Asia Investment Round-Up: Philippines Gains Manufacturing Favour

In BMI's new 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 June to August 2013.

Dearer Fuel No Threat To Indonesia's Potential

At first glance, the recently legislated fuel price hikes in Indonesia in late June together with the financial markets turbulence in developing countries, would have logically deterred investment in the Indonesian autos market. However, it is our view that while the fuel price hikes will undoubtedly have a negative short-term impact on the market as vehicle sales get hurt, Indonesia still retains medium- to long-term potential ( see 'Fuel Price Hikes: Initial Thoughts', July 1).

In BMI's new 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 June to August 2013.

ASIA PRODUCTION INVESTMENT JUNE-AUGUST 2013
Date Announced Country City/State/Region Company Value Brief Description Capacity Export Destinations (if applicable) Date Onstream
Source: BMI. n/a - not applicable
Jun-13 Singapore Jurong Island Lanxess SGD656mn (US$516mn) Lanxess has opened a rubber butyl plant in Singapore which will create 160 local jobs. Rubber butyl is a key raw material needed to manufacture modern radial or tubeless rubber tyres. 100,000 metric tonnes by 2015 Asian markets 2013-2015
Jun-13 Indonesia Bekasi Bosch Indonesia US$12.8mn Bosch Indonesia will open a new component factory in Bekasi to produce oxygen sensors and injectors for car engines. About 120 staff will be employed. n/a n/a 2014
Jun-13 India Pune Great Wall Motor Undisclosed Great Wall will establish a car assembly plant in Pune and aims to start serial production latest by 2016. Not stated Not stated 2016
Jul-13 Thailand Bang Na-Trat Road Volvo Group (Thailand) THB5bn (US$159mn) THB2bn will be used to expand truck production to satisfy both local and overseas demand. The balance THB3bn will be used to extend service network and increase the number of dealerships from 10 to 17. 4,500 units South East Asian market 2013-2015
Jul-13 Indonesia n/a Toyota Gosei Safety Systems IDR80bn (US$7.3mn) Expand airbag production plant and install new production equipment. 1.5mn airbags and 800,000 steering wheel units ASEAN markets By 2016
Jul-13 India n/a Renault-Nissan US$5bn Both automakers will jointly investment US$2.5bn over the next four years. The investment will go towards building a base in India which will be used to introduce new technology and products to the domestic as well as other emerging markets. n/a Brazil, Russia, South Africa 2013-2018
Jul-13 Indonesia n/a Suzuki Motor JPY60bn (US$612mn) Suzuki will use the investment to manufacture small cars in Indonesia based on its fuel-efficient 660cc mini car sold in Japan. 200,000 units South East Asian market 2014-2015
Jul-13 Indonesia Jakarta Toyota Motor JPY23bn (US$236mn) Toyota will invest in a new car engine plant through its subsidiary PT Toyota Motor Manufacturing Indonesia to produce engines for non-international MPVs. The firm will hire at least 400 new workers. 216,000 engines a year n/a 2016
Jul-13 China Beijing BAIC, Beijing Electronics and SK Group CNY1bn (US$163mn) The three firms will form a joint venture to produce battery packs for EVs. SK will own 40% of the venture, while Beijing Electronics and BAIC will own 41% and 19% respectively. 10,000 battery packs a year n/a 2014
Jul-13 India Gujarat, Manesar and Gurgaon Maruti Suzuki India INR35bn (US$538mn) The firm has earmarked INR35bn for capital expenditure in FY2013/14. The funds will be used to expand production capacity as well as possibly set up plants in overseas markets. n/a Africa, Middle East and other neighbouring countries 2013-2014
Jul-13 India Not stated VE Commercial Vehicles INR10bn (US$154mn) VE Commercial Vehicles, a JV between Volvo Group and Eicher Motors, will invest INR10bn by the end of 2014 to expand an existing truck manufacturing plant and build a bus manufacturing facility. 100,000 engines by 2015. n/a 2013-2014
Aug-13 China Jiangsu Province Beijing Automotive Group Co (BAIC) CNY15bn (US$2.5bn) BAIC will takeover Zhenjiang Auto and invest CNY15bn in the CV manufacturer to restructure its production facilities towards the production of cars. 300,000 units n/a Not stated
Aug-13 China Beijing Daimler AG EUR2.0bn (US$2.64bn) Daimler will use the investment to introduce 20 new or upgraded models in the Chinese car market over the next two years as it aims to increase annual sales to over 300,000 units. 300,000 units Not stated 2013-2015
Aug-13 Thailand Rayong Province Toyota Boshoku US$18mn A new automotive interior components firm Boshoku Automotive (Thailand) Co Ltd will be established by Toyota Boshoku, which will supply parts to nearby automotive manufacturers. Not stated n/a 2014
Aug-13 Philippines Manila Mitsubishi Motors US$202mn Mitsubishi will be expanding its local production by building a second assembly plant in the outskirts of Manila by 2015. The plant will manufacture subcompacts, sports utility vehicles and other models by 2017. 100,000 units by 2015 and 200,000 units by 2017 ASEAN markets 2015
Aug-13 Indonesia Cikampek Volkswagen EUR200mn (US$264mn) Volkswagen will make an announcement later this year on building a new plant in Cikampek, West Java, according to an Indonesian Minister. Not stated South East Asia markets Not stated
Aug-13 China Guangdong Beiqi Foton Motor CNY3.2bn (US$523mn) Beiqi Foton intends to build an assembly plant in Guangdong province to expand its passenger vehicle business. After the factory becomes operational, Beiqi will merge its existing plant in Foshan with this facility. 240,000 SUVs and pick-ups n/a Not stated

Dearer Fuel No Threat To Indonesia's Potential

At first glance, the recently legislated fuel price hikes in Indonesia in late June together with the financial markets turbulence in developing countries, would have logically deterred investment in the Indonesian autos market. However, it is our view that while the fuel price hikes will undoubtedly have a negative short-term impact on the market as vehicle sales get hurt, Indonesia still retains medium- to long-term potential ( see 'Fuel Price Hikes: Initial Thoughts', July 1).

In line with our view, we have witnessed a number of investments in the sector since the upward revision in pump prices, as firms remain bullish on the country's consumer story. Furthermore, it is BMI's long-held view that the market's low degree of localisation will attract more supplier investments in the coming years, as parts makers look to support the increasing investment by original equipment manufacturers (OEMs), and OEMs seek to reduce their costs by sourcing components locally ( see 'Bosch Indonesia Embraces Local Manufacturing', July 10).

We have also maintained that Indonesia's newly enacted low-cost green car (LCGC) law is a boon to auto production and we expect more investment (such as the one by Suzuki in July) in this space as automakers take advantage of tax breaks to manufacture fuel-efficient cars ( see 'Suzuki Will Benefit From LCGC Incentives', August 1).

Philippines Gains Favour With Manufacturers

It is another of BMI's views that the Philippines in set to be the fastest growing Asian market in 2013 and 2014 as its nascent consumer story begins to take off just as its regional peers suffer from a myriad of headwinds ( see 'Philippines On Course To Be Asia's Top Performer', July 22). Although the boom in sales was largely satisfied through dealership imports in the past, we recently see promising signs of investment in domestic manufacturing.

Mitsubishi Motors is investing US$202mn to build a second assembly plant and increase its domestic capacity to 100,000 units by 2015 and 200,000 units by 2017. The Philippines remains an important market for Mitsubishi in its quest to increase its penetration of South East Asian countries. Additionally, Japanese automaker Toyota Motor has indicated that it aims to bolster its strong domestic presence by increasing its investment in local manufacturing ( see 'Toyota Leads The Way In Increasing Localisation', July 15). These developments could signal the start of the Philippines gaining favour as a manufacturing base and we see auto production getting a boost in the coming years.

China Rebalancing View Well-Placed

The recent investments by Beiqi Foton Motor and Beijing Automotive Group Co towards increasing their passenger car production capacity validates our view that the car segment will outperform the commercial vehicle (CV) segment in the coming years. Indeed, as the Chinese economy rebalances from an investment-led model to one where private consumption makes up a bigger share, we expect more CV capacity to be re-oriented towards passenger car production in the coming years.

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This article is tagged to:
Sector: Autos
Geography: Asia, Asia, China, Indonesia, India, Philippines, Singapore, Thailand, Asia, Asia, Asia, Asia
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