Automobiles

Global automakers are speeding up localization in the non-European and non-North American markets including China, Latin America, and Russia, in the interest of price competitiveness and new market penetration. The trend is expected to further accelerate down the road. The combined overseas production ratio of Hyundai Motor Company and Kia Motors has reached 54.3% in the first half of this year, too. 

According to the Korea Automotive Research Institute (KARI), Mercedes Benz is planning to manufacture its new GLA-Class SUV, which debuts in the United States in 2015, in Nissan’s plant in Mexico with the Infiniti Q30. The GLA, A, CLA, and B-Class vehicles share the same platform with the Q30. Mercedes Benz is also mulling over manufacturing the CLA-Class for the US market in Nissan’s Mexican plant from 2018, not in Hungary. The German carmaker is going to start the construction of production facilities in Brazil as well. 

“The demand for high-end cars is rapidly on the rise along with the income levels of emerging market consumers,” KARI researcher Shin Ju-yeon explained, continuing, “It seems that Mercedes Benz is attempting to avoid tariffs and cut production costs by means of the local production of compact cars.”

In the meantime, Volkswagen is said to be planning to increase its engine production capacity to over one million units in China. According to the China Association of Automobile Manufacturers (CAAM), Volkswagen took the lion’s share in the Chinese market, with a market share of 20.5% as of the end of last year. 

FAW-Volkswagen, a local subsidiary of the company, put into operation the EA211 engine manufacturing plant with an annual capacity of 450,000 units back in October 2012 in Chengdu. The third-generation EA888 manufacturing factory kicked off its operation with the same annual production capacity in Changchun in August this year, too. It is going to establish an EA211 plant in Foshan as well, where will start to manufacture 300,000 vehicles a year in H2 2013. 

Shanghai Volkswagen built an EA888 plant with an annual production volume of 600,000 units last year, and is putting more EA888 manufacturing facilities into operation to add 450,000 units to its yearly capacity. The facilities are expected to be a boon to the company’s price competitiveness enhancement and cost reduction efforts.

Mitsubishi, Nissan, Ford, and Toyota have recently announced their plans for the local production of SUVs in Russia, considering that the SUV segment is continuing its growth in spite of overall market contraction. SUVs accounted for 33.5% of the total auto sales there during the seven months of this year, 5.0 percentage points up from a year earlier. BMW and Audi are producing their small sedans like the BMW 1 Series C, X1 SUV C, A3 C, and Q3 SUV C in emerging markets such as China, India and Brazil, too.

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