Asia Investment Round-Up: Chongqing Could Be Interior China's Gateway
In BMI's monthly round-up of production investments, we track the latest projects from the production side of the industry and analyse trends that we see developing on a regional basis. In doing so, we hope to build a picture of any potential hubs that may be developing, as well as company strategy in terms of production bases and export programmes. Our latest update reviews investments from February 2014 to March 2014.
Chongqing Burnishes Its Auto Friendly Credentials
The recent investments by automakers and suppliers in China reinforce our bullish view on the Chinese auto market. Moreover, we believe the increasing number of firms basing their manufacturing operations in Chongqing highlights the region's strong potential as a production base.
While Chongqing has been China's motorbike manufacturing powerhouse for some time, producing over 8mn motorbikes annually, it has been attracting greater interest from automakers and suppliers in recent years. In 2012, Ford Motor opened its second Chongqing plant, which brought the automaker's total plants in the country to three. Fast forward to 2014, Nexteer Automotive Corp has based its steering systems plant in the city and Hyundai Motor is working with the local government to locate a suitable site in the city to build a new production facility ( see 'Hyundai's New Plant Will Help Defend Market Share', March 27).
As carmakers begin to target the interior regions of China to find new areas of growth, we expect this city to continue attracting greater investment from both automakers and suppliers, given its more inland location, which will serve as a gateway to the rural areas of the country.
Indian Firms Keep The Faith
Despite the challenging FY2013/14 (April-March), a period during which most Indian automakers saw a decline in their domestic sales, firms are showing their commitment to the market with their investment strategies. In our opinion, the significant FY2014/15 capex plans by both Maruti Suzuki and Tata Motors, aimed at rolling out new models and furthering research and development, is a sign that these firms are still keeping their faith in the market.
This also chimes with our view for a recovery in auto sales in FY2014/15, albeit a mild one, after industry sales experienced their first contraction in FY2013/14, since 2008.
At the same time, companies such as Daimler India Commercial Vehicles and Volvo Buses continue to invest in the commercial bus segment, which we see as holding promise despite the industry-wide downturn ( see 'Mahindra's Product Line Extension Smart Amid Downturn', January 30)
Suppliers Also Benefit From Indonesia's Export Potential
Regular readers will know that we have been highlighting the strengths of the Indonesian auto export base for some time. However, it is not just carmakers, which can benefit from the country's export potential, but suppliers as well.
The recent expansion in capacity by Pertamina Lubricants, the subsidiary of state energy company Pertamina, is an example of this. By building out additional domestic capacity for the region, the supplier will not just serve the Indonesian after-sales market, but will also be able to export its products to other customers in the South East Asian region ( see 'Pertamina Lubricants To Benefit From After-sales Market', March 13). Furthermore, we see the firm profiting from its access to cheap labour and the ample availability of raw materials in the country.
|Date Announced||Country||City/State/Region||Company||Value||Brief Description||Capacity||Export Destinations (if applicable)||Date Onstream|
|Feb-14||India||n/a||Kluber Lubrication India||INR1.5bn (US$24.6mn)||The synthetic lubricants specialist intends to expand its business by more than 25% in 2014 and has allocated INR1.5bn for expansion purposes over the next five years.||Not stated||n/a||2014-2019|
|Feb-14||Malaysia||Not stated||WSA Capital Corp Sdn Bhd & Venture Asean Pte Ltd||Undisclosed||The two companies have entered into a JV to manufacture automotive components in Malaysia for export purposes.||Not stated||ASEAN, Australia and global markets||Not stated|
|Mar-14||China||Shanxi province||BEM Shanxi Co.||US$200mn||Eco Motors & First Auto Works Jingye Engine Company have established a JV called BEM Shanxi Co, which will manufacture an advanced engine designed by EcoMotors in Shanxi in 2015. The JV will receive a US$200mn investment from First Auto's parent, FAW.||Not stated||Not stated||2015|
|Mar-14||Indonesia||Tanjung Priok||Pertamina Lubricants||IDR1.3trn (US$113mn)||The firm, a unit of state energy company Pertamina, plans to open two lubricant factories to capture the growing automotive demand in the country. The first will be a grease plant worth IDR500bn and the other will be a lube oil plant, which will cost IDR800bn.||8000 metric tons annually for the grease plant||Not stated||2014-2015|
|Mar-14||China||Chongqing||Nexteer Automotive Corp & Chongqing Changfeng Machinery Co||CNY300mn (US$49mn)||Nexteer's 50-50 joint venture with Chongqing Changfeng Machinery will build produce steering systems in Chongqing to supply automakers in the region.||Not stated||n/a||October 2014|
|Mar-14||China||Chongqing (likely location)||Hyundai Motor||Not stated||Hyundai intends to construct a fourth car plant in China to meet rising demand for its vehicles.||The new facility will have an annual production of 300,000 cars and will raise the automaker's domestic capacity to 1.51mn units.||Not stated||Not stated|
|Mar-14||China||Shanghai||Honan Corun New Energy Co.||CNY50mn (US$8.1mn)||The firm plans to build a plant in Shanghai to manufacture batteries for hybrid vehicles.||Not stated||Not stated||Not stated|
|Mar-14||India||n/a||Volvo Buses & SMK||INR1.25bn (US$20.8mn)||Volvo will launch a cheap brand of buses in India called UD buses with its local JV partner SMK. Volvo buses will own 15% of the JV and SMK, the rest.||Plant will have an initial capacity of 500 buses in phase 1, which will be ramped up to 2000-2500 buses in a few years time||South East Asia, West Asia and other regions||2014|
|Mar-14||India||Chennai||Daimler India Commercial Vehicles||INR4.25bn (US$70.8mn)||DICV plans to set up a dedicated bus manufacturing facility inside its existing truck manufacturing facility at Oragadam, which will employ 300 people.The firms expects to use the new facility for the manufacture and assembling of buses under the Mercedes Benz and BharatBenz brands.||1,500 buses annually||n/a||Q215|
|Mar-14||India||n/a||Tata Motors||INR15bn (US$250mn)||Tata will invest INR15bn in FY2014/15 to develop its CV business. The investment will be used for the launch of new products and variants, as well as enhancements, innovations and technologies for the business.||n/a||Not stated||n/a|
|Mar-14||India||n/a||Maruti Suzuki||INR40bn (US$667mn)||Maruti will invest INR40bn in FY2014/15 for R&D and new model launches.||n/a||Not stated||n/a|
|Mar-14||Taiwan||Changhua County & Greater Taiwan||Depo Auto Parts||TWD3-5bn (US$98.7-164.5mn)||The Taiwanese automotive components manufacturer plans to expand its domestic capacity and these investments are part of the firm's TWD10bn investment plan over 2014-2015. The company will invest the funds in a 12-hectare plot situated in Changhua Coastal Industrial Park and its facility in Greater Taiwan's Sinying District.||Not stated||Not stated||2014-2015|
|n/a - not applicable. Source: BMI|