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Automotive World Online - as OEMs Near-Shore China Prepares to Globalise
CVs Electronics eMobility Manufacturing OEMs Powertrain Safety Suppliers Research Megatrends
As OEMs near-shore, China
prepares to globalise
31 Aug 2012
by Automotive World
Posted in: Comment, OEMs
Over the last decade, many Western automotive companies, including Ford, GM,
BMW and Volvo, globalised their manufacturing footprint in order to take advantage of
vehicle and parts manufacturing in lower cost emerging markets. Whilst this strategy
has worked well in terms of helping Western car manufacturers find a foothold in
lucrative markets such as China, there is an interesting new trend developing: whilst
Western companies are now working on ‘near-shoring’ and reverse globalisation’
strategies, Chinese companies are looking to globalise their operations.
A recent study from Boston Consulting Group found that up to three million jobs could
potentially return to the US, as around a third of large US-based manufacturers – each
with sales greater than US$1bn – look to move manufacturing back from China to North
America. The study also found that future decisions on production locations would be
based on labour costs (57%), product quality (41%), ease of doing business (29%) and
proximity to customers (28%). In fact, Detroit was recently highlighted as a profit centre
once again as the city has started to ramp up its manufacturing base. A prime example
of this near shoring activity comes from Ford, which decided to source key components
from its Rawsonville plant rather than from suppliers in China.
Whilst Western companies are now working on near-shoring’ and ‘reverse
globalisation’ strategies, Chinese companies are looking to globalise their operations
This investment in US manufacturing is having the knock-on effect of helping to
persuade car manufacturers to source parts from North America once again, as well as
creating significant inward investment from European automotive companies looking to
take advantage of any upswing in the US economy and increased consumer confidence.
Thus the automotive industry in North America appears to have gone full circle, from
exploring globalisation opportunities to bringing some production back home.
As mentioned above, whereas many Western companies have recently started to focus
on nearshoring strategies, automotive companies based in emerging markets have
conversely been looking to globalise their manufacturing operations. Chinese
automotive companies have grown confidence in their car production skills, leading to
OEMs such as JAC Motors establishing a new plant in Brazil to manufacture cars
specifically for that market. As China’s domestic car production begins to reach a state
of over-capacity amid slowing market demand, domestic car producers such as Chery,
SAIC and JAC Motors are looking to explore business opportunities in other emerging
markets where their cars will be accepted by local buyers. Furthermore, having a
manufacturing plant in Brazil would provide an ideal stepping stone to begin selling
vehicles in the more lucrative North American market as and when Chinese vehicles
reach high enough quality levels to be accepted by buyers in that region.
Consumers have long been used to Japanese and Korean OEMs manufacturing
vehicles outside their home market. The question now is how long it will take for
consumers to accept Chinese cars being manufactured outside China
With this increased investment in North American plants and growing desires to re-