Global suppliers, attracted by stunning growth prospects, are shrugging off this year’s slowdown in auto sales in China and investing heavily in the world’s largest auto market.
Automotive News reported that Continental AG, for instance, plans to hire 5,000 workers in China by year end. It has 16,000 now.
Magna International Inc., too, is all in. In 2014, the company plans to operate 28 plants in China, eight more than now. In 2001, Magna had just one plant in the country.
In a global industry still recovering from the Great Recession, China offers near-certain prospects for robust growth.
Because a growing number of autos are built on global platforms, suppliers can gear up swiftly in China by producing the same parts that they make elsewhere.
But suppliers must be nimble to work with powerful government officials in China and help domestic automakers fill gaps in engineering expertise.
China’s central government decreed in the first quarter that government officials must buy vehicles from domestic automakers. That’s bad news for Audi, the brand of choice for officials, but possibly good news for suppliers, such as Magna and Johnson Controls Inc., that can provide elaborate rear seating areas preferred by chauffeur-driven officials.
Growth in China highlighted a good 2011 for suppliers. In the Automotive News list of the top 100 global suppliers, 68 posted double-digit gains from 2010, driven in part by North America’s rebound from the recession. The only troubled group in the top 100 was Japanese suppliers, who endured a slump caused by the March 11 earthquake.
Growth projections in China are compelling. Analysts and industry executives expect light-vehicle sales to reach 30 million by 2020, more than double the 14.5 million sold in 2011.
In other words, in eight years China’s auto market is tracking to match the size of today’s European and U.S. markets combined.
As they plan ahead, the suppliers are unmoved by the sales slowdown in China. In the first four months of this year, sales of passenger vehicles rose just 2%, according to the China Association of Automobile Manufacturers.
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The following is an in-depth story from Automotive News tracking the ramp-up in the automotive supply sector in response to the industry’s healthy sales. To view the entire article click here.
Thanks to a rush of orders from automakers, suppliers are cranking up production in North America.
Feeling more confident about the next few years, suppliers are hiring and adding machinery and production lines, and even building plants. The extreme caution that followed the Great Recession of 2008 and 2009 is dissipating.
Don Walker, CEO of Magna International Inc., says his company is getting bigger orders from Chrysler Group, Ford Motor Co. and General Motors.
“We are flat-out at our plants in North America on some products,” Walker told reporters last week at the Geneva auto show.
BMW, Volkswagen and Mercedes-Benz also are boosting orders, he said. “The export demand for those brands is much higher than planned, and we are trying to meet demand.”
According to a January survey of 109 suppliers by the Original Equipment Suppliers Association, 64% of respondents said they were optimistic about their outlook for the next 12 months, up from only 27% in a November survey.
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