Auto Parts Manufacturing – Part 3

In my previous post, I decided to take look at the top 100 companies in the world in order to determine how many are from France and Korea.

I found that aside from the #7th largest auto parts company in the world, France also had the #15th and #40th largest company. Korea was even more impressive, aside from the #8th largest auto parts company, Korea also boasts the #38th, #46th, #70th and #90th. Super impressive.

In order to gain some insight in to why/how France and Korea I wanted to start by finding answers to the questions below.

(6)Who needs automotive parts?
(7)Why don’t Automotive manufacturers produce their own parts?
(8)Why do Automotive manufacturers setup in emerging markets?
(9)Why has the automotive industry remained regionalized?
(10)Why have Auto Supplier contributions increased from 56% to 82% in 2015?
(11)For automakers to produce more cars, what are the downstream impacts to industry,
jobs, economy?

Let’s get to it shall we.


It seems simple enough to determine that Automobile Manufacturers need Automotive Parts. Doesn’t get any easier than that right.

So why don’t automotive manufacturers produce their own parts? From my research and reading, indications are that auto manufacturers focus on important things like building dealer networks, marketing and sales functions.

Why do automotive manufacturers setup in emerging markets? So far these are easy simple answers; Domestic demand growth, increasing competition, high tax imposition on CBU and CKD. CBU – Completely build unit. Vehicles imported in a fully assembled state. CKD – Completely knocked down unit. Individual parts are imported but the vehicle is assembled locally.

Why has the automotive industry remained regionalized? Although automakers are spread globally, the automotive industry remains regionalized due to socioeconomic trends, infrastructure development, customer requirements and government regulations.

Why have auto supplier contributions increased from 56% to 82% in 2015? Dawn of the mega suppliers occurred due to auto manufacturers concentrating on dealers networks, marketing and sales.

For automakers to produce more cars, what are the downstream impacts to industry, jobs, economy? My research shows the following downstream impacts; logistics, fuel, banking, media (advertising dollars), car rentals and hires and aftermarket products.


 

So where to go from here? After answering the questions above, I’ve even more questions albeit more specific to France and Korea and ultimately lessons learned that Canada could adopt in order to answer question posed by the Red Tape challenge.

(1)What percentage of auto parts manufactured in France and Korea end up outside of their respective countries vs stay in.

(2)How many automobiles do France and Korea manufacture each year? Is there enough information out there to determine how many automobiles are shipped to other countries for sale? If possible, list the auto manufacturers in France and Korea and determine market share of those companies around the world.

(3)Are there 1 or 2 key government regulations in France and Korea that help support the auto parts industry. Perhaps upstream regulations are in place for easier or incentive based import of raw materials or export of auto parts. Maybe critical downstream regulations that create demand? Another item to look at would be whether major trade partners have progressive regulations which allows for low CKD. This would then allow countries to import parts from France/Korea.

There you have it – more questions. One thing is for sure, I’ve learned a lot about this topic in just 2 days.  Look out for part 4 coming this week.

 



 

 

 

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