Cost breakdown analysis of automotive wiring harness in China
The highest cost in terms of proportion is the material cost, followed by labor cost.
Chart 1: Direct material expenses have the highest proportion in total costs. (Zhejiang Commercial Securities Research Institute)
From the perspective of the automotive industry, the main production materials for wire harness industry are wire, terminals,
sheaths, sealing components, etc., involving materials such as copper, rubber, plastic, etc. The price is mainly determined by the
market price of commodities such as copper, stone oil, natural rubber, and other chemical materials. According to the 2021 annual
report of HuGuang Group, the direct material cost accounts for the highest proportion of the cost, reaching 76.64%.
The automotive wiring harness industry is a typical labor-intensive industry, requiring a large number of workers to engage
in operations such as inserting, wiring, wrapping, and rolling during the harness manufacturing process.
Therefore, labor costs are relatively high in the wiring harness industry. According to HuGuang Group’s 2021 annual report, direct labor costs account for 13.43%.
Figure 2: Automotive wiring harness assembly line (Zhejiang Commercial Securities Research Institute)
The cable cost is the highest, with the core material being copper.
Among all raw materials, cables (wires), sheaths, and terminals are the top three in terms of proportion.
According to the data in the prospectus of Huguang Group in 2019, cables, sheaths, and terminals accounted for 29.70%, 18.73%,
and 18.17% of the company’s total procurement amount, respectively. In 2017, 2018, and 2019, the proportion of wire, terminal,
and sheath procurement accounted for 65.66%, 64.78%, and 66.60% of the total procurement respectively, and the top three raw materials procurement ratios remained relatively stable.
The core material of the cable is copper, so the cost of copper material is the absolute driver of the cable production cost,
mainly including copper bars and copper wires. The same material accounts for over 80% of the cable manufacturer’s operating costs.