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.
|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.
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.