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Mando improves profitability in Chinese market Diversified customer base helps Korean auto parts supplier increase profitability

Translated by Ryu Ho-joung 공개 2022-05-26 08:10:37

이 기사는 2022년 05월 26일 08:03 더벨 유료페이지에 표출된 기사입니다.

South Korean auto parts supplier Mando Corp has seen its profitability grow for two straight years in China, thanks to its efforts to diversify its customer base in the world's biggest car market.

Mando China Holdings (MCH), the holding company for Mando’s Chinese business, recorded revenue of 416.5 billion won ($329.6 million) in the first three months of 2022, up 24.4% from a year ago. Net profit more than tripled to 21.2 billion won in the same period, lifting its net profit margin to 5.09%.

This marks a sharp reversal from the three years from 2017 to 2019, during which MCH struggled with the effects of a diplomatic row between Seoul and Beijing over a missile defense system and the trade dispute between the US and China.

In this period, Hyundai Motor Group, which was MCH’s major customer, suffered a sharp slowdown in car sales in China, decreasing the holding company’s profitability. Geely, another main customer of MCH, was also hit hard by the US-China trade war. As a result, MCH’s net profit margin fell from 3.99% in 2017 to 1.53% in 2018, and turned negative in 2019, dropping to -1.85%.

However, the company turned profitable in the following year, recording a net profit of 1.5 billion won. In 2021, MCH recorded 57 billion won in net profit on revenue of 1.54 trillion won.

The strong improvement in profitability was largely driven by efforts by Mando to diversify its customer base in the Chinese market.

“What is notable about Mando’s first-quarter performance is that the share of revenue from Hyundai Motor Group, Geely and General Motors significantly reduced from 81% to only 35% of its overall revenue from China, suggesting a more diversified customer base in the country,” said an analyst at one securities firm in Seoul.

“Especially now, revenue from North America-based battery electric vehicle makers represents almost a third of Mando’s revenue from China.”

MCH was merged into Mando earlier this month, allowing the auto parts supplier to directly run its Chinese operations. “The merger will help minimize unnecessary costs and increase management efficiency,” an official at Mando said.

Mando, part of Halla Group, has also stepped up efforts to diversify its customer base in other global markets. Last year, it established several new production facilities in countries like the US, Europe, China and India to more quickly respond to demand from local customers. The company also has 18 research and development centers abroad.

Mando is focusing on new mobility technologies like electrification and hydrogen cars as well. It has recently received orders from foreign electric vehicle makers. (Reporting by Seo-young Kim)
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