Move towards harmonisation of vehicle / parts standards an

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Conference on Regional Integration in Asia and
the Emerging Trade Regime
ITC Geneva, ICRIER , CII

• Supply Chain Linkages across borders in Asia
  Automobile Industry

Dilip Chenoy Director General SIAM
New Delhi
28 March 2007
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Presentation Outline

• Asia Vehicle Parts Production Overview
• Export of CBUs
• 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

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Asia Vehicle Parts Production Overview
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Auto Industry Growth 2001 -2012
(in 000 units)
Source DRI-WEFA
12 million units production growth in the period
of 2001-2012 13 million units in 2001
25 million units in 2012
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Production, Trade and Domestic Sales
Unit 1,000
Year 2005
Source JAPIA
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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.

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Export of CBUs by Japanese Auto Manufacturers 2002

• Source) Export from Japan JAMA
• Others Global Insight (DRI Automotive)

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Export of CBUs by N. American European Auto
Manufacturers 2002

• Source) Global Insight (DRI Automotive)

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CBU Export among Developed Countries 2002
Unit thousand (s)
Source) The Society of Motor Manufacturers and
Traders Ltd./ Wards Communication/ JAMA Note) 1/
France, Germany, Italy, Spain, Sweden 2/ EU 15
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Ch 86-89 SourceAFTA, ASEAN Trade Data
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Ch 86-89 SourceAFTA, ASEAN Trade Data
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Assembly plant Trim Final Test
Lines assembly fix
Press Shop Stamping
Body Shop Sub/Body Assembly

• Paint shop
• Clean
• Paint body

Component plants Diverse material processes
Engine Dress

• Raw
• Material
• Suppliers
• Steel
• Aluminium
• Polymers

• Engine Plant
• Machining
• Assembly
• Test

Foundry Casting of Engine block
Forge Forging of High-strength parts
Finished vehicle Into distribution And retail
network

• Transmission
• Plant
• Machining
• Assembly
• Test

STEPS IN PRODUCING AN AUTOMOBILE
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An Example of a sourcing structure of an OEM
Manufacturing Body-in-white, Painting final
assembly
Pre- assembly
Key Suppliers/groups (systems, modules)
Components suppliers /groups (components
,subsystems)
Materials, semi-finished, standard parts
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• Large Scale Effects
• High Technology
• Little product variability
• Light compact products

• ICs

• Scale Driven
• Moderate product variability
• Moderate weight/bulk

Global

• Alternators/starter motors
• Heat Exchangers
• Hub Units

2,000 Km

• HVAC systems
• Fuel Tanks

• Modules / Systems assemblies
• Moderate product variability
• Heavy / Bulky

300 400 Km

• Modules / Systems Assemblies
• Exact in-line sequencing
• Heavy / Bulky

• Seats
• Alarms
• Dashboards
• Painted Bumpers

20-30 km
GLOBAL SOURCING THE THEORY
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Systems Structure of an automobile
Source Time for a model change, Maxton Wormald
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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

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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

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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

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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

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FTAs Status in Asia
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)
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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.

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Thank you

• dchenoy_at_siam.in

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FTAs in Asia Pacific Region (as of Jan. 2004)
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MFN IMPORT DUTIES IN ASEAN