentum of 15% to 20% this year.

The demand for the motor market will remain stable for a considerable period of time. The international market demand for AC motors is considerable and will continue to be in a high-growth stage.

With the further expansion of the overseas market for motor products, small and medium-sized motors will make major breakthroughs in export volume, variety, product grade, and foreign exchange earnings.

In addition, many manufacturers are optimistic about the prospects for exporting motors to the EU and American markets. The development of the power, petrochemical, and metallurgical industries will keep the effective demand trend of the motor market stable.

According to market demand, the current urgent need is to develop products with high technical level and good market development prospects; products for agriculture, rural areas, and farmers ("three rural areas") and environmentally friendly products.

The rapid development of consumer industries such as automobiles and home appliances, as well as their technological progress and rapid product updates, will expand the demand space for the motor industry. In addition, international market demand is in a high-growth stage, especially for small and medium-sized motor products, and export volume and product grade will gradually improve. The trend of product structure adjustment, technological upgrading, and industry restructuring in the motor industry will become more obvious.

Therefore, if there are no major policy adjustments in macroeconomic regulation in the second half of the year, the motor industry will continue the good operating trend of the first half of the year. In terms of growth rate, the growth in the second half of 2007 will not be lower than 17%.