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Automotive World Online - as OEMs Near-Shore China Prepares to Globalise
Automotive World Online - as OEMs Near-Shore China Prepares to Globalise
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Automotive World Online - as OEMs Near-Shore China Prepares to Globalise

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  • 1. Login Join Email Alerts Contact Search... CVs Electronics eMobility Manufacturing OEMs Powertrain Safety Suppliers Research Megatrends As OEMs near-shore, China prepares to globalise 31 Aug 2012 by Automotive World Posted in: Comment, OEMs Over the last decade, many Western automotive companies, including Ford, GM, BMW and Volvo, globalised their manufacturing footprint in order to take advantage of vehicle and parts manufacturing in lower cost emerging markets. Whilst this strategy QUICK LINKS has worked well in terms of helping Western car manufacturers find a foothold in lucrative markets such as China, there is an interesting new trend developing: whilst Western companies are now working on ‘near-shoring’ and reverse globalisation’ News Releases strategies, Chinese companies are looking to globalise their operations. Analysis A recent study from Boston Consulting Group found that up to three million jobs could Research potentially return to the US, as around a third of large US-based manufacturers – each with sales greater than US$1bn – look to move manufacturing back from China to North America. The study also found that future decisions on production locations would be based on labour costs (57%), product quality (41%), ease of doing business (29%) and proximity to customers (28%). In fact, Detroit was recently highlighted as a profit centre once again as the city has started to ramp up its manufacturing base. A prime example of this near shoring activity comes from Ford, which decided to source key components from its Rawsonville plant rather than from suppliers in China. Whilst Western companies are now working on near-shoring’ and ‘reverse globalisation’ strategies, Chinese companies are looking to globalise their operations This investment in US manufacturing is having the knock-on effect of helping to persuade car manufacturers to source parts from North America once again, as well as creating significant inward investment from European automotive companies looking to take advantage of any upswing in the US economy and increased consumer confidence. Thus the automotive industry in North America appears to have gone full circle, from exploring globalisation opportunities to bringing some production back home. As mentioned above, whereas many Western companies have recently started to focus on nearshoring strategies, automotive companies based in emerging markets have conversely been looking to globalise their manufacturing operations. Chinese automotive companies have grown confidence in their car production skills, leading to OEMs such as JAC Motors establishing a new plant in Brazil to manufacture cars specifically for that market. As China’s domestic car production begins to reach a state of over-capacity amid slowing market demand, domestic car producers such as Chery, SAIC and JAC Motors are looking to explore business opportunities in other emerging markets where their cars will be accepted by local buyers. Furthermore, having a manufacturing plant in Brazil would provide an ideal stepping stone to begin selling vehicles in the more lucrative North American market as and when Chinese vehicles reach high enough quality levels to be accepted by buyers in that region. Consumers have long been used to Japanese and Korean OEMs manufacturing vehicles outside their home market. The question now is how long it will take for consumers to accept Chinese cars being manufactured outside China With this increased investment in North American plants and growing desires to re- eMagazines Webinars Conferences Contact Us
  • 2. shore manufacturing to their home market, it will be left to emerging market countries such as China to drive the continued globalisation of the automotive industry. It is inevitable that some Chinese OEMs will look for their suppliers to enter new markets with them in order to guarantee the delivery of key components. However, it is still unknown whether China-based suppliers will be able to scale their operations quickly enough or if Chinese OEMs will choose to source parts locally from key suppliers like Delphi, Bosch and Johnson Controls. Consumers have long been used to Japanese and Korean OEMs manufacturing vehicles outside their home market. The question now is how long it will take for consumers to accept Chinese cars being manufactured in locations outside China. One thing is for sure: the globalisation of the automotive industry will continue for many years to come. The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd. Mark Morley is Automotive Director at GXS. The AutomotiveWorld.com Expert Opinion column is open to automotive industry decision makers and influencers. If you would like to contribute an Expert Opinion piece, please contact editorial@automotiveworld.com. About | Terms & Conditions | Privacy Policy | Copyright Information | Site map | WebjectS. © automotive world ltd. all rights reserved.

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