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Car makers target Asia as next major market
PM
AUTOMOTIVE
BRIEFING
C a r m a k e r s t a r g e t Asia as next major market THE d e v e l o p i n g n a t i o n s of Asia are emerging as the l a t e s t b a t t l e g r o u n d of t h e w o r l d c a r i n d u s t r y as t h e m a j o r m a n u f a c t u r e r s look for e x p a n d i n g future m a r k e t s a n d c h e a p e r sources of parts. China, Vietnam, T h a i l a n d and India are among the n a t i o n s c a u g h t u p in t h e flurry of activity as t h e car giants of Europe, N o r t h America a n d J a p a n seek a foothold in t h e region. I n d u s t r y analysts all p o i n t to Asia/Pacific as t h e m a j o r growth m a r k e t in t h e m e d i u m to long term, with car sales in Asia expected to treble during t h e n e x t 15 years. This reflects t h e fact t h a t a l t h o u g h 80% of t h e world's p o p u l a t i o n live outside western Europe, North America a n d J a p a n only 8% of t h e global vehicle sales are into t h e s e markets. Of t h e developing m a r k e t s China presents probably the greatest challenge a n d opportunity. The c o u n t r y h a s recently announced its automotive industry policy which it h o p e s will n o t only establish an internationally competitive manufacturing base, b u t also m a k e cars a " p a r t of Chinese family life". To achieve this t h e Chinese Government h o p e s to rationa-
lise its c u r r e n t chaotic set-up of a r o u n d 120 m a n u f a c t u r e r s to "six to seven m a n u f a c t u r e r s w h o would become t h e backbone of t h e industry". C h i n a p r o d u c e d 1.3 million vehicles in 1993, of w h i c h 1 million were cars, b u t p l a n s to have lifted a n n u a l p r o d u c t i o n to 3 million vehicles by 2000. Foreign manufacturers have welcomed t h e news that t h e y will b e e n c o u r a g e d to p a r t i c i p a t e in t h e C h i n e s e expansion. Although carm a k e r s including Volkswagen, Citroen and Peugeot have already established themselves in China, t h e r e is currently a freeze on further e n t r a n t s u n t i l 1996. As p a r t of its policy a n n o u n c e m e n t , however, C h i n a said it would welcome u p to four a d d i t i o n a l c a r m a k e r s after t h e m o r a t o r ium. US m a n u f a c t u r e r s Ford a n d General Motors, t o g e t h e r with Japanese companies Toyota, Nissan a n d H o n d a are all e x p e c t e d to m a k e strong bids for t h e s e slots. Foreign ownership in j o i n t ventures, however, will not be allowed to exceed 50% a n d manufact u r e r s will be limited to two j o i n t v e n t u r e s each. Vietnam is a n o t h e r Asian country a t t r a c t i n g a great deal
of i n t e r e s t from foreign m a n u facturers i n t e r e s t e d in setting up joint ventures. France's R e n a u l t a n d J a p a n ' s Mitsubishi Motors are a m o n g t h e leading m a n u f a c t u r e r s to sign m a n u f a c t u r i n g a g r e e m e n t s in V i e t n a m in r e c e n t m o n t h s . Renault h a s signed a letter of i n t e n t to supply kits to Vietn a m Motors (VMC) for assembly. VMC is i t s e l f a j o i n t v e n t u r e company, with Philippino, J a p a n e s e a n d Vietnamese p a r t n e r s . Mitsubsishi, m e a n while, h a s received governm e n t a p p r o v a l to form a j o i n t vehicle manufacturing and sales v e n t u r e in Vietnam with Proton, t h e Malaysian m a n u facturer. It is n o t only t h e established players in t h e world car i n d u s t r y , however, t h a t are looking to exploit t h e growth p o t e n t i a l in Asia/Pacific. S o u t h Korean industrial group Daewoo is currently establishing a j o i n t v e n t u r e in I n d i a to b o o s t its worldwide automotive interests. Daewoo h a s signed a j o i n t v e n t u r e a g r e e m e n t with DCM-Toyoto a n d e x p e c t s to begin assembling cars in 1995. The j o i n t v e n t u r e company, DCM-Daewoo, will b e c a p i t a l i z e d a t $200 m i l l i o n with Daewoo holding a con-
trolling 51% share. Daewoo will r e n o v a t e t h e p r o d u c t i o n lines a t DCM-Toyota's p l a n t in Noida City to assemble kits of its LeMans Racer. A n n u a l production h a s initally b e e n set at 25 000, b u t t h e r e are p l a n s to increase it to 50 000. Daewoo is also p l a n n i n g j o i n t v e n t u r e c a r a s s e m b l y p l a n t s in t h e Philippines, Vietnam, Uzbekis t a n a n d Romania. General Motors (GM) is also looking to India as p a r t of a global e x p a n s i o n strategy. T h r o u g h its E u r o p e a n operation, GM h a s recently established a joint venture to m a n u f a c t u r e t h e Opel A s t r a in India. Indeed, GM is using Opel, its G e r m a n subsidiary, to lead its e x p a n s i o n into new markets. The I n d i a n a n n o u n c e m e n t follows t h e e s t a b l i s h m e n t of similar v e n t u r e s in Talwan last year a n d Indones i a t h i s y e a r . GM is a l s o investigating manufacturing in China, P a k i s t a n a n d t h e P h i l i p p i n e s and, o u t s i d e of Asia, Russia, Colombia, Venezuala a n d Zimbabwe. Nor is t h e growing globilization of t h e world car industry limited to complete vechicle m a n u f a c t u r i n g or assembly, t h e r e is also increasing i n t e r e s t in sourcing p a r t s from t h e d e v e l o p i n g c o u n t r i e s of Asia. J a p a n e s e - b a s e d I s u z u Motors is already p l a n n i n g to b o o s t t h e p e r c e n t a g e of comp o n e n t s it buys from its Southeast Asian neighbours. This is evidenced by its p l a n s for a pick-up t r u c k with u p to 75% of i t s c o m p o n e n t s s o u r c e d from n a t i o n s s u c h as Thailand. Kozo Sakalno, p r e s i d e n t of I s u z u ' s N o r t h A m e r i c a n operations, says t h e p l a n reflects n o t only t h e c h e a p e r wages and infrastructure costs, b u t also t h e increasing engineering a n d m a n u f a c t u r ing know-how n o w available in S o u t h e a s t Asia. Sources: The Wall Street Journal Europe, Financial Times, Automotive News
6
MPR September 1994
AUTOMOTIVE
BRIEFING
C a r m a k e r s t a r g e t Asia as next major market THE d e v e l o p i n g n a t i o n s of Asia are emerging as the l a t e s t b a t t l e g r o u n d of t h e w o r l d c a r i n d u s t r y as t h e m a j o r m a n u f a c t u r e r s look for e x p a n d i n g future m a r k e t s a n d c h e a p e r sources of parts. China, Vietnam, T h a i l a n d and India are among the n a t i o n s c a u g h t u p in t h e flurry of activity as t h e car giants of Europe, N o r t h America a n d J a p a n seek a foothold in t h e region. I n d u s t r y analysts all p o i n t to Asia/Pacific as t h e m a j o r growth m a r k e t in t h e m e d i u m to long term, with car sales in Asia expected to treble during t h e n e x t 15 years. This reflects t h e fact t h a t a l t h o u g h 80% of t h e world's p o p u l a t i o n live outside western Europe, North America a n d J a p a n only 8% of t h e global vehicle sales are into t h e s e markets. Of t h e developing m a r k e t s China presents probably the greatest challenge a n d opportunity. The c o u n t r y h a s recently announced its automotive industry policy which it h o p e s will n o t only establish an internationally competitive manufacturing base, b u t also m a k e cars a " p a r t of Chinese family life". To achieve this t h e Chinese Government h o p e s to rationa-
lise its c u r r e n t chaotic set-up of a r o u n d 120 m a n u f a c t u r e r s to "six to seven m a n u f a c t u r e r s w h o would become t h e backbone of t h e industry". C h i n a p r o d u c e d 1.3 million vehicles in 1993, of w h i c h 1 million were cars, b u t p l a n s to have lifted a n n u a l p r o d u c t i o n to 3 million vehicles by 2000. Foreign manufacturers have welcomed t h e news that t h e y will b e e n c o u r a g e d to p a r t i c i p a t e in t h e C h i n e s e expansion. Although carm a k e r s including Volkswagen, Citroen and Peugeot have already established themselves in China, t h e r e is currently a freeze on further e n t r a n t s u n t i l 1996. As p a r t of its policy a n n o u n c e m e n t , however, C h i n a said it would welcome u p to four a d d i t i o n a l c a r m a k e r s after t h e m o r a t o r ium. US m a n u f a c t u r e r s Ford a n d General Motors, t o g e t h e r with Japanese companies Toyota, Nissan a n d H o n d a are all e x p e c t e d to m a k e strong bids for t h e s e slots. Foreign ownership in j o i n t ventures, however, will not be allowed to exceed 50% a n d manufact u r e r s will be limited to two j o i n t v e n t u r e s each. Vietnam is a n o t h e r Asian country a t t r a c t i n g a great deal
of i n t e r e s t from foreign m a n u facturers i n t e r e s t e d in setting up joint ventures. France's R e n a u l t a n d J a p a n ' s Mitsubishi Motors are a m o n g t h e leading m a n u f a c t u r e r s to sign m a n u f a c t u r i n g a g r e e m e n t s in V i e t n a m in r e c e n t m o n t h s . Renault h a s signed a letter of i n t e n t to supply kits to Vietn a m Motors (VMC) for assembly. VMC is i t s e l f a j o i n t v e n t u r e company, with Philippino, J a p a n e s e a n d Vietnamese p a r t n e r s . Mitsubsishi, m e a n while, h a s received governm e n t a p p r o v a l to form a j o i n t vehicle manufacturing and sales v e n t u r e in Vietnam with Proton, t h e Malaysian m a n u facturer. It is n o t only t h e established players in t h e world car i n d u s t r y , however, t h a t are looking to exploit t h e growth p o t e n t i a l in Asia/Pacific. S o u t h Korean industrial group Daewoo is currently establishing a j o i n t v e n t u r e in I n d i a to b o o s t its worldwide automotive interests. Daewoo h a s signed a j o i n t v e n t u r e a g r e e m e n t with DCM-Toyoto a n d e x p e c t s to begin assembling cars in 1995. The j o i n t v e n t u r e company, DCM-Daewoo, will b e c a p i t a l i z e d a t $200 m i l l i o n with Daewoo holding a con-
trolling 51% share. Daewoo will r e n o v a t e t h e p r o d u c t i o n lines a t DCM-Toyota's p l a n t in Noida City to assemble kits of its LeMans Racer. A n n u a l production h a s initally b e e n set at 25 000, b u t t h e r e are p l a n s to increase it to 50 000. Daewoo is also p l a n n i n g j o i n t v e n t u r e c a r a s s e m b l y p l a n t s in t h e Philippines, Vietnam, Uzbekis t a n a n d Romania. General Motors (GM) is also looking to India as p a r t of a global e x p a n s i o n strategy. T h r o u g h its E u r o p e a n operation, GM h a s recently established a joint venture to m a n u f a c t u r e t h e Opel A s t r a in India. Indeed, GM is using Opel, its G e r m a n subsidiary, to lead its e x p a n s i o n into new markets. The I n d i a n a n n o u n c e m e n t follows t h e e s t a b l i s h m e n t of similar v e n t u r e s in Talwan last year a n d Indones i a t h i s y e a r . GM is a l s o investigating manufacturing in China, P a k i s t a n a n d t h e P h i l i p p i n e s and, o u t s i d e of Asia, Russia, Colombia, Venezuala a n d Zimbabwe. Nor is t h e growing globilization of t h e world car industry limited to complete vechicle m a n u f a c t u r i n g or assembly, t h e r e is also increasing i n t e r e s t in sourcing p a r t s from t h e d e v e l o p i n g c o u n t r i e s of Asia. J a p a n e s e - b a s e d I s u z u Motors is already p l a n n i n g to b o o s t t h e p e r c e n t a g e of comp o n e n t s it buys from its Southeast Asian neighbours. This is evidenced by its p l a n s for a pick-up t r u c k with u p to 75% of i t s c o m p o n e n t s s o u r c e d from n a t i o n s s u c h as Thailand. Kozo Sakalno, p r e s i d e n t of I s u z u ' s N o r t h A m e r i c a n operations, says t h e p l a n reflects n o t only t h e c h e a p e r wages and infrastructure costs, b u t also t h e increasing engineering a n d m a n u f a c t u r ing know-how n o w available in S o u t h e a s t Asia. Sources: The Wall Street Journal Europe, Financial Times, Automotive News
6
MPR September 1994