November 6, 2002
Shift to global platforms positions China for explosive growth – forecaster
Detroit, Michigan – CSM Worldwide, a global market intelligence and forecasting service, reported that China, as well as other countries in the Emerging Markets, is on the verge of realizing significant gains in global automotive production.
China will experience 13 percent annual compounded growth over the next five years, driving light-vehicle production to 4 million units by 2007. Additionally by 2007, China will be responsible for 56 percent of the growth in Emerging Markets light-vehicle production. (CSM defines Emerging Markets as Australia, China, India, Indonesia, Malaysia, Philippines, South Africa, Taiwan and Thailand.) The growth will be fed by industry consolidation and the rise of global platforms, and positions China to become not only a source for vehicles, but components, powertrains, tooling and machinery as well.
Growth in China is not without some risks, however. According to Bob Fish, CSM Chief Economist, “Being in position to succeed and succeeding are different matters, and businesses in China still must execute the plan to reap the benefits. Another possible detriment to expected growth is the question of whether the government will ever give up more than 50 percent equity in the country’s leading manufacturing companies.”
Other key findings:
- Asian economies are still generally dependent on exports to the United States, where consumer and capital spending are on a dull but positive growth path.
- Low-cost component sourcing from Asia could actually benefit UAW and CAW represented facilities in North America by lowering overall vehicle costs thus making those facilities more cost competitive.
- In Japan and Korea, B-segment and sub-compact cars represent the next major competitive battleground. In preparation, companies such as Toyota, Honda and Nissan are expanding overseas capacity and shifting domestic production priorities.
- As platform commonization proceeds, Western suppliers will become increasingly involved in Japan and Korea.
- In the Emerging Markets, competition will increase as quality, scales of economy and access to markets improve.
- Lower-cost global components are increasingly available from China, ASEAN and India. This will encourage OEM contracts in high-volume, mass market vehicles as OEMs must cut components costs.