Automotive LEDs Become the Next Lighting Red Sea
In the first half of 2023, the Chinese auto market will set off a fierce price war, which is even called a "suicide price cut" by the outside world. After the price fight started from electric vehicles (EV) and new energy vehicles, it will spread all the way to fuel vehicles. fight. Recently, the supply chain privately pointed out that Chinese automakers are under urgent pressure to reduce costs. Recently, an extreme price comparison model has emerged, requiring LED manufacturers to compare prices before certification. In order to grab orders at low prices, the price difference of automotive LEDs may reach 40~50%. The automotive market is regarded as a niche market with high barriers to entry. Now, under price competition, it has become the next red sea market for LED lighting.
According to the industry, China's new car market will be in chaos in 2023, and the upstream supply chain will be forced to follow up to reduce costs. SAIC Motor's executives have changed their positions in a flash before, and the new officials will be vigorous in controlling costs. It is reported that LED suppliers are required to cut prices by 5 ~10%, many suppliers are complaining, and some manufacturers can't bear the pressure of price cuts, privately plan to diversify the proportion of customer supply, and turn to other international joint venture car manufacturers.
In addition, in the past, major international automakers were strict with automotive LEDs and had to provide specifications and product certification, or pass third-party certification to ensure quality. However, the rules of the game for Chinese automakers have changed drastically recently. Each company is required to compare prices one by one, and then finalize the detailed specifications and subsequent certification operations.
The relevant supply chain pointed out that although most of the price comparison models focus on the application of LED lighting in the car and do not involve driving safety, but the practice of bad money driving out good money, the price difference between various companies may be as high as 40%, leading to vicious competition in the industry. If there is a problem, the LED supplier will be responsible for compensation.
China's auto industry has entered into price wars, leading to chaos. LED industry players revealed that car manufacturers have recently become more stringent on payment terms. It has even been reported that if dealers or suppliers stop delivering goods, the follow-up payment will be paid in installments of 4 years. The payment period The elongation will not only lead to an increase in variables, but will also bring difficulties to upstream suppliers' capital allocation. The industry speculates that the reason behind this may be that the cost reduction practice has gone to the extreme. In order to avoid customer complaints about the quality after the suspension of delivery, and even a recall for repairs, the car factory therefore requires a postponement of payment to avoid the risk of unsuccessful compensation from subsequent upstream suppliers.
Taiwanese LED industry players said that standard LED components usually face customer demand for price cuts every quarter, but the cost pressure of Chinese automakers is indeed great, and all companies are generally developing towards low-cost costs, placing too much emphasis on cost reduction models, just like LED In the competition mode of the lighting market, each supplier must lower the specifications to sell, and cannot take into account the quality, forming a price-killing battlefield.
Although the competition in the price war in the Chinese auto market has not yet seen signs of slowing down, little-known electric vehicle brands have sprung up. The price of small electric vehicles is only about RMB 30,000, and they only provide transportation functions in urban areas. Naturally, the requirements are very low. In addition to the development of China's independent supply chain in recent years, the proportion of Chinese LED manufacturers' supply continues to increase.
Although Taiwan-based LED manufacturers have been actively deploying automotive LED supply chains in recent years, they mainly target high-end or overseas car manufacturers. For example, Hongkai’s automotive light sources focus on the high-end automotive market, and IC LEDs ensure a stable supply position; Addison supplies North American car manufacturers customers , the newly established automotive finished product line will officially enter mass production from the second quarter; Everlight will also sprint into the automotive LED market in 2023, including taillights, headlights, smart ambient lights and other automotive lighting applications are expected to have double digits Growth strength.