The following discussion will provide additional detail on major assembler investment announcements by company during 2012. Complete details on all new capacity investment announcements for 2012 appear on pages 24 to 29 of this report. Previous reports in this series provide details on global new capacity investment announcements dating back to 1995.
A. Chrysler Chrysler, having just achieved two full years of profitability, made two new capacity investment announcements in 2012 totalling $1.64 billion and 165,000 new units of capacity.
Chrysler’s first announcement (see page 24 for complete details) was for $500 million to expand capacity at its plant in Saltillo, Mexico. Chrysler will add 45,000 units of capacity at the plant which currently assembles the Ram series of pickups. A Ram branded version of the Fiat Ducato commercial van will be added to assembly at the plant and Saltillo will become the North American centre for light commercial vehicle assembly in North America.
The second announcement for $1.14 billion, along with Russian partner Sberbank, was for a new assembly plant to be located in St. Petersburg, Russia. The plant will have a capacity of 120,000 units and will assemble Jeep SUVs when opened in 2014.
For 2012, Chrysler’s sales and market share were up in both the U.S. and Canada and Chrysler increased deliveries outside of North American to over 500,000 units. In addition to Russia, Chrysler/Fiat products are now being assembled in China.
B. Ford Ford made two new capacity announcements in 2012 totalling $1.36 billion and 500,000 additional units of capacity (see page 24). All 500,000 units of capacity added will be in China where Ford is moving fast to catch up with the sales leaders in the world’s largest light vehicle market.
Ford’s first announcement was to add 250,000 units of capacity to their joint venture plant in Chongqing, China at an expense of $600 million. Currently Ford assembles the Mondeo, Focus and S-Max at the plant. To these products Ford will add assembly of the EcoSport and Kuga when the capacity comes on line in 2014.
Ford’s second announcement was for $760 million to build a new assembly plant in Hangzhou, China. The plant will have a capacity of 250,000 units when opened in 2015. The Hangzhou plant will assemble the Ford Escape and EcoSport. When opened, Ford’s light vehicle assembly capacity in China will have increased to 1.2 million units.
Ford’s joint venture plants in China had previously included Mazda but Ford and Mazda have decided to go their separate ways in China. Ford is also looking to expand capacity in Brazil and to add a plant in Russia.
C. General Motors General Motors, exhibiting significant profitability over the past three years, made three new capacity investment announcements during the past year totalling $3.76 billion and 832,000 new units of capacity (see page 25 for complete details). The new capacity is being added in China and Russia.
General Motors, one of the top sellers in China, made two new capacity investments in China. The first investment, involving $2.2 billion and 300,000 units of capacity, was for a new plant to be located in Wuhan, China. This joint venture plant is with GM’s major partner in China, SAIC. The vehicles to be assembled at this plant were not announced. GM’s second investment in China will cost $1.06 billion and add another 400,000 units of capacity in China for GM and is also with SAIC. This assembly plant, which will also assemble engines, will be in Chongqing, China and the products to be assembled at the plant were not announced. When opened, these two new GM plants will increase General Motors’ assembly capacity in China to 1.8 million units.
General Motors also announced a $500 million investment to expand capacity at its plant in St. Petersburg, Russia from 98,000 units to 230,000 units. The St. Petersburg plant assembles the Opel Astra and Chevrolet Cruze. GM is also considering a future truck plant, possibly to be located in Thailand, and GM is also looking to upgrade its plant in Gujarat, India.
D. The Japanese Assemblers The Japanese assemblers, as a group, made $2.406 billion in new capacity investment announcements in 2012 adding 774,000 units of capacity (see pages 25 to 27 for details). Capacity was added in China, Thailand, Japan, Mexico, Canada and the U.S.
Honda. Honda made only one new capacity investment announcement in 2012 for $40 million. Honda announced that it would expand capacity at its plant in Greensburg, Indiana by 50,000 units. Capacity at the plant will grow to 250,000 units. Assembly of the Civic hybrid will be added to assembly of the Civic sedan and Acura ILX and ILX hybrid.
Honda is considering a new plant in China with its joint venture partner, Dongfeng Motor Group, to be tentatively located in Wuhan, China. With plans to increase North American sales to over 2 million units by 2016, Honda will be adding additional new capacity in North America.
Nissan. Nissan made three new capacity announcements in 2012 totalling $1.458 billion. The first announcement was to expand capacity at a joint venture plant with Dongfeng Motor Co. in Xiangyang, China. Assembly of two Infiniti models will be added to assembly of the Teana and Murano models at the Xiangyang plant. Plant capacity will be increased to 250,000 units. The second China announcement was for $785 million for a new assembly plant with joint venture partner Dongfeng. The plant will be located in Dalian, China and will have a capacity for 150,000 units. The plant will assemble unnamed upscale SUVs, sedans and MPVs. Nissan assembly capacity in China will grow to nearly 1.4 million units.
The third Nissan announcement was for a new plant to be located in Thailand. The plant will have a capacity of 150,000 units when opened in 2014 and the first vehicle to be assembled at the plant will be the Navara pickup. Nissan is also looking at the possibility of a new assembly plant to be located in Mexico and moving Infiniti assembly from Japan to Mexico.
Toyota. Toyota made three small new capacity announcements in 2012 totalling $580 million and 130,000 units of capacity. All of Toyota’s new capacity announcements were for North America.
Toyota announced expansions at both of their Canadian assembly plants. Toyota announced that they will expand capacity at their plant in Woodstock by 50,000 units raising Woodstock capacity to assemble the RAV4 SUV to 200,000 units. Toyota also announced that they will expand capacity in Cambridge by 30,000 units. The expansion will accommodate 30,000 additional units of the Lexus RX350 including a hybrid version of the RX350. The Woodstock and Cambridge expansions will increase Toyota capacity in Canada to over 500,000 units.
Toyota’s third announcement was to expand capacity at its Princeton, Indiana plant by 50,000 units. The Princeton expansion will accommodate additional assembly of the Highlander SUV including a hybrid version of the Highlander. In total, Toyota will be adding 1,200 assembly jobs in Canada and the U.S. through these expansions.
Other Japanese Assemblers. Other Japanese assemblers made three small expansion announcements totaling $328 million and 174,000 units of capacity.
Isuzu Motors Ltd. announced an investment of $128 million for a new plant to be located in Nanchang, Japan. The plant will have 100,000 units of capacity when opened in 2014 and will assemble commercial trucks. Mazda announced an additional expenditure of $125 million to add 50,000 units of capacity to a plant currently under construction in Guanajuato, Mexico. Guanajuato capacity will be expanded from 140,000 units to 190,000 and the additional capacity will be used to assemble a new subcompact vehicle for Toyota. Finally, Subaru announced an expansion of 30,000 units to their plant in Lafayette, Indiana. The added capacity will be used to assemble additional Outback crossovers and Legacy sedans and wagons. Lafayette capacity will be expanded to 200,000 units.
Mitsubishi Motors Corp. is said to be exploring additional assembly capacity in Russia and Thailand. Mazda is looking to expand capacity in Eastern Europe and is talking with Sollers in Russia. Isuzu has purchased land in Alabama with the intention of building a light truck assembly plant when market conditions warrant.
E. South Korean Assemblers Kia made one new capacity announcement in 2012 (see page 27) totalling $1 billion. Kia announced a new joint venture assembly plant (with Dongfeng Motor Corp. and Jiangsu Yueda Investment Company) to be located in Jiangsu province, China. The plant will have a capacity of 300,000 units when opened in 2014 and will be Kia’s third plant in China. Unnamed vehicles suitable for the local market will be assembled at the plant.
Hyundai has expressed interest in new capacity in Russia, the Ukraine and Thailand while Kia is interested in expanding capacity in Slovakia. With Hyundai/Kia pushing output at their two plants in Alabama and Georgia to the limit, Hyundai could be interested in another plant in North America.
F. Other Assemblers The remaining world assemblers announced new investments totalling $5.964 billion in 2012 (see pages 28 and 29) and 870,000 units of new capacity.
European Assemblers. European assemblers made $4.161 billion in new capacity investment announcements in 2012. Daimler made two announcements totalling $1.9 billion; Volkswagen made one announcement totalling $2 billion; and BMW made one announcement totalling $261 million.
Daimler’s two new announcements both involved plants to be located near Beijing, China. The first plant will be with joint venture partner Beiqi Foton Motor Co. and will be a new plant to assemble medium and heavy-duty commercial trucks. Capacity at the plant will be 160,000 trucks when opened in 2014. Daimler’s second expansion will be with joint venture partner Beijing Automotive Group and will expand capacity at the current Beijing Benz plant from 100,000 to 300,000 units. The added capacity will be used to assemble A class, B class GLA SUV compact vehicles from the MFA platform.
Volkswagen Group announced a new plant to be located in San Jose Chiapa, Mexico. The plant will have a capacity of 150,000 units when opened in 2016 and will assemble the Audi Q5 SUV. BMW announced a new plant to be located in Joinville, Brazil. The plant will have a capacity of 30,000 units and it is likely that the first vehicle to be assembled at the plant will be the BMW 3-Series.
In other European assembler news, Volkswagen is looking to expand capacity in Russia and further expand in China while Porsche is considering production in both the U.S. and China.
Indian Assemblers. Jaguar Land Rover, owned by Tata Motors Ltd. of India, announced a $1 billion joint venture plant with Chery Automobile Co. of China for a new plant to be located in Changshu, China. The plant will have an assembly capacity of 130,000 units and will assemble both Jaguar and Land Rover vehicles. Jaguar Land Rover is also examining the possibility of a plant to be located in Saudi Arabia.
Chinese Assemblers.Chinese assemblers, a fast growing force in the global automotive industry, made four new capacity investment announcements in 2012 totalling $803 million. These announcements understate the importance of Chinese new capacity investments. For all new joint venture investments made in China, credit has been given to the Detroit 3, Japanese, South Korean, European or Indian joint venture partner. The Chinese announcements given here represent only new capacity investments from Chinese light vehicle assemblers that do not involve a joint venture partner.
Chery Automobile Co. made two new capacity announcements. The first announcement ($400 million) was for a new plant to be located in San Paulo, Brazil. The plant will have a capacity of 150,000 units and will first assemble the Chery Celer. The second announcement, for $80 million, is for a new assembly plant to be located in Malaysia that will have a 10,000 unit capacity.
Beiqi Foton Motor Co. made one announcement for a new truck plant to be located in Camacari, Brazil. The plant will have a capacity of 30,000 units and will assemble commercial trucks. Beijing Automotive Industry Holding Corp. announced a new plant to be located in Springs, South Africa. The plant will have a capacity of 10,000 units and will assemble minibuses.
Clearly, as the automotive market in China continues to grow and continues to be the largest automotive market in the world, we will see ongoing capacity investments in China and more capacity being added by the Chinese automotive OEMs. The Chinese OEMs are generally supported by their provincial governments, support which allows them to invest in technology and capacity beyond what their sales numbers might suggest.
A number of observations can be made when examining the capacity building investment announcements of the major global automotive assemblers during 2012 and some current and forecasted industry production and sales data.
First, worldwide production of light and medium vehicles in 2012 was approximately 81.1 million units, up 6.6% over 2011. The Office of Automotive & Vehicle Research is forecasting worldwide production of light and medium vehicles to exceed 100 million units by 2017 with over 11 million units of this growth, or nearly 86% of the growth, occurring outside of North America. While some new assembly plants will be built in North America in the years ahead (primarily by the Japanese, South Korean, and European assemblers), real growth in assembly capacity will be coming in other parts of the world.
Second, light vehicle assembly in North America increased by 17.6% in 2012 to 15,475,654 units. This figure represents the highest vehicle assembly in North America since 2006.
Third, vehicle assembly and sales in China continue to grow. China has been, for several years, the largest vehicle sales market in the world (having passed the U.S.) and the largest assembly country in the world (having passed Japan). The Asia/Pacific region now accounts for 49.9% of global vehicle assembly (up from less than one-third in 2004) and will grow to 51.2% of vehicle assembly in 2017. North America accounted for 19.1% of global assembly in 2012 (down from 32.2% in 1995).
Fourth, light vehicle production in Canada grew by 15.4% in 2012 to 2,454,064 units with sales growing by 5.7% to 1,677,990 units. Light vehicle assembly in the U.S. grew by 19.5% to 10,140,812 units while assembly in Mexico was up 12.6% in 2012 to 2,880,778 units. North American light vehicle sales are expected to grow about 7.1% in 2013 to 18,340,000 units. The Japanese, European and South Korean assemblers will account for a slightly larger share of North American sales and production in 2013.
Fifth, light vehicle assembly in North America will exceed 17 million units by 2015 and will approach all time high North American production levels by 2017.
Sixth, the Detroit 3 accounted for nearly 60 percent of vehicle assembly in North America in 2011 but this is expected to decline to about 51 percent by 2015.
Seventh, nearly 60% of the light vehicle production growth in North America from 2012 to 2017 will come from the Japanese assemblers.
Eighth, total new capacity investment announcements for 2012 declined to $16.130 billion from $24.136 billion in 2011.
Ninth, the countries receiving the largest capacity investment announcements in 2012 were China, Mexico, Russia and Brazil.
Tenth, there were two new capacity investment announcements for Canada in 2012 totalling $180 million and 80,000 units (Toyota in Cambridge and Woodstock), three new announcements for the U.S. (totalling 124,000 units) and three new capacity announcements for Mexico (totalling 245,000 units).
Eleventh, China accounted for 59.6% of all the investment announcements made during 2012.
Twelfth, the new capacity announcements from the Detroit 3 in 2012 were made for China, Mexico and Russia.
For automotive parts suppliers, it is important to note a few things. Vehicle production in North America will grow back to volumes approaching normal pre-downturn levels by 2015. However, what new capacity may be added in North America will be added by the new North American manufacturers, not the Detroit 3. As they continue to grow in capacity, the NNAMs are looking for new supply sources, supply sources that are located close to their new plants. While difficult to break into, these are customers well worth pursuing. Outside of North America, production will be growing significantly in the Asia/Pacific region (especially in China, India, Indonesia and Thailand), in Eastern Europe (especially Russia, the Czech Republic, Poland, Romania and the Ukraine), in South America (Brazil and Argentina), and with a little growth in the Middle East and Africa. Table 9 shows where new capacity investments have been going over the past five years. The new capacity announcements shown in Table 9 represent plants that have recently opened or soon will be opening. These are the countries where production is and will continue to grow and where the parts market will also be growing.
As can be seen in Table 9, by far the leading region for new capacity investments in recent years is the Asia/Pacific region with 17,171,500 units of new capacity announced from 2007 to 2012. The leading automotive countries in the region (China and India) essentially have received more new capacity announcements than any of the other regions of the globe. Europe, particularly countries in Eastern Europe, and South American have also enjoyed as much or more new capacity investments since 2007 as North America. North America has received only 9.6% of all global new capacity announcements since 2007 with most of the new capacity (62.2%) going to Mexico. The Asia/Pacific region accounts for 64.9% of all new capacity announcements since 2007!
North American parts makers must look to the Chinese and Indian automotive markets and assemblers. Major Chinese independents and Indian assemblers such as Geely, Chery, Great Wall Automobile, Nanjing Automobile, Changfeng, ChangAn, Tata, Mahindra & Mahindra and others will be growing their parts purchasing in China, India, Eastern Europe, Latin America and, in the not too distant future, North America.
For companies most comfortable staying with traditional customers such as General Motors, Ford and Chrysler, you must be ready to move to new geographic markets. Future growth in sales from the Detroit 3 will be coming outside of North America. Staying with traditional customers in your home market is not going to work.