[China Wealth Connect] Deli Shares’ Eight-Year Strategic Plan Yields Results: Building a Global Moat and Achieving Growth Against the Trend, Breaking Through Industry Bottlenecks.

Building a Global Moat: Achieving Growth Against the Trend and Breaking Through Industry Stagnation

Recently, the term “anti-involution” has become a buzzword frequently used in policy discussions and across various industries. In the automotive sector, efforts to combat “inolution” have fully accelerated starting from the second quarter of 2025. Faced with intense price wars and overcapacity in the domestic market, Chinese automakers are increasingly focusing their solutions on “going global.” However, at present, simply exporting products is no longer sufficient to address risks such as tariffs, logistics challenges, and compliance issues. How to establish a sustainable R&D, production, and sales system overseas has thus become a major challenge for every enterprise.

Eight years ago, in 2017, Fuxin Del Automotive Components Co., Ltd. (hereinafter referred to as “Del Shares,” stock code: 300473) acquired Germany’s Kaxus entirely in cash—a move that was then seen as a bold expansion. Yet today, eight years later, reexamining this transaction within the context of “fighting against involution” offers Chinese auto parts manufacturers a verifiable and replicable path toward globalization.

A strategic breakthrough to establish a global presence.

In 2017, while most Chinese auto parts companies still regarded “going global” as simply “exporting,” Deli Shares took a major step forward in its “going global” strategy by completing a wholly-owned acquisition worth 1.937 billion yuan. The target company, German Karkos, has long been deeply entrenched in a niche segment of the supply chain and has maintained steady orders from top-tier automakers such as Mercedes-Benz, BMW, Porsche, Volkswagen, Audi, Ford, and General Motors. Following the completion of the transaction, Deli Shares not only completed its product lineup in noise reduction, thermal insulation, and lightweight materials but also secured at one stroke production bases spanning multiple countries across three continents, as well as an R&D system covering multiple disciplines including acoustics, thermodynamics, and materials science. As a result, the company’s global expansion strategy has now been fully implemented.

Following the acquisition, Deli Shares carried out a systematic integration of KakuSi. In terms of business operations, while maintaining KakuSi’s existing order book, Deli Shares has placed particular emphasis on expanding its business in the new-energy vehicle sector as well as tapping into the growing market for domestic自主品牌. In terms of operational management, Deli Shares has brought KakuSi’s assets and financial systems under a unified oversight framework and, through a consultative committee, is able to monitor KakuSi’s operational status promptly, accurately, and comprehensively, offering targeted management recommendations. In terms of personnel management, while retaining parts of the original German core management team, Deli Shares has also brought in senior executives with an international perspective and continues to cultivate key talent locally in Europe and North America, laying a solid foundation for KakuSi’s sustained performance growth in the future.

Industry insiders pointed out that Deli Shares has overcome numerous challenges—such as team management and cultural integration—through systematic integration and refined operations, achieving stable growth in KaKuSi’s performance and setting a successful example for Chinese-funded overseas mergers and acquisitions.

Strong resilience across cycles

Although various integration efforts are steadily advancing, the external environment following Del's acquisition of KakuSi is far more complex than anticipated. In 2020, affected by the public health crisis, global automotive production and transportation were severely disrupted. In the second half of 2021, a global shortage of automotive chips hampered vehicle manufacturers' production, dragging down the revenues of auto parts companies. In 2022, external factors such as inflation in Europe and the U.S. and the Russia-Ukraine conflict followed one after another, impacting various industrial sectors.

Under the combined impact of multiple shocks, KaKuSi’s factories in various regions have all been affected to varying degrees. However, rather than simply waiting passively for things to improve, KaKuSi has proactively implemented a range of measures, including negotiating with customers externally to adjust prices and share the risks associated with fluctuations in raw material costs; optimizing its internal organizational structure by shifting production capacity to lower-cost regions; streamlining supply chain structures and product processes at the production end to reduce costs; and accelerating mass production of existing projects while actively seeking new customers and developing new products in the market.

Analysts say that looking back from 2020 to 2022, various “black swan” events have served as an extreme stress test for auto parts companies—any single weak link could spell their demise. However, thanks to its strong foothold in the European and U.S. markets, KakuSi has managed to stabilize its business by taking on price risks together with its customers, shifting production capacity, reducing costs through process optimization, and accelerating the launch of new projects. As a result, the company has achieved remarkable recovery in its performance over the past two years.

According to the financial report, Deli Shares achieved revenues of 4.513 billion yuan in 2024, representing a year-on-year increase of 5.0%. Net profit attributable to shareholders reached 32.428 million yuan, up 151.7% from the previous year. Among them, KakuSi contributed the majority of both revenue and profits. At a time when the industry is experiencing a downturn, KakuSi’s strong intrinsic resilience and operational efficiency have demonstrated its ability to navigate economic cycles, enabling Deli Shares to achieve growth against the trend.

Three-layer barriers build a moat.

In 2024, as the trade environment became increasingly complex, Del Shares did not passively wait for policy changes; instead, leveraging KakuSi’s localized production and sales system, it effectively mitigated the impact of tariff policies.

According to available data, Kaxu’s overseas production bases are located in European and American countries including the United States, Mexico, Germany, Spain, Belgium, Poland, Austria, and Slovakia. Situated within the same tariff zone as overseas vehicle manufacturers, Kaxu can keenly identify customers’ latest needs and respond promptly without having to route products through third countries. In addition, Kaxu has established R&D centers in locations such as the United States, Germany, Austria, and Shanghai, enabling it to develop products in sync with customers’ new model requirements. Under the general trend of shortening the new-vehicle development cycle from the previous 5–7 years to just 2–3 years, customers are willing to pay a premium for this “one-stop turnkey” service. As a result, Del Shares has been able to avoid the domestic price wars.

On the other hand, domestic automakers generally offer relatively long payment terms to their component suppliers, causing domestic component manufacturers considerable headaches over cash flow issues. This is precisely why industry associations and automakers have recently been urgently calling for an end to “involution.” Yet this pressure seems not to exist for KakuSi. Benefiting from more favorable payment policies from its overseas customers, Del Shares has demonstrated outstanding cash flow performance from operating activities in recent years. In 2024, cash received from sales of goods and provision of services totaled 4.72 billion yuan, representing an increase of approximately 8.5% year-on-year. The net cash flow generated from operating activities reached 480 million yuan, up 31.9% compared to the previous year.

In addition, Deli Shares has implemented a number of cost-reduction and efficiency-enhancing measures to cope with the challenging external environment, and the resulting improvements have gradually been reflected in its financial statements. Deli Shares’ gross profit margin rose from 16.4% in 2022 to 19.7% in the first quarter of 2025, while its operating expense ratio has continued to decline. During a period when the industry as a whole has generally experienced “revenue growth without profit growth,” Deli Shares has achieved growth against the trend, once again demonstrating that the value of a globalized business strategy lies not only in diversifying tariff risks but also in synchronously optimizing production capacity, R&D efforts, and cash flow—turning cyclical fluctuations into structural advantages.

Innovative Momentum Driven by Technological Extension

Kakus’s noise-canceling, thermal-insulating, and lightweight products have firmly established themselves as the core of Del’s revenue. In 2024, this segment accounted for 70.8% of the company’s total revenue, becoming a cornerstone that stabilizes Del’s performance. More importantly, amid the global automotive industry’s rapid shift toward electrification and intelligent technologies, Del is gradually transferring Kakus’s accumulated expertise from the traditional internal-combustion engine vehicle sector to the new-energy vehicle market.

In 2021, KakuSi established a New Energy Vehicle Division and subsequently developed and launched specialized products—including battery flame-retardant protective covers, battery pack electromagnetic shielding covers, motor wraps, and air compressor wraps—that significantly enhance the safety and comfort of new energy vehicles. Starting in 2022, KakuSi’s new products have been steadily supplied to European vehicle manufacturers, demonstrating both product quality and mass-production capabilities, and paving the way for the next phase of growth.

As consumer demand for quieter and lighter vehicles continues to rise, automakers are accordingly increasing their investment in NVH (Noise, Vibration, and Harshness) performance. According to a forecast by Mordor Intelligence cited by Guotai Haitong Securities, the global market size for soundproofing and thermal insulation materials will grow from US$16.9 billion in 2024 to US$22.2 billion by 2029. Industry insiders point out that thanks to its globally distributed production capacity and simultaneous development capabilities, KakuSi possesses inherent advantages in this field and is poised to continue benefiting from it.

In addition to KakuSi, Deli Shares also adopts a global perspective in the R&D of other new products. In the field of new-energy batteries, Deli Shares established Japan Deli in 2018 and began deploying resources into solid-state battery technology. Solid-state battery prototypes have successfully passed needle-prick, overcharge, and thermal abuse tests, as well as UN38.3 certification. Currently, Deli Shares possesses the capability to produce various types of prototype samples and is actively advancing the construction of a pilot production line. In the commercial vehicle sector, Deli Shares has recognized that hydraulic retarders have become standard equipment in overseas heavy-duty truck markets. Consequently, the company has independently developed hydraulic retarder products for the domestic market, which boast advantages such as high braking torque per unit mass, light weight, and compact size. These products have now been adopted in bulk by leading commercial vehicle customers.

Regarding the market development for the new product, industry insiders predict that Del Shares may leverage KakuSi’s global R&D, production, and sales system as well as its customer resources to launch innovative products into the global market in the future.

Restarting M&A to achieve two-way penetration both internally and externally.

In November 2024, Del Shares plans to acquire Aizhuo Technology, a company whose core business includes automotive film-decorated parts and automotive wrap-decorated parts. The company has long been deeply rooted in the Chinese automotive market, with clients including well-known domestic automakers such as FAW, BYD, Chery (including Zhijie), BAIC (including Xiangjie), and XPeng. Aizhuo Technology is a national high-tech enterprise and a specialized, refined, and innovative small- and medium-sized enterprise in Shanghai, and it possesses the capability to supply products to international markets.

Industry insiders pointed out that KakuSi’s overseas network can help Aizhuo Technology’s products enter the global market, while Aizhuo Technology’s strong local presence will enable KakuSi to expand into the domestic market, achieving mutual penetration. In terms of product synergy and support, Deli Shares’ motors, electric pumps, and mechanical pumps—as well as KakuSi’s noise-reduction, thermal-insulation, and lightweight products—all require extensive mold support. Aizhuo Technology boasts a mature mold design and manufacturing system, capable of providing low-cost, high-efficiency mold solutions that effectively reduce production costs and enhance R&D efficiency.

The announcement shows that Aizhuo Technology’s revenue and net profit in 2024 increased by 68.95% and 65.42%, respectively, year-on-year, demonstrating strong organic growth momentum. Its revenue is primarily concentrated in the domestic market, forming a natural complement to KakuSi’s overseas market revenue. Analysts say that if this transaction is successfully completed, Del Shares will simultaneously possess both an “overseas technology stronghold” and a “local traffic gateway,” further unlocking the company’s growth potential.

        In today’s context, Deli Shares has achieved a profound transformation—shifting the focus of competition from price to value—precisely through its acquisition of KakuSi. Eight years ago, Deli Shares made a forward-looking strategic move that enabled it to build three core competencies that are difficult for domestic peers to match: globalized production capacity deployment to hedge against regional risks, deep technological integration to enhance customer loyalty, and robust cash flow to support continuous innovation. At a time when “fighting involution” has become an industry-wide trend, this case points out a breakthrough path for Chinese auto parts manufacturers: by leveraging global resource allocation and deepening technological expertise, they can establish differentiated competitiveness in a broader landscape. With its globally oriented strategic capabilities, Deli Shares will become the most resilient ark capable of navigating economic cycles.