ITC Geneva, ICRIER, CII Conference on Regional Integration in Asia and the Emerging Trade Regime Supply Chain Linkages across borders in Asia : Automobile Industry Dilip Chenoy Director General SIAM New Delhi 28 March 2007
Presentation Outline Asia : Vehicle & Parts Production Overview Export of CBU s ASEAN Exports and Imports Steps in producing a vehicle Global sourcing Automotive Supply in Asia Supply Linkages in Asia Status and impact of FTAs & RTAs in Asia
Asia : Vehicle & Parts Production Overview Country Production Million nos. Local firms Foreign firms Parts/Materials Nature of capitalisation Nos. China 5.70 8 17 Local & Foreign 2000 + India 1.64 7 12 Local & Foreign 530+ Indonesia 0.50-7 Local & Foreign 171 Japan 10.79 8 4 Local 468 Korea 3.69 3 3 Foreign & local 913 Malaysia 0.56 1 4 Local & Foreign 117 Philippines 0.65-5 Foreign 256 Thailand 1.12-10 Local & Foreign 809 Vietnam 0.35-14+ Foreign 46
Auto Industry Growth : 2001-2012 (in 000 units) 25000 20000 15000 10000 5000 0 20,430 20,019 North America 17,546 17,777 2001 2012 6,500 5,906 2,435 9,801 1,460 2001 2012 Diff % Share NORTH AMERICA 20019 20430 411 2% EUROPE 17777 17546-231 -1% JAPAN 5,906 6,500 594 5% CHINA 2,435 9,801 7,366 62% SOUTH KOREA 1,460 2,500 1,040 9% ASEAN 1,171 2,703 1,532 13% INDIA 821 1,800 979 8% AUSTRALIA 773 905 132 1% TAIWAN 347 527 180 2% TOTAL ASIA 12,913 24,736 11,823 100% 2,500 Europe Japan China South Korea 1,171 2,703 1,800 905 821 773 Source: DRI-WEFA 527 347 ASEAN India Australia Taiwan 12 million units production growth in the period of 2001-2012 13 million units in 2001 25 million units in 2012
Production, Trade and Domestic Sales Year 2005 Unit: 1,000 Country Production Export Import Domestic Sales Japan 10,800 5,053 268 5,852 China 5,708 195 162 5,762 Korea 3,699 2,586 32 1,142 ASEAN 2,365 531 1,885 Thailand 1,125 464 703 Malaysia 563 47 551 Indonesia 622 10 534 Philippines 55 10 97 India 1,642 196 1,440 Taiwan 446 515 Total 24,660 16,528 World 64,539 Asia s Share 38.2% Source JAPIA
Importance of Asian Auto Market Low growth for auto in developed markets Importance of Asia increasing would be a 10 million market with three hubs China, India and ASEAN. Number of component suppliers would increase. Sourcing from Asia to increase as auto makers increase sourcing from low cost countries Move towards harmonisation of vehicle / parts standards and technical regulations.
Export of CBUs by Japanese Auto Manufacturers 2002 Source) Export from Japan: JAMA Others: Global Insight (DRI Automotive)
Export of CBUs by N. American & European Auto Manufacturers 2002 Source) Global Insight (DRI Automotive)
CBU Export among Developed Countries 2002 Unit: thousand (s) Japan & S. Korea 191 1/ 1,132 2/ 2,447 32 908 1/ W. Europe 164 2/ United States 99 1/ 316 12 Source) The Society of Motor Manufacturers and Traders Ltd./ Ward s Communication/ JAMA Note) 1/ France, Germany, Italy, Spain, Sweden 2/ EU 15 Australia
6000 ASEAN Exports 5000 USD million 4000 3000 2000 1000 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Intra ASEAN China YearIndia Japan Korea *Ch 86-89 Source:, ASEAN Trade Data
USD million 14000.0 12000.0 10000.0 8000.0 6000.0 4000.0 2000.0 0.0 ASEAN Imports 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Intra ASEAN ChinaYear India Japan Korea *Ch 86-89 Source:, ASEAN Trade Data
Press Shop Stamping Body Shop Sub/Body Assembly Paint shop Clean Paint body Assembly plant Raw Material Suppliers Steel Aluminium Polymers Component plants Diverse material & processes Foundry Casting of Engine block Forge Forging of High-strength parts Engine Plant Machining Assembly & Test Transmission Plant Machining Assembly & Test Trim Final Test & Lines assembly fix Engine Dress Finished vehicle Into distribution And retail network STEPS IN PRODUCING AN AUTOMOBILE
An Example of a sourcing structure of an OEM Preassembly Manufacturing Body-in-white, Painting final assembly Key Suppliers/groups (systems, modules) Components suppliers /groups (components,subsystems) Materials, semi-finished, standard parts
Large Scale Effects High Technology Little product variability Light compact products ICs Scale Driven Moderate product variability Moderate weight/bulk Alternators/starter motors Heat Exchangers Hub Units Global 2,000 Km Modules / Systems assemblies Moderate product variability Heavy / Bulky 300 400 Km Modules / Systems Assemblies Exact in-line sequencing Heavy / Bulky 20-30 km HVAC systems Fuel Tanks Seats Alarms Dashboards Painted Bumpers GLOBAL SOURCING :THE THEORY
Source : Time for a model change, Maxton & Wormald Systems Structure of an automobile
GLOBAL SOURCING : PRACTICE Most systems or parts cannot simply be exchanged between different car types or even between different models occupying the same segment. They are typically dimensioned precisely to the requirements of the individual model and have to fulfill very precise interface requirements. Family of suppliers uniquely affiliated to a given vehicle manufacturer Some suppliers large & powerful : supply to many
Automotive Supply in Asia Auto parts production increasing in Asia Production of labour intensive parts being transferred to low cost countries Industry in each country at different stage of development China & Malaysia : preferential treatment Thailand & India : Enhancing competitiveness Technical assistance to local companies poor OEMs looking to increase local content Specialist suppliers for steel, plastics, aluminium
Supply Linkages in Asia (1) Nissan China & Thailand to supply parts globally Thailand Engine plant would supply to Malaysia and Indonesia Thailand to promote procurement from ASEAN and optimise investments relating to vendors Honda Moved Asia Pacific HQ to Thailand Local component production started in Indonesia, Philippines, Malaysia & Thailand Consolidation of sourcing launched in India Hyundai 10+ Korean suppliers in Thailand supply parts to India
Supply Linkages in Asia (2) Toyota Thailand emerging as centre for engines, India & Philippines for transmission For the IMV in ASEAN 90% parts from Thailand rest from ASEAN. CKD exports from Thailand Mitsubishi Tires, sintered parts, wheels and gaskets from Malaysia, forged parts from Indonesia, transmissions from Philippines India OEMs start sourcing from China & ASEAN Steel Preferred supply base Japan & Korea
FTAs Status in Asia Japan China India ASEAN Thai Malay Sing Phil Korea Indonesia Japan X S N EPAA EPAA EPAE EPAA N N China X EHPE EHPE India S X CECAA EHPE CECAA ASEAN N EHPE CECAA X N Thai N EHPE EHPE X Malay N X Sing EPAE CECA X FTAA Phil N X Korea N S N FTAA X Indonesia N X S = Studying, N = Negotiating EPA = Economic Partnership Agreement A= Agreed E = In effect EHP = Early Harvest Programme CECA = Comprehensive Economic Cooperation Agreement ( as of 2005)
Impact of RTAs & FTAs on Supply Chain Duties lowered and or eliminated within External tariff rates lowered but much higher than Application specific models and variants being developed for and manufactured in ASEAN. Japanese, US and European automakers have moved base to Thailand : Export to ASEAN and other regions Exports of vehicles, parts, components to ASEAN and other markets to grow in volume and type Parts and components for after market sourced principally from the ASEAN. Most global TIER 1 part makers to set up manufacturing facilities in ASEAN linked to local firms. Currently China, Korea and India have negligible exports to ASEAN. OEMs would continue to determine sourcing.
Thank you dchenoy@siam.in
FTAs in Asia Pacific Region (as of Jan. 2004)
MFN IMPORT DUTIES IN ASEAN INDONESIA MALAYSIA PHILIPPINES THAILAND PASSENGER CARS CKD 25% - 50% 25% - 35% 10% 33% CBU 45% - 80% 80% - 200% 20% - 30% 80% COMMERCIAL VEHICLES CKD 25% 0% - 40% 3% 10% - 33% CBU 5% - 45% 30% - 200% 15% - 30% 30% - 60% MOTORCYCLES CKD 5% - 25% 5% - 30% 3% 0% CBU 35% - 60% 60% - 120% 30% 60%