Transplant OEMs drive growth in North American auto industry

03/11/2015 9:290 commentsViews: 14

It’s likely that New Domestic OEMs will spur the majority of the North American automotive production growth going forward into the next five years.

While domestic automakers are pushing into emerging markets abroad, international automakers are taking the same cue, expanding their production and assembly presence in North America, according to industry insiders who spoke yesterday at the 16th annual West Michigan Automotive Suppliers Symposium hosted by the Van Andel Global Trade Center.

For example, Renault-Nissan has adopted a strategy of localization to encourage suppliers to open production facilities to serve its plants as the company expands its North American footprint, said Roberto Soto Montes, director of purchasing of Renault-Nissan North America, which has production facilities in Tennessee and Mississippi.

“Specifically for Nissan, we are pushing (North American) suppliers to (locate near our plants),” Soto Montes told MiBiz following his presentation. “I understand other OEMs have a trend to go to China or India, but in our case, there is a very strong combination of cost reduction and localization. We are really pushing for having maximum production near our plants.”

Over the next decade, the majority of North American light vehicle production growth is expected to come from Asian automakers, according to data from IHS Automotive Group. Out of the 19 million units projected to be built in North America in 2021, 7.2 million will be produced by the transplant OEMs Toyota, Honda, Renault-Nissan and Hyundai.

Subaru of North America also expects to lean more on its suppliers to open new lines as the automaker’s assembly plant in Lafayette, Ind. expands, said Ed Wulbrecht, vice president of quality control at Subaru of Indiana Automotive, in an interview with MiBiz. Subaru has invested $791 million to expand the plant to produce 450,000 units a year. The company maintains 20 suppliers in Michigan, five of which are located in the West Michigan region, he said.

INTERNATIONAL DEVELOPMENT

Despite the rise in North American manufacturing activity from the transplanted OEMs, the majority of primary vehicle research and development will continue to take place in Germany and Europe, said Mike Wall, director of automotive analysis at IHS Automotive.

“It’s important to know where vehicles are being built, but it?s even more important to know where those platforms will be designed and developed,” Wall said. “It can take you easily across time zones and certainly across continents.”

However, more globalized production could prove to be troublesome for suppliers of a global component that are unaccustomed to having a presence overseas, said Michael Dorney, director of global business development for Grand Rapids-based Lacks Enterprises Inc.

To address this concern, Dorney encourages suppliers to adopt a global marketing strategy, even if the company has limited exposure to international markets.

“I think it’s clear that global decision making is going to affect your sales process,” Dorney said during the symposium. “Whether you’re selling new or current technology, you may need to expand your sales process beyond your traditional OEM product engineering and purchasing contacts.”

While that move may not require opening a sales office in international markets, companies should at least develop strong marketing personnel that understand cultural nuances and can develop strong relationships with key decision makers, Dorney said.

Internationally, Lacks maintains a marketing presence in Germany, England, Sweden and Japan. The Tier 1 supplier manufactures composite wheel systems, trim and coatings and has grown to reach approximately $500 million in annual sales, as MiBiz previously reported.

FORECASTING GROWTH

Production for light vehicles both in North America and globally is expected to ramp up as emerging markets – primarily in Asia – generate increased demand. Despite the perception of North America as a developed market, vehicle production in the U.S. and Mexico, in particular, is expected to continue to grow steadily, Wall said.

North American light vehicle production is forecasted to reach 17.4 million units in 2015 and grow to 19 million by 2021, according to data from IHS.

Globally, light vehicle production is expected to reach 89.5 million units in 2015, up from 87.4 million units in 2014, according to the IHS data. That figure is expected to grow to 107 million units globally by 2021.

Production growth in North America will be supported by a significant number of new vehicle launches starting in 2017. Automakers expect to launch 35, 44 and 38 new vehicle programs in 2017, 2018 and 2019, respectively, according to IHS projections.

Those new launches have already boosted suppliers? demand for capital and are likely to continue as companies begin to tool-up to meet that production, Wall said.

“The need for capital is going to be out there and it’s born on the strength of the industry as well,” Wall said. “These are vehicle redesigns that are locked and loaded and coming down the pipe. It’s a testament to where we see the industry going and evolving through the forecast horizon.”

Source: mibiz.com

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