Opportunities for Localising Automotive ComponentsPresentation by Roger Pitot, NAACAM To SA Institute of Foundrymen January 2011
Profile of NAACAM• Established 1980• Over 180 members with 260 plants• Members comprise 70% of dedicated auto component manufacturing companies in SA• Independently elected President and two Deputy Presidents, and 4 Executive Committee members• 5 Regions with Chairmen and Deputy Chairs – quarterly meetings for members in each region
Low Real Local Value within Components Imports 38 Imports =53%40% SA60% Net 24 Local Content =47%
Current Breakdown of costs and Local Content65%: % of total material cost 35%: true local material plus value add as % of total material cost Exterior Electrical / Electronic 10% •Glass •Harnesses •Paint •Starter motors •Bumpers 19% 3% •Alternators •Mirrors •Wiper systems •HVAC 5% Interior 23% •Cockpit Body •Seats •Door panels 7% 15% •Carpets •Bonnets 6% •Bootlids •Sideframes •Axles •Doors •Differentials Chassis and Drive-train •Drive shafts 33% 14% •Brakes
Challenges in Expanding and Deepening Local Content Electrical / Electronic Exterior • Lack of common• Low volumes / economies of scale specifications across OEMs• Frequently changing technology • Lack of competitive suppliers• Distance from design centres • Low volumes / economies of scale Interior • Differing raw materials specs (resins, carpets) Body • Differing technologies • Local steel quality • Local steel specifications • Differing OEM • Investment costs specifications • Local steel quality • Local steel specifications Chassis and Drive-train
Joint OEM InitiativeTo Increase Local Content: • Improve local suppliers’ competitiveness - Develop local suppliers (including Tier 2/3) - Consolidate local supplier base - Consolidate OEMs’ business (increase commonality of local suppliers) • Align existing OEM technologies and / or specifications wherever possible • Attract new technologies and / or suppliers
Approach: 5 Joint OEM Teams• Chassis and Drivetrain• Electrical / Electronic• Exterior• Interior• Body
Team Approach• List all commodities per Commodity Group• Analyse commodities, e.g. - Local vs. import - High value commodities not available in SA - Local commodities with high import content - Local commodities available locally but suppliers not well supported or well developed• Select high priority projects and assign project leaders & team members• Selective engagement of suppliers• Meet regularly, track progress
Opportunities - Body• Pressed part localisation: hand brake lever and side impact beams identified as further potential• Steel: 2010 Imported steel list sent to AMSA to determine whether some grades can be combined in one local grade. VW success in localising some steels already• Press shop JV with international partners: OEMs facilitating various JV’s with multinational partners• Localisation of BTR material for hot forming is major opportunity. Local equivalent hardness found below spec October 2010. Material composition being verified and next steps to be determined.
Opportunities - Interior• Localisation of vinyl. Headliner, sunvisor material lamination trials in progress.• Plastic injection moulded seat profiles. One OEM has approved local sourcing, others investigating.
Opportunities - Exterior• Increase local raw materials (Polypropylene) in local injection moulded plastic parts. OEMs studying potential for commonisation of PP specs and in discussions with potential supplier.• Automotive paints products: looking to increase local raw materials in various locally produced paints products.• Weather strips localisation: phase 1 would be limited to importation of extrusions with local cutting to size and then assembly; phase 2 would include local moulding of extrusions. Several OEMs in RFQ process with potential supplier.
Opportunities - Chassis• Driveshafts: looking to re-establish manufacturing of driveshafts in SA• Brake calipers: investigating potential to deepen localisation by localising castings, machining and plating.• Cold Coil Spring Steel Localisation not feasible – local market too small to justify investment• Wheel Rim (Band) Commonisation – complexity due to different materials and thickness
Opportunities – Electrical/Electronic• Instrument clusters: localisation of certain sub-components plus local assembly.• Review feasibility to localize hooters & horns – local supplier identified• Motors and Alternators: discussions with suitable local Tier 2 & 3 aluminium die castings suppliers.• Batteries: AGM (absorbed glass mat) battery manufacturing facility at local supplier being commissioned.• Vehicle harnesses: investigating opportunity to develop Tier 2 and 3 suppliers to localise Battery & Ring type terminals / Harness clips / Harness tape / Corrugated sleeving
Challenges & Opportunities• Maintaining local content on new models with higher levels ofnew technology• Global excess capacity of many suppliers• Supplier development capabilities of local organisations?• OEM Team member participation• Fast track introduction of certain new suppliers throughacquisition of existing suppliers