Thank you for participating in the Global Chinese Elite Automobile Association and Auto Industry Innovation Forum. The theme of this forum is "China embraces the world." Secretary-General Zhu Mingrong gave me a topic called "Overseas Mergers and Acquisitions Promote the Development of Chinese Automobile Enterprises in an International Way." I changed the name “Overseas M&A promotes the international development of Chinese Auto Parts companiesâ€. Focusing on parts and components, we are not paying enough attention to the parts. The real car power must have strong, own zero. Parts industry.
Without the support of a strong independent auto parts industry, it is difficult for our own branded auto companies to reach the first camp. It is true that our entire vehicle company has achieved great results, but it still has not reached the top camp in the world. From the weak brand to the first camp must go to a differentiation strategy, especially a differentiated product strategy. The powerful Chinese auto industry calls for China's Bosch and Delphi.
We should acknowledge that our gap in parts and components should not underestimate the gap between China's autonomous parts and components industry and the world advanced level. This is a recent in-depth study and exploration by the China Automotive Component Research Association organized by the Ministry of Industry and Information Technology. They investigated nearly 55,000 Chinese parts companies. This is their report. First of all, this industry is very large, with a total output value of 3.8 trillion yuan. At the same time, the profitability of this industry is still quite good. The average level is 6-8%, but the joint venture's average profitability level has reached 10%, and their level is even higher. Overall, their investment in research and development accounted for 2%. Why 2%? The following data can illustrate the problem. There are 100,000 parts and components companies, but looking at their size, 62% of them are small businesses. What does small business mean? The output value is less than 20 million yuan. The automobile is a typical economy of scale. Our auto parts companies are large on the one hand, but they are small and scattered on the other hand and have no core competitiveness. This gap we must fully realize that we cannot underestimate it.
To make auto parts in China stronger, it is necessary to build a large number of multinational and international auto parts companies with core competitiveness. How do we do this, I think that the stone of his hill, you can attack jade. We can look at the development of parts and components companies in other countries. I asked our company colleagues to do a study. We see that Bosch is number one for several years in a row. Let's look at how he developed. He has acquired one or more mergers and acquisitions almost every year, and he has developed himself through an extension.
Mainland companies are also currently ranked top, while the mainland is more typical. At first, it only made tires, but now it is far more than just making tires, and many aspects have come to the front. It has also rapidly advanced to the forefront of the world through extensional development.
Delphi, this is my old owner, this company also develops itself through this kind of method.
The same is true of MAGNA. The founder is also a legend. Starting from his garage at home, he has already achieved the top automotive parts company in the world rankings.
We say that this is not the only road, but it must be a path that we should learn from. At the same time, we can also look at the development of other industries in China. From China, the relatively good internationalization is the home appliance industry. Just after the Secretary-General was mentioned to Yuwu, our export share is very small and we are still on the decline. Judging from the home appliance industry, the sign of internationalization is the market share outside the home country, and home appliance companies account for more than 40% of them. They quickly upgrade and also accelerate brand building. When I went to the United States in the 1980s, I couldn't see any Chinese brands at that time. Today, especially the home appliance brands can be said to have become household names. Mr. Fu Yuwu mentioned the four major standards of our automobile city, including the construction of an international brand. This is something the home appliance industry does better than us.
We also see that Chinese companies are stepping up to the world. From the previous year, Chinese companies have entered a new phase in their integration into the world. I call it the 2.0 upgrade. Since the beginning of reform and opening up, we have begun to integrate into the world. In the 1.0 version of the first phase, I think the main sign is that foreign companies enter China, establish joint ventures in China, and invest in China. Since the previous year, our foreign investment has exceeded the number of foreign investment. In other words, it has become a net capital exporting country, which shows that Chinese companies are beginning to go out quickly. This is the beginning of our version 2.0.
This year we have been quicker. This is some information provided by Reuters. In the first six months of the year, Chinese companies’ overseas acquisitions exceeded 120 billion yuan, 2.1 times the same period of last year. It is expected that the total number of Chinese enterprises in 2016 could exceed 200 billion, and this pace is obviously accelerating. From the perspective of overseas M&A by Chinese companies, the pace is also greatly accelerated. Chinese companies that used to go overseas for mergers and acquisitions can be said to be rare. Today, Chunhui company delivered two in September and another in October. The main reasons are changes in the internal environment, the need for industrial upgrading, the need for corporate transformation, and the need for an external environment, including the One Belt and One Road strategy of our country. The 2025 strategy provides a good environment for Chinese companies to go global. Looking at the future direction of the industry, focusing on the future of the automotive industry, smart, lightweight, etc. will be the key development direction. Since 2013, the overseas acquisitions of auto and auto parts companies have reached USD 17.7 billion, and the auto parts industry is more active than the entire vehicle industry. Overseas mergers and acquisitions and local integration have become the twin engines of development. And these mergers and acquisitions mainly occurred in developed countries such as the European Union. From January to June this year, 38 mergers and acquisitions were completed in Germany.
Next, we will introduce Chunhui's event. Five years ago, we established Chunhui Capital, an investment and consulting company specializing in automotive and related advanced manufacturing. We emphasize combining industry and capital, linking China with overseas, supporting the overseas M&A of China's spare parts companies, introducing advanced technologies and products, and gaining further development in China. In overseas M&A, we mainly do four things, including target selection, transaction execution, fund provision, and post-investment management.
In the past few years, we have completed ten mergers and acquisitions, and the amount of mergers and acquisitions exceeded $2 billion. Especially from last year to this year, our pace has also been greatly accelerated with the pace of Chinese companies going abroad. If you look at the statistics for the past two years, Chunhui has accounted for a considerable proportion of the M&A projects completed by Chinese auto companies. From our practice, who is buying one? Private enterprises gradually became the main force of overseas mergers and acquisitions. We all went out together with Chinese companies. Among the partners, 90% of projects completed were private enterprises. Why buy? buy what? It mainly depends on four aspects. First, he must have advanced technology, advanced products, high-quality customer channels, advanced talents and management. In this case, he can combine with the Chinese market to form a win-win situation. Here are a few examples I have mentioned. For example, Ocean Electric teamed up with Chunhui Capital. In 2013, it completed the American Petrile Motor Company and made the Ocean enter the first camp of motor vehicles. We also helped Wanfeng Auto acquire the world's top lightweight components and win the Canadian magnesium company. In the same year, we also helped Shanghai Pulit to successfully merge and acquire Wilhelm Plastics. In 2015, we acquired Delphi's car receiving system with Northeast Industrial Group to accelerate the transformation of industrial enterprises in northeast China. This project also created an international record, which took only 103 days from start to finish. This year we continued this trend and completed a number of international mergers and acquisitions.
From our practice, we think there are several points that are very important. First of all, integrity is a stepping stone for overseas M&A. Win-win is an important concept for successful M&A. Although it is negotiations and trades, we still need to achieve a win-win situation. We say so and do so. Technology, product, customer resources and development prospects in the Chinese market are important basis for the value judgment of M&A. "One company, two systems" in management is the basic mode of post-merger management. Returnees and overseas Chinese are important resources to support overseas acquisitions by Chinese companies. These people had played a huge role in the early days of China's reform and opening up. If we do not have this resource, we will not go so fast because of the early information asymmetry, the returnees in the automotive industry in China, and the process of internationalization of Chinese auto companies. Among them, it should be said that it also played a key role. From the acquisition of Geely to the merger and acquisition of Beiqi, it can be said that the returnees played a key role in them. I believe that Chinese, overseas Chinese, and returnees will play an important role in the integration of Chinese companies into the World 2.0 upgrade. The demand is the same, 1.0 is the introduction, 2.0 is going out, the basic needs are in, and I believe it will play a greater role. At the same time, I also very much hope that our global automotive elite organization will play our leading role in this process and use our resources to help Chinese companies do a better job in internationalization.
There are many opportunities when it comes to opportunities. There are some appropriate resources in the international arena worth exploring. To sum up, there are 16 aspects in all. There are specific projects. We will not talk about them here. At present, we have a time and also a geographical position. Just talking about our market, adding two or three or four, five to twenty do not add up to us. This is our time and place, and our country has a one-on-one policy to support Chinese companies going out. I think we work together to build China's Bosch, China's Delphi, thank you all.
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