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Conference on Regional Integration in Asia and the Emerging Trade Regime
Supply Chain Linkages across borders in Asia : Automobile Industry
ITC Geneva, ICRIER , CII
New Delhi 28 March 2007
Dilip ChenoyDirector General SIAM
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 OverviewCountry 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
12 million units production growth in the period of 2001-2012
13 million units in 2001 25 million units in 2012
Source: DRI-WEFA
2001 2012 Diff % ShareNORTH 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%
17,777
821 773 347
9,801
2,7031,800
5,906
1,1711,4602,435
20,019
2,500
6,500
527905
17,546
20,430
0
5000
10000
15000
20000
25000
NorthAmerica
Europe Japan China SouthKorea
ASEAN India Australia Taiwan
2001
2012
(in ‘000 units)
Auto Industry Growth : 2001 -Auto Industry Growth : 2001 -20122012
Production, Trade and Domestic Sales
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
Thailand
Malaysia
Indonesia
Philippines
2,365
1,125
563
622
55
531
464
47
10
10
1,885
703
551
534
97
India 1,642 196 1,440
Taiwan 446 515
Total 24,660 16,528
World 64,539 Asia’s Share 38.2%
Year 2005 Unit: 1,000
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)
Source) The Society of Motor Manufacturers and Traders Ltd./ Ward’s Communication/ JAMANote) 1/ France, Germany, Italy, Spain, Sweden 2/ EU 15
Japan & S. Korea
W. Europe United States
Australia
1911/1,1322/ 2,447 32
991/316
9081/
1642/
12
ASEAN Exports
0
1000
2000
3000
4000
5000
6000
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Year
US
D m
illio
n
Intra ASEAN China India Japan Korea
*Ch 86-89Source:AFTA, ASEAN Trade Data
ASEAN Imports
0.0
2000.0
4000.0
6000.0
8000.0
10000.0
12000.0
14000.0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Year
US
D m
illi
on
Intra ASEAN China India Japan Korea
*Ch 86-89Source:AFTA, ASEAN Trade Data
PressShop
Stamping
Body ShopSub/BodyAssembly
Component plantsDiverse material &
processes
FoundryCasting of Engine block
ForgeForging ofHigh-strengthparts
TransmissionPlant•Machining•Assembly & •Test
Engine Plant•Machining•Assembly &Test
Paint shop•Clean•Paint body Assembly plant
Trim Final Test & Lines assembly fix
RawMaterialSuppliers•Steel•Aluminium•Polymers
EngineDress
Finished vehicleInto distributionAnd retail network
STEPS IN PRODUCING AN AUTOMOBILE
ManufacturingBody-in-white,
Painting final assembly
Key Suppliers/groups(systems, modules)
Components suppliers /groups(components ,subsystems)
Pre-assembly
Materials, semi-finished, standard parts
An Example of a sourcing structure of an OEM
•Large Scale Effects•High Technology•Little product variability•Light compact products
•Scale Driven•Moderate product variability•Moderate weight/bulk
•Modules / Systems assemblies•Moderate product variability•Heavy / Bulky
•Modules / Systems Assemblies•Exact in-line sequencing•Heavy / Bulky
•ICs
•Alternators/starter motors•Heat Exchangers•Hub Units
•HVAC systems•Fuel Tanks
•Seats•Alarms•Dashboards•Painted Bumpers
Global
20-30 km
300 – 400 Km
2,000 Km
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 AsiaJapan 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 AFTA AFTA AFTA AFTA N AFTA
Thai N EHPE EHPE AFTA X AFTA AFTA AFTA AFTA
Malay N AFTA AFTA X AFTA AFTA AFTA
Sing EPAE CECA AFTA AFTA X AFTA FTAA AFTA
Phil N AFTA AFTA AFTA AFTA X AFTA
Korea N S N FTAA X
Indonesia N AFTA AFTA AFTA AFTA AFTA 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 AFTA• External tariff rates lowered but much higher than AFTA• 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.
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%
