Autos Investment Round-Up: Supply Chain Increasingly Mature


In BMI 's regular 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 January to May 2013.

Latin America Production Investment Jan- May 2013
Date Announced Country City/State/Region Company Value Brief Description Date Onstream
Compiled by BMI
May-07 Brazil Fiat US$7.46bn Expanding capacity to build cars, trucks, and heavy equipment in the country. Also, Fiat to invest in its engine manufacturing in the country. 7,700 direct new jobs created 2016
May-03 Mexico Guanajuato Honda Motor US$470mn Transmission plant. 1,500 new jobs. Initial capacity of 350,000 annually 2015
May-02 Mexico Furukawa Electric US$12.2mn Wires and cables produced at this new plant will be sold in Mexico and exported to Latin America and Europe. Initially employing 300 new workers 2014
Apr-15 Mexico Silao, Guanajuato Autoneum Through a partnership with Japanese producer Nittoku, site will manufacture acoustic and thermal management components 2013
Apr-04 Mexico San Luis Potosi North American Lighting Mexico US$55mn New production plant
Apr-04 Mexico San Luis Potosi Nissan Manufacturing US$90mn New production plant
Apr-01 Mexico Nidec Nidec has announced that it is to establish Nidec Automotive Motor Americas Corporation as the strategic base for its automotive motor business in the Americas region. The site will emply 534 workers in Mexico and 14 in the United States, allowing the company to better target the high-growth North America market, in addition to elsewhere in the Americas region.
Mar-22 Brazil ArcelorMittal Vega US$10mn New post-treatment technology at its galvanising plant. Site has 540,000 annualt production capacity
Mar-19 Mexico Mitsubishi Electric Corporation Establish a new Mexico-based subsidiary, Mitsubishi Electric Automotive de Mexico, to manufacture and sell automotive equipment for domestic and export markets
Feb-28 Mexico Guanajuato Hella US$100mn Build new automotive lighting and electronic systems manufacturing site. Annual capacity of 1.2mn headlamps and 1.5mn real combination lamps for North American and Latin American regions 2013
Feb-25 Brazil Sao Paulo Toyoda Gosei US$45mn Rubber and plastic components 2014
Feb-08 Mexico Jatco US$220mn Build autos transmission plant. 400,000/yr capacity 2014
Jan-28 Brazil Gravatai Industrial Complex General Motors Adding third shift to plant. 1,450 direct jobs
Jan-16 Mexico Silao Volkswagen New engine plant. 330,000/yr capacity. Will supply VW's US and Mexico production facilities
Jan-04 Mexico Mazda Increasing capacity. 230,000/yr capacity 2014
Jan-03 Mexico Guanajuato GSW Internal Manufacturing US$2.15 Wiring harnesses for vehicles. Will export to Mexico, US, Japan, Indonesia, Thailand 2013
Jan-03 Mexico Guanajuato Hanwa Steel US$40mn Steel sheets 2013

Looking at the table, a number of trends stand out.

Mexico Investment

A number of auto companies have invested in the central Mexican states over the year, and the area is fast becoming a key site for industrial productivity. BMI believes that as the area develops, companies will be increasingly keen to invest, as a consolidated manufacturing base would offer a number of cost-reducing opportunities, such as economies of scale, availability of skilled labour, and good infrastructure and transport links. We expect this trend to continue.

Further, BMI maintains a bullish outlook on auto production in Mexico, predicated on low labour costs; relative weakness in the peso, which will serve to make exports more competitive; a high number of free trade agreements (FTAs), including the North American Free Trade Agreement (NAFTA); and comparative weakness in the productive capacity of Mexico's regional competitors. We believe that these factors have informed the strong investment across the supply chain over the year to date, and should continue to attract autos investment in the country, particularly for export-orientated production.

Brazil View Playing Out

BMI maintains a bullish view on the Brazilian passenger car market, forecasting sustained growth over our forecast period to 2017. As the passenger car segment continues to grow, we expect auto companies to invest across the supply chain.

The Brazilian government's import tariffs are designed to stimulate the autos sector by attracting foreign investment, and increasing the level of domestic innovation. As the table shows, a number of international auto manufacturers have invested in the country as this policy continues to bear fruit, and we expect this to continue as manufacturers target this high-growth market.

Over the longer term, we maintain our bullish outlook for the sector, predicated on government policy attracting investment, resurging domestic sales, and the potential for Brazil to become a regional production hub. Indeed, BMI believes that, once the sector does begin to develop in earnest, we expect to see strong growth in domestic manufacturing.

Dearth Of Investment Elsewhere

As the table shows, there has been no other investment that we are aware of in the other countries we cover in the region. Generally speaking, the other markets in Latin America are much smaller than Brazil and Mexico, and these two countries are key drivers of growth, acting as investment and export hubs for the wider region.

In Venezuela, for example, we have revised down our production forecasts for 2013, and expect to see little investment in the market over the medium term as our bearish outlook plays out. Further, we recently revised up our 2013 forecast for vehicle production in Argentina, but retain a bearish outlook on the market as the business environment remains poor and the weak currency will erode profit margins for international automakers.

This article is tagged to:
Sector: Autos
Geography: Latin America, Argentina, Brazil, Mexico, Venezuela