Consultants Forum    |   FacilityLocations    |   FastFacility    |   Advertise    |   Subscribe    |   Newsletter    |   RSSRSS

Automotive Industry Update 2007

As the Big Three aim for profitability, Toyota and Honda shoot for the stars.

Steve Stackhouse-Kaelble (Feb/Mar 07)
(page 2 of 2)
The Global Perspective
It should come as no surprise that the big automotive story globally is China. Analysts have been predicting and preparing for the rise of the Chinese auto industry for years, and the boom is occurring just as expected, according to Garel Rhys, director of the Centre for Automotive Industry Research at the Cardiff University Business School in Wales. "It seems to be accelerating because the Chinese are beginning to believe the people who are saying they are the next big thing," he says. "It's certainly a continuation of the trends of the last five years, when we've seen a lot of activity occurring in China."

Consider the statistics: China vaulted past Japan last year to become the world's number-two vehicle market (the United States is number-one). Car purchases in China were up 37 percent, according to the China Association of Automobile Manufacturers, and sales of all vehicles including trucks and buses were up 25 percent. Some 7.2 million vehicles were sold in China last year, compared with 5.7 million tallied in Japan by the Japan Automobile Manufacturers Association.

"Everybody thought the market in China would take a year off growth, but it didn't happen. It was another record year," says Rhys. And that has translated into major activity on the plant construction and expansion front. "In China, you probably have more than half of the world's activity in terms of expanding and building facilities," he says.

Behind the Chinese boom is robust economic growth, estimated at 10.5 percent for 2006. The growth has translated into great sales figures for Chinese automakers and foreign manufacturers alike. General Motors, for example, saw China sales rise 32 percent to nearly 880,000 vehicles and recently announced plans to build hybrids in China. Ford's China sales of all brands rose 87 percent to about 167,000 units. BMW's sales were up by more than 50 percent. In fact, high-end cars are selling so well that Rolls-Royce has had to hire more workers to meet the Chinese demand for its Phantom, which retails at more than $300,000. Shanghai General Motors Corp., a GM joint venture, is China's top-selling automaker, while the biggest Chinese manufacturer is Chery Automobile Co.

The next chapter of the China story involves exports. Chinese automakers exported some 325,000 vehicles in 2006, mostly trucks and buses destined for Asia, Africa and Latin America. But they have their sights set on Western markets. Changfeng Motor Co. brought SUVs and pickups to the Detroit Auto Show this year, signaling its intention to crack the American market in the not-too-distant future. DaimlerChrysler may team up with Chery to make small cars for sale in the United States and elsewhere within a couple of years. And ZX Auto has plans to enter the U.S. market by the middle of next year, which could make it the first Chinese car seller in the States.

Geely Automobile Co. also hopes to break into the American market next year. It had a presence at last year's Detroit Auto Show, and is gearing up production dramatically. "Geely wants to build 650,000 cars by 2013," says Rhys. "That really is a representation of what the other companies are doing. They are all expanding, and also expanding in the heavy truck and diesel engine areas."

Growth in India may be a bit overshadowed by the Chinese boom, but Rhys says India is full of opportunities: "More people are aware of the growth in India now."

Among recent headlines, Honda is making plans for its second Indian plant, a $200 million small-car plant in the western state of Rajasthan. Initial production would be about 50,000 units. Honda already is selling small sedans in India. Also, Volkswagen recently announced plans for a plant in Maharashtra state that by 2009 will build 110,000 cars annually.

Automakers are lured by promises of healthy economic growth in India. Some 1.1 million passenger cars were made there in 2005, and analysts expect that figure to reach 2 million by 2010.

Even with growing local demand, some Indian manufacturers have their eye on the global pie. For example, a small manufacturer named Mahindra & Mahindra is making plans to enter the American market, perhaps as soon as the fall of 2008. Word is that an SUV and a pickup would be the first products to hit the U.S. market.

Rhys sees activity and promise in Russia, where he says "the next 10 years in Russia are going to be very interesting, indeed, in automotive developments." Also, keep an eye on the Ukraine and other former Soviet bloc and Eastern European destinations. For example, Poland, the Czech Republic, and Slovakia have enjoyed positive automotive and component manufacturing headlines in recent years. One current report has Ford shifting production of its leading small-car brand, the Ka, from Spain to a production line in southern Poland.

Mexico continues to attract attention from automakers. Reports from the Mexican Automotive Industry Association indicate that at least three new plants could be established there in the next few years. General Motors, Volkswagen, and DaimlerChrysler are among those said to be looking, and the total investment estimates of $7.5 billion would match the investments made by automakers in the past six years.
<< Back  Page1 2   
Ask the Author
Have questions, comments or concerns about this article? Submit to Ask Area Development here and the author or an expert from our network of site selection and facility planning professionals will answer:
News Items
Around The Web
Studies/Research
News Items
Around The Web
Studies/Research

Share