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INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS Ifeyinwa Uchenna Onugha Guillermo Carlos Arenas Alberto Criscuolo Thomas Kenyon GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION

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Page 1: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS

Ifeyinwa Uchenna Onugha

Guillermo Carlos Arenas

Alberto Criscuolo

Thomas Kenyon

GVC AUTOMOTIVE INDUSTRY

FINAL PRESENTATION

Page 2: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS

STRATEGIC SEGMENTATION

Page 3: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Analysing the “Automotive” Industry (GVC Style)

1. What does the automotive industry consist of?

What are the different “businesses” that exist? Is it really as simple as 2-wheels, 4-wheels, trucks

and autoparts?

2. What will the automotive industry consist of “tomorrow”?

What trends are we seeing, in which direction is the industry heading

3. What would it take to participate? To compete?

What would it take for any country / region to compete in any one of the business segments that

we have identified?

4. What would it take for COUNTRY X to participate?

What do I have? What don’t I have? What policy needs to change? What investments need to be

made?

Page 4: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Through “Strategic Segmentation”, we have tried to answer

questions (1) and (2)

1. What does the automotive industry consist of?

What are the different “businesses” that exist? Is it really as simple as 2-wheels, 4-wheels, trucks

and autoparts?

2. What will the automotive industry consist of “tomorrow”?

What trends are we seeing, in which direction is the industry heading

3. What would it take to participate? To compete?

What would it take for any country / region to compete in any one of the business segments that

we have identified?

4. What would it take for COUNTRY X to participate?

What do I have? What don’t I have? What policy needs to change? What investments need to be

made?

Page 5: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

What are the emerging Strategic Segments within the automotive

industry?

INTUITIVE / KNEE JERK SEGMENTATION:

By no of wheels?….

By type of supplier?….

Page 6: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

What are the emerging Strategic Segments within the automotive

industry

INTUITIVE / KNEE JERK SEGMENTATION:

By no of wheels….

By type of supplier….

THESE ARE

FINISHED PRODUCTS

NOT

BUSINESS SEGMENTS

Page 7: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

So.. How Do We Identify ‘True’ Business Segments

in the Automotive Industry

(both those that exist and those that are emerging)

Page 8: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

First we must first identify and understand global industry trends

and constraints…

Rates of urbanisation and congestion

Awareness of atmospheric pollution and increase in emissions controls

Ever more stringent crashworthiness and safety requirements

Emphasis has shifted to information technology

Product lifecycle is evolving

Page 9: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Rates of Urbanisation

• In 1800, 2% of the world’s population lived in cities. Now it’s 50%.

• Cities generate a disproportionate share of new private sector jobs

• Cities cover only a fraction of the world's land mass but concentrate 80 percent

of global GDP

• Car usage is increasing year on year even in high-income economies

Increasing rates of urbanisation and congestion

Page 10: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

• Cities are becoming more crowded and road space more scarce. However as

urbanisation is good for the economy, it is supported.

• Onus is on cities and local governments to find to reduce the demand for road space

Increasing rates of urbanisation and congestion - Implications

• Public transport is may be seen as an inferior good;

and as incomes rise, people switch away from

inferior goods. This could be compounded in

emerging economies with a growing middle class

who may wish to replace bicycle/motorcycles with

cars (as symbol of improved social class).

• High density conurbations tend towards integrated

mass transport solutions. (It is cheaper and more

efficient to take more people shorter distances).

Systems are less successful in sprawling cities like

Johannesburg

Page 11: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Pollution awareness and increase in emissions controls

In 2013,

TRANSPORTATION

contributed

MORE THAN HALF OF CO2

and nitrogen oxides, and almost

¼ OF THE HYDROCARBONS

emitted into the atmosphere1

CO2 REGULATION

is likely to TIGHTEN and

not just in EUROPE.

CHINA, the US and JAPAN

have also enacted laws to

REDUCE EMISSIONS

International Transport Forum2

Page 12: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Pollution awareness and increase in emissions controls

In 2013,

TRANSPORTATION

contributed

MORE THAN HALF OF CO2

and nitrogen oxides, and almost

¼ OF THE HYDROCARBONS

emitted into the atmosphere1

CO2 REGULATION

is likely to TIGHTEN and

not just in EUROPE.

CHINA, the US and JAPAN

have also enacted laws to

REDUCE EMISSIONS

- Implications for automotive…

OEMs will invest more in2

• e-Mobility (electrical/hybrid

powertrains, batteries)

• lightweight and

aerodynamic drag-reducing

technologies

Opportunity for

specialist suppliers to

recapture power /

value / margin

Page 13: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Ever more stringent crashworthiness and safety requirements

CRASHWORTHINESS

REQUIREMENTS

(e.g. seatbelts, airbags and

crumple zones)

are EVER MORE STRINGENT

often requiring anthropomorphic

crash test dummies and

ADVANCED TESTING

FACILITIES

MANY PASSENGER VEHICLES

now include (often

as a differentiatior)

ADVANCED DRIVER

ASSISTANCE

features (e.g. infrared night vision,

tire pressure monitoring systems,

emergency brake assist, and

electronic stability controls)

Page 14: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Ever more stringent crashworthiness and safety requirements

- Implications for automotive…

CRASHWORTHINESS

REQUIREMENTS

(e.g. seatbelts, airbags and

crumple zones)

are EVER MORE STRINGENT

often requiring anthropomorphic

crash test dummies and

ADVANCED TESTING

FACILITIES

MANY PASSENGER VEHICLES

now include (often

as a differentiatior)

ADVANCED DRIVER

ASSISTANCE

features (e.g. infrared night vision,

tire pressure monitoring systems,

emergency brake assist, and

electronic stability controls)

Cost of testing

continuously increasing

Safety requirements

may vary from region to

region

‘State-of-the-art’,

accredited, well

managed testing

facilities are necessary

to compete

Supply of subsystems

may require advance

Research and

Development capacity

Page 15: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Emphasis has shifted to information technology

THAT WHICH MADE

“A CAR, A CAR”

(e.g. speed, acceleration,

torque, engine size,

number of cylinders)

LESS IMPORTANT

Consumers want

TRAFFIC INFORMATION

services,

and a host of

INFOTAINMENT

FEATURES,

including internet radio

and smartphone

compatibility

Number of

NETWORKED CARS

will rise 30%

year on year;

by 2020

1 IN 5 CARS

will be

CONNECTED TO THE

INTERNET

Page 16: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Emphasis has shifted to information technology

THAT WHICH MADE

“A CAR, A CAR”

(e.g. speed, acceleration,

torque, engine size,

number of cylinders)

LESS IMPORTANT

Consumers want

TRAFFIC INFORMATION

services,

and a host of

INFOTAINMENT

FEATURES,

including internet radio

and smartphone

compatibility

Number of

NETWORKED CARS

will rise 30%

year on year;

by 2020

1 IN 5 CARS

will be

CONNECTED TO THE

INTERNET

- Implications for automotive…

need to constantly

identify differentiating

features and services

Location is key. Remote Swedish cities (e.g.) may require total on-board

solutions, whilst in busy Italian cities (e.g.) collaboration between road /

car / data providers may be more feasible

Page 17: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Product lifecycle is evolving

Aftersales market is

growing.

CHINA AFTERSALES

market is estimated to

grow 20% a year1

Trend has moved from

buying vehicles to

leasing vehicles to

RENTING VEHICLES

(maintenance included)

Specific requirements

and preferences of the

markets require a

LOCALISATION OF

THE AFTERMARKET

Page 18: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Product lifecycle is evolving

Aftersales market is

growing.

CHINA AFTERSALES

market is estimated to

grow 20% a year1

Parts either need to be

available JIT in

consumer country or

held as stock

Trend has moved from

buying vehicles to

leasing vehicles to

RENTING VEHICLES

(maintenance included)

In manufacturer

/ maintainer’s

interest to

monitor vehicles

in realtime

Scania is already “directing” truck drivers to

nearest garages and pre-booking hotel rooms!

Specific requirements

and preferences of the

markets require a

LOCALISATION OF

THE AFTERMARKET

- Implications for automotive…

Companies trying to

exploit the

aftermarket with a

standardized global

approach will

most likely fail.

Finding an

individual approach is

essential.

Maintenance, durability

and recycling much

more important

Page 19: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

So our Automotive Universe (both current and future) is not

segmented by engine size / wheel base / complexity but instead is a

function of the density of the environment and the type of cargo…

DENSE / URBAN / CITY

ENVIRONMENT (OF THE NEAR

FUTURE)

SPRAWLING / RURAL /

SPARSELY POPULATED

Movement of

People

Individual Strategic Segment 1 Strategic Segment 2

Groups Strategic Segment 3 Strategic Segment 4

INTRACITY INTERCITY

Movement of

Merchandise

Light Strategic Segment 5 Strategic Segment 6

Heavy Strategic Segment 8

Page 20: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

So our Automotive Universe (both current and future) is not

segmented by engine size / wheel base / complexity but instead is a

function of the density of the environment and the type of cargo…

DENSE / URBAN / CITY

ENVIRONMENT (OF THE NEAR

FUTURE)

SPRAWLING / RURAL /

SPARSELY POPULATED

Movement of

People

Individual Strategic Segment 1 Strategic Segment 2

Groups Strategic Segment 3 Strategic Segment 4

INTRACITY INTERCITY

Movement of

Merchandise

Light Strategic Segment 5 Strategic Segment 6

Heavy Strategic Segment 8

•Congestion common

•Parking limited

•Pollution a concern

•Road (expansion) is limited

Page 21: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

So our Automotive Universe (both current and future) is not

segmented by engine size / wheel base / complexity but instead is a

function of the density of the environment and the type of cargo…

DENSE / URBAN / CITY

ENVIRONMENT (OF THE NEAR

FUTURE)

SPRAWLING / RURAL /

SPARSELY POPULATED

Movement of

People

Individual Strategic Segment 1 Strategic Segment 2

Groups Strategic Segment 3 Strategic Segment 4

INTRACITY INTERCITY

Movement of

Merchandise

Light Strategic Segment 5 Strategic Segment 6

Heavy Strategic Segment 8

• Little / no congestion

• Parking no problem

• Pollution less acute

• Road expansion and

availability not a problem

Page 22: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

What makes each segment distinct from the other? 1)The value chain required to successfully compete is different for each

2) We consider not only the product but also the service and the user

DENSE / URBAN / CITY

ENVIRONMENT (OF THE NEAR

FUTURE)

SPRAWLING / RURAL /

SPARSELY POPULATED

Movement of

People

Individual Strategic Segment 1 Strategic Segment 2

Groups Strategic Segment 3 Strategic Segment 4

INTRACITY INTERCITY

Movement of

Merchandise

Light Strategic Segment 5 Strategic Segment 6

Heavy Strategic Segment 8

Page 23: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Next steps (3) and (4)…

1. What does the automotive industry consist of?

What are the different “businesses” that exist? Is it really as simple as 2-wheels, 4-wheels, trucks

and autoparts?

2. What will the automotive industry consist of over the next 10yrs?

What trends are we seeing, in which direction is the industry heading

3. What would it take to participate? To compete in each segment?

What would it take for any country / region to compete in any one of the business segments that

we have identified?

4. What would it take FOR ME to participate?

What do I have? What don’t I have? What policy needs to change? What investments need to be

made?

Page 24: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Value Chain Flowchart

VEHICLE

DESIGN &

TESTINGKNL

TOOLING

EXT/INT

CAP

CHASSIS

CAP

INTERI

OR

3363LAB

ELECTRONICS

CAP

TOOLING

CHASSIS

CAP

TOOLING

PWTRAIN

CAP

OTHER

CAP

PWTRAIN

DESIGN &

TESTINGKNL

ELECTRON.

DESIGN &

TESTINGKNL

POWERTRAIN

CAP

SHI

PLAB

MAINTE

NANCELAB

RECYCLIN

GLAB

EXTE

RIORCAP

FINANCIAL

SERVICES

KNL

ASSEMB

LYCAP

Local/Cluster Value Chain

Global Value Chain

Regional Value Chain

SEGMENT 2: RURAL – PEOPLE INDIVIDUALIDEAL VALUE CHAIN

Final assembly

Labor intensity:4.5 (mean = 11)

Minimum scale:100k units

Page 25: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Global – Regional – Cluster Automotive Value Chains flowchartSTRATEGIC SEGMENT 1: DENSE / URBAN / CITY ENVIRONMENT – PEOPLE INDIVIDUAL

PARK

ROADS

CAPVEHICLE

DESIGN &

TESTINGKNL

TOOLING

EXT/INT

CAP

CHASSIS

336330

336340

CAP

INTERIOR

336360

LAB

ELECTRONICS

336320

CAP

TOOLING

CHASSIS

CAP

TOOLING

PWTRAIN

CAP

OTHER

336390

CAP

PWTRAIN

DESIGN &

TESTINGKNL

ELECTRON.

DESIGN &

TESTINGKNL

POWERTRAIN

336310

336350

CAP

SHIP

LAB

NETWORK

MNGMT

KNL

MAINTE

NANCELAB

RECYCLING

LAB

EXTERIOR

336370

336211

CAP

FINANCIAL

SERVICES

KNL

ASSEMBLY

CAP

Local/Cluster Value Chain

Global Value Chain

Regional Value Chain

IDEAL VALUE CHAIN

Page 26: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Global – Regional – Cluster Automotive Value Chains flowchartSTR. SEGMENT 4: SPRAWLING/ RURAL/SPARSELY POPULATED– PEOPLE GROUP

VEHICLE

DESIGN &

TESTINGKNL

TOOLING

EXT/INT

CAP

CHASSIS

336330

336340CAP

INTERIOR

336360

LAB

ELECTRONI

CS 336320

CAP

TOOLING

CHASSIS

CAP

TOOLING

PWTRAIN

CAP

OTHER

336390

CAP

PWTRAIN

DESIGN &

TESTINGKNL

ELECTRON.

DESIGN &

TESTINGKNL

POWERTRAIN

336310

336350

CAP

SHIP

LAB

MAINTENA

NCE

LAB

RECYCLI

NG

LAB

EXTERIO

R 336370

336211CAP

FINANCIAL

SERVICES

KNL

ASSEMBLY

LAB

Local/Cluster Value Chain

Global Value Chain

Regional Value Chain

IDEAL VALUE CHAIN

Page 27: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Regional and Local Value Chains

Page 28: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

MEXICO: AUTO VALUE CHAIN

Page 29: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Where is Mexico positioned and where might it be going?

DENSE / URBAN / CITY

ENVIRONMENT (OF THE NEAR

FUTURE)

SPRAWLING / RURAL /

SPARSELY POPULATED

Movement of People

Individual Strategic Segment 1 (‘Uber’) Strategic Segment 2 (‘Toyota Corolla’)

Groups Strategic Segment 3 Strategic Segment 4

Movement of

Merchandise

Light Strategic Segment 5 Strategic Segment 6

Heavy Strategic Segment 7 Strategic Segment 8

Rural US Market

Little/no congestion

Parking no problem

Pollution less acute

Road availability

Mexi

co

City

Page 30: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

VEHICLE

DESIGN &

TESTINGKNL

TOOLING

EXT/INT

CAP

CHASSIS

CAP

INTER

IOR

336

3

LAB

ELECTRONICS

CAP

TOOLING

CHASSIS

CAP

TOOLING

PWTRAIN

CAP

OTHER

CAP

PWTRAIN

DESIGN &

TESTINGKNL

ELECTRON.

DESIGN &

TESTINGKNL

POWERTRAIN

CAP

SHI

PLAB

MAINTE

NANCELAB

RECYCLIN

GLAB

EXT

ERIO

RCAP

FINANCIAL

SERVICES

KNL

ASSEMB

LYCAP

Local/Cluster Value Chain

Global Value Chain

Regional Value Chain

Mexico is well established in the ‘Toyota Corolla’ segment (2)

Mexico’s Position in the Value Chain

Page 31: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

But there is scope for deepening some functions to close the

gap between Tier 1s and local Tier 2s

Page 32: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

And to further develop R&D capacity….

Page 33: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

VEHICLE

DESIGN &

TESTINGKNL

TOOLING

EXT/INT

CAP

CHASSIS

CAP

INTER

IOR

336

3

LAB

ELECTRONICS

CAP

TOOLING

CHASSIS

CAP

TOOLING

PWTRAIN

CAP

OTHER

CAP

PWTRAIN

DESIGN &

TESTINGKNL

ELECTRON.

DESIGN &

TESTINGKNL

POWERTRAIN

CAP

SHI

PLAB

MAINTE

NANCELAB

RECYCLIN

GLAB

EXT

ERIO

RCAP

FINANCIAL

SERVICES

KNL

ASSEMB

LYCAP

Local/Cluster Value Chain

Global Value Chain

Regional Value Chain

The Mexican Segment 2 value chain ten years from now?

Mexico’s Potential Position in the Value Chain

Page 34: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

The ‘Uber segment’ (1) is also expanding……

PARK

ROADS

CAPVEHICLE

DESIGN &

TESTINGKNL

TOOLING

EXT/INT

CAP

CHASSIS

336330

336340

CAP

INTERIOR

336360

LAB

ELECTRONICS

336320

CAP

TOOLING

CHASSIS

CAP

TOOLING

PWTRAIN

CAP

OTHER

336390

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PWTRAIN

DESIGN &

TESTINGKNL

ELECTRON.

DESIGN &

TESTINGKNL

POWERTRAI

N 336310

336350

CAP

SHIP

LAB

NETWORK

MNGMT

KNL

MAINTE

NANCELAB

RECYCLING

LAB

EXTERIO

R

336370

336211CAP

FINANCIAL

SERVICES

KNL

ASSEMBLY

CAP

Local/Cluster Value Chain

Global Value Chain

Regional Value Chain

Mexico’s Position in the Value Chain

Page 35: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

What Does This Mean for IFC/WB?

Build clearing house of traffic data (partnership with

apps: Easy Taxi, OlaCabs, GrabTaxi)

Advise on municipal regulation - safety standards, tariff

transparency

Support consortia of international and tooling/machining

companies – build scale & transfer expertise

Help evaluate Program Pro Auto support (INADEM)

Segment 1 Segment 2

Page 36: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

SERBIA & MACEDONIA IN THE

EUROPEAN AUTOMOTIVE

VALUE CHAIN

Page 37: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Overview of the European Periphery Automotive Regional Value Chain

A Snapshot of the Participants in the EP RVC and Main Trends OEMs Plants in Europe within a 1 & ½ days from the Western Balkans

End-Market Trends and Sales Potential Forecasts in 2020

Two distinct integrations in the EP RVC: Serbia (PVs) and Macedonia (components)

Page 38: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Serbia Automotive: a solid manufacturing base geared towards a

single OEM

Turnover of the Serbian Automotive Industry

Product Breakdown of Serbia Automotive

Main Automotive Plants in Serbia (OEM, Tier 1, Tier 2) FIAT and Main Automotive FDI in Serbia

A Solid Automotive Footprint… Leading to Good Performance… Built around the FDI Strategy of one OEM…

Page 39: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Automotive FDI Pipeline in 2015 Country of origin

Cap-Con USA

Gentherm USA

Key Safety Systems USA

Mediterr Shock Absorbers Italy

Mensan Otomotiv Turkey

ODW Elektrik Germany

Kostal Germany

Macedonia Automotive: the New Kid on the Bloc in the European

RVC…

Current and Pipeline Tier 1 and Tier 2 FDI in MacedoniaMain Automotive Plants in Macedonia Performance of Auto-Components Industry

An Embryonic Automotive Base…

A Recent Wave of Uncoordinated

Auto-FDI in Segment 2… Is Auto-Parts as the Entry to the EP RVC?

Page 40: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Can Serbia and Macedonia Compete in the “Toyota Corolla”

Segment in Europe?

DENSE / URBAN / CITY

ENVIRONMENT (OF THE NEAR

FUTURE)

SPRAWLING / RURAL /

SPARSELY POPULATED

Movement of

People

Individual Strategic Segment 1 Strategic Segment 2

Groups Strategic Segment 3 Strategic Segment 4

INTRACITY INTERCITY

Movement of

Merchandise

Light Strategic Segment 5 Strategic Segment 6

Heavy Strategic Segment 8

Demand Trends in the EU:

• more onboard

electronics

• high fuel efficiency

• stringent

environmental

regulation

• increased safety

• networked mobility

Page 41: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

The Western Balkans are well-positioned in the Euro-Periphery RVC for ST. SEGMENT 2: INTERCITY – PEOPLE INDIVIDUAL

VEHICLE

DESIGN &

TESTINGKNL

TOOLING

EXT/INT

CAP

CHASSIS

336330

336340

CAP

INTERI

OR

33636

0LAB

ELECTRONICS

336320

CAP

TOOLING

CHASSIS

CAP

TOOLING

PWTRAIN

CAP

OTHER

336390

CAP

PWTRAIN

DESIGN &

TESTINGKNL

ELECTRON.

DESIGN &

TESTINGKNL

POWERTRAI

N 336310

336350

CAP

SHIP

LAB

MAINTE

NANCELAB

RECYCLIN

GLAB

EXTERIO

R

336370

336211CAP

FINANCIAL

SERVICESKNL

ASSEMBL

Y

CAP

Western Balkans - Local/Cluster Value Chain

Global Value Chain

European Periphery Regional Value Chain

Serbia has a relatively good positioning through FIAT, although both strategic positioning (lock-in)

and supply chain efficiency risks do exist…

Page 42: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

VEHICLE

DESIGN &

TESTINGKNL

TOOLING

EXT/INT

CAP

CHASSIS

336330

336340

CAP

INTERIO

R

336360LAB

ELECTRONICS

336320

CAP

TOOLING

CHASSIS

CAP

TOOLING

PWTRAIN

CAP

OTHER

336390

CAP

PWTRAIN

DESIGN &

TESTINGKNL

ELECTRON.

DESIGN &

TESTINGKNL

POWERTRAI

N 336310

336350

CAP

SHIP

LAB

MAINTE

NANCELAB

RECYCLIN

GLAB

EXTERIO

R

336370

336211CAP

FINANCIAL

SERVICES

KNL

ASSEMBL

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CAP

MACEDONIA - Local/Cluster Value Chain

Global Value Chain

European Periphery Regional Value Chain

Is Macedonia better off in becoming a auto-parts hub for specific component systems in Segment 2?

The Western Balkans are well-positioned in the Euro-Periphery RVC for ST. SEGMENT 2: INTERCITY – PEOPLE INDIVIDUAL

Page 43: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Focus on specific Auto-Component Systems (Electronics & Electrics, Interior,

Exhaust, Telematics) in Segment 2 to leverage skilled labor, low cost, R&D niches,

and FDI tech-assets?

42

Macedonia’s Export of Automotive Components by Country of DestinationMacedonia’s Export of Automotive Components by Type

Macedonia’s Potential Automotive Component Systems Specialization

Page 44: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

A Small Country for a Big Product: Macedonia and Bus

Manufacturing…

DENSE / URBAN / CITY

ENVIRONMENT (OF THE NEAR

FUTURE)

SPRAWLING / RURAL /

SPARSELY POPULATED

Movement of

People

Individual Strategic Segment 1 Strategic Segment 2

Groups Strategic Segment 3 Strategic Segment 4

INTRACITY INTERCITY

Movement of

Merchandise

Light Strategic Segment 5 Strategic Segment 6

Heavy Strategic Segment 8

Demand Trends for Bus:

• Global demand to reach US

$41 billion and 664,000 units

by 2018

• growth of urban population

& need to reduce traffic

congestion

• growth in the number and

size of private transportation

companies

• more stringent emissions

standards and diffusion of

electric, hybrid models

Page 45: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Global – Regional – Cluster Automotive Value Chains flowchartSTR. SEGMENT 4: SPRAWLING/ RURAL/SPARSELY POPULATED– PEOPLE GROUP

VEHICLE

DESIGN &

TESTINGKNL

TOOLING

EXT/INT

CAP

CHASSIS

336330

336340

LAB

INTERIOR

336360

LAB

ELECTRONI

CS 336320

CAP

TOOLING

CHASSIS

CAP

TOOLING

PWTRAIN

CAP

OTHER

336390

CAP

PWTRAIN

DESIGN &

TESTINGKNL

ELECTRON.

DESIGN &

TESTINGKNL

POWERTRAI

N 336310

336350

CAP

SHIP

LAB

MAINTEN

ANCE

LAB

RECYCLI

NG

LAB

EXTERIO

R

336370

336211CAP

FINANCIA

L

SERVICESKNL

ASSEMBLY

CAP

Macedonia Local/Cluster Value Chain

Global Value Chain

European Regional Value Chain

Macedonia’s positioning in the Bus European Periphery RVC

Page 46: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Deepening and Expanding the Bus Manufacturing Value Chain in

Macedonia…

• €25M investment

• 431 employees

• Production of intercity coaches

(500 for US market)

• Started operations in 2013

• Sourced locally chassis modules

(Aktiva) & fiberglass body parts

(Uniplast)

• Potential to localize high-volume

low-value components

• Small minimum investment size to (Euro 25 million) vs.

1 billion Euro for PV plant (FIAT)

• Labor intensive (21.2 hours worked per $1K of value

added vs. 4.4 hours worked per $1K of value added for

PV manufacturing

• Discrete production process and small batches

production runs

• Buyers require tailor-made solutions

• High ratio of unit value ($300K to $400K) to transport

costs makes shipping long distance is a viable

• Supply chain with made-to-order linkages and high-

intensity information exchange

Bus manufacturing structural requirements fit well

Macedonia as a potential production hub in the European

RVC

Page 47: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

What Does This Mean for IFC/WB?

• WBG lending and advisory operations should encompass a regional scale to reflect

the cross-border nature of the EP automotive RVC

• There is no such thing as an automotive GVC, each value chain is local, regional,

and global at the same time

• Supplier Development Programs or other WBG-supported programs (matching

grants, etc.) should be designed according to the dynamics of the specific strategic

segment (Segment 4 for Macedonia), and

• the distribution of functions among the local, regional, and global dimensions of

the VC (for example, no point in organizing meet-the-buyer events for Segment 2 if

procurement is centralized in HQ)

• Attracting an OEM in Segment 2 at all costs is not necessarily the best GVC

insertion strategy for WBG clients

Some preliminary considerations…

Page 48: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

COLOMBIA’S AUTO INDUSTRY

Page 49: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Palliative Care: Clinging to the Traditional Model

DENSE / URBAN / CITY

ENVIRONMENT (OF THE NEAR

FUTURE)

SPRAWLING / RURAL /

SPARSELY POPULATED

Movement of

People

Individual Strategic Segment 1 Strategic Segment 2

Groups Strategic Segment 3 Strategic Segment 4

INTRACITY INTERCITY

Movement of

Merchandise

Light Strategic Segment 5 Strategic Segment 6

Heavy Strategic Segment 8

Segment 2 represents the traditional car/motorbike business segment. Think: “Toyota Corolla”…

Page 50: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

VEHICLE

DESIGN &

TESTINGKNL

TOOLING

EXT/INT

CAP

CHASSIS

336330

336340

CAP

INTERIOR

336360

LAB

ELECTRONICS

336320

CAP

TOOLING

CHASSIS

CAP

TOOLING

PWTRAIN

CAP

OTHER

336390

CAP

PWTRAIN

DESIGN &

TESTINGKNL

ELECTRON.

DESIGN &

TESTINGKNL

POWERTRAIN

336310

336350

CAP

SHIP

LAB

MAINTE

NANCELAB

RECYCLIN

GLAB

EXTERIOR

336370

336211

CAP

FINANCIAL

SERVICES

KNL

ASSEMBLY

CAP

Global Value Chain

Regional Value Chain

Palliative Care: Clinging to the Traditional Model

The ideal value chain in the traditional (“Toyota Corolla”) segment:

Local/Cluster Value Chain

Page 51: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

VEHICLE

DESIGN &

TESTINGKNL

TOOLING

EXT/INT

CAP

CHASSIS

336330

336340

CAP

INTERIOR

336360

LAB

ELECTRONICS

336320

CAP

TOOLING

CHASSIS

CAP

TOOLING

PWTRAIN

CAP

OTHER

336390

CAP

PWTRAIN

DESIGN &

TESTINGKNL

ELECTRON.

DESIGN &

TESTINGKNL

POWERTRAIN

336310

336350

CAP

SHIP

LAB

MAINTE

NANCELAB

RECYCLIN

GLAB

EXTERIOR

336370

336211

CAP

FINANCIAL

SERVICES

KNL

ASSEMBLY

CAP

Local/Cluster Value Chain

Global Value Chain

Regional Value Chain

Palliative Care: Clinging to the Traditional Model

Optimal Sub-optimal Not present

Colombia is it participating (well) in very few of the value chain activities in this business segment…

Page 52: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Palliative Care: Clinging to the Traditional Model

However, even with greater participation, Colombia cannot compete in the traditional automotive

sector without increasing its local market…

In order to do stimulate local demand, Colombia might;

• Introduce financial support / incentives for end consumers.

• Introduce car scrappage programs

• Improve road Infrastructure

0

40

80

120

160

02 03 04 05 06 07 08 09 10 11 12 13

Tho

usa

nd

s

Private Vehicles

SUVs

Vans and Light Trucks

Public Transportation

Commercial Vehicles 0

20

40

60

80

100

02 03 04 05 06 07 08 09 10 11 12 13

Tho

usa

nd

s

Page 53: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Palliative Care: Clinging to the Traditional Model

…However increasing local demand will undermine efforts to reduce traffic congestion

2002 2012

Time spent

in traffic

everyday

52mins 71mins

(Transmilenio began operation in 2000)

AfterBefore Now

Page 54: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Palliative Care: Clinging to the Traditional Model

…Colombia could instead explore an ‘expansion’ of its home market to include its neighbours

48.1%

7.4%

9.2%

35.3% Colombia

Bolivia

Ecuador

Peru

Import of New Vehicles – Andean Community (2014)

Page 55: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Palliative Care: Clinging to the Traditional Model

…But the industry would still need to work towards the regionalisation of products and parts to

survive

Example: The Totoyota Corrolla

The Market The Preference The Difference…

USA Americans view their cars as an expression of their

lifestyle: They want them to project a youthful image and

have soft seats and soft steering for relaxed cruising on

the highway

In the United States the vehicle has

a more streamlined appearance and

softer seats.

EU Europeans attach great importance to safety, which means

that they appreciate such features as more solid doors.

They want their cars to be stable on the road and

accelerate quickly in the low gears

In Europe, vehicles have more solid

(looking) bumpers and headlights

that are integrated into the car body

Japanese Japanese focus on fuel efficiency, modern design and

practical details

In Japan there are more drink

holders as an example

Production of region-specific models often takes place in 16 different respective markets

Page 56: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

VEHICLE

DESIGN &

TESTINGKNL

TOOLING

EXT/INT

CAP

CHASSIS

336330

336340CAP

INTERIOR

336360

LAB

ELECTRONI

CS 336320

CAP

TOOLING

CHASSIS

CAP

TOOLING

PWTRAIN

CAP

OTHER

336390

CAP

PWTRAIN

DESIGN &

TESTINGKNL

ELECTRON.

DESIGN &

TESTINGKNL

POWERTRAIN

336310

336350

CAP

SHIP

LAB

EXTERIO

R 336370

336211CAP

ASSEMBLY

CAP

Local/Cluster Value Chain

Global Value Chain

Regional Value Chain

Leap of Faith: Organising industry towards value-added services

MAINTENA

NCE

LAB

RECYCLI

NG

LAB

FINANCIAL

SERVICES

KNL

Whilst Colombia’s participation in the traditional bus segment is also limited…Optimal Sub-optimal Not present

Page 57: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

ROADS

RAILS

CAPVEHICLE

DESIGN &

TESTINGKNL

TOOLING

EXT/INT

CAP

CHASSIS

336330

336340CAP

INTERIOR

336360

LAB

ELECTRONI

CS 336320

CAP

TOOLING

CHASSIS

CAP

TOOLING

PWTRAIN

CAP

OTHER

336390

CAP

PWTRAIN

DESIGN &

TESTINGKNL

ELECTRON.

DESIGN &

TESTINGKNL

POWERTRAIN

336310

336350

CAP

SHIP

LAB

NETWORK

MNGMT

KNL

MAINTENANCE

LAB

RECYCLING

LAB

EXTERIO

R 336370

336211CAP

FINANCIAL

SERVICES

KNL

ASSEMBLY

CAP

Local/Cluster Value Chain

Global Value Chain

Regional Value Chain

Leap of Faith: Organising industry towards value-added services

The BRT/ networked trucks segment is more expansive…Optimal Sub-optimal Not present

Page 58: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

ROADS

RAILS

CAPVEHICLE

DESIGN &

TESTINGKNL

TOOLING

EXT/INT

CAP

CHASSIS

336330

336340CAP

INTERIOR

336360

LAB

ELECTRONI

CS 336320

CAP

TOOLING

CHASSIS

CAP

TOOLING

PWTRAIN

CAP

OTHER

336390

CAP

PWTRAIN

DESIGN &

TESTINGKNL

ELECTRON.

DESIGN &

TESTINGKNL

POWERTRAIN

336310

336350

CAP

SHIP

LAB

NETWORK

MNGMT

KNL

MAINTENANCE

LAB

RECYCLING

LAB

EXTERIO

R 336370

336211CAP

FINANCIAL

SERVICES

KNL

ASSEMBLY

CAP

Local/Cluster Value Chain

Global Value Chain

Regional Value Chain

Leap of Faith: Organising industry towards value-added services

And there are clear opportunities for Colombian industry to appropriate this value.

THIS IS WHERE THE VALUE IS

RETAINED

Page 59: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Leap of Faith: Organising industry towards value-added services

Bus Rapid Transit systems have been particularly popular in Latin America

Passengers per day - Global

Passengers per day – Latin America

Cities where BRT systems are planned or under construction

In Operation

Under construction

Page 60: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Leap of Faith: Organising industry towards value-added services

The BRT value chain is broad, and Colombia’s direct participation is far below what it could be…

Page 61: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Leap of Faith: Organising industry towards value-added services

The BRT value chain is broad, and Colombia’s direct participation is far below what it could be…

Page 62: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Leap of Faith: Organising industry towards value-added services

Colombia’s Fourth Generation Program presents an opportunity for Colombian industry to leap

forward…

TARGET

reduction in travel time 24-30%

reduction in

transportation costs

15-20%

Page 63: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Leap of Faith: Organising industry towards value-added services

But industry and government must look beyond traditional assembly and supply of parts…

Software installed in our truck fleet

diagnoses problems and sends alerts to a

local call center where staff redirect

drivers to local dealers stocked with

replacement parts. We also send

information to the dealer before the truck

arrives, so they can pull up the

truck/driver’s information (warranty,

customer data) so as to provide a tailored

experience.

Dieter Haban (paraphrased), CIO of Daimler AG subsidiary.

Page 64: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

What Does This Mean for IFC?

Support to BRT development;

- Fare collection

- Station management / design

- Operations

- Architecture

Support growth of aftersales industry (with/without OEM) including;

- Replacement parts logistics and management capacity?

- Service / Repair centers?

- Network capabilities?

- Telematics and Navigation?

Also

- Financial Services?

- Electronics?

IN SUPPORT OF GOVERNMENT AND PRIVATE SECTOR’S OWN INITIATIVES

Page 65: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

VIETNAM AUTO INDUSTRY

Page 66: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

High and differentiated tariffs provide protection to local CKD industry and generate sizeable rents

HS codes Description MFN CEPT

Personal Vehicles

8703.21-23 Under 3,000 cc 70 50

8703.24 More than 3,000 cc 64 50

Commercial Vehicles

8704.10-90 GVW under 5 tons 56/68 5

GVW 5 ~ 10 tons 50 5

GVW 10 ~ 24 tons 20/15 5

GVW 24 ~ 45 10/15 5

GVW more than 45 0 0

Buses

8702.10-90 All types 70 50

Import Tariffs for Motor Vehicles (2014)

Page 67: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Global – Regional – Cluster Automotive Value Chains

flowchart ST. SEGMENT 2: SPRAWLING/

RURAL/SPARSELY POPULATED– PEOPLE INDIVIDUAL

VEHICLE

DESIGN &

TESTINGKNL

TOOLING

EXT/INT

CAP

CHASSIS

336330

336340

CAP

INTERIOR

336360

LAB

ELECTRONICS

336320

CAP

TOOLING

CHASSIS

CAP

TOOLING

PWTRAIN

CAP

OTHER

336390

CAP

PWTRAIN

DESIGN &

TESTINGKNL

ELECTRON.

DESIGN &

TESTINGKNL

POWERTRAIN

336310

336350

CAP

SHIP

LAB

MAINTE

NANCELAB

RECYCLIN

GLAB

EXTERIO

R 336370

336211

CAP

FINANCIAL

SERVICES

KNL

ASSEMBLY

CAP

Local/Cluster Value Chain

Global Value Chain

Regional Value Chain

Optimal Sub-optimal Not present

Page 68: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

The Challenge in ASEAN: Economies of Scale and First-Mover Advantage

Company Plant in ThailandCapacity

(thousands)Plant in Vietnam

Capacity (thousands)

Toyota Gateway I 230 Vinh Phuc 36Ban Pho 230Samrong 240Gateway II* 80

Mitsubishi Laem Chabang 510 Vinastar (Binh Duong) 20Isuzu Samrong 300 Ho Chi Minh City 5

Gateway 100Nissan Samut Prakan I 220 TCIEV (Danang) 6.5

Samut Prakan II 150Honda Ayutthaya 300 Vinh Phuc 10

Prachinburi 120General MotorsRayong 250 Thanh Tri 20Ford Rayong 150 Hai Duong 14Suzuki Rayong 100 Bihn Da 5Hino Hino 10 Hanoi 4Kia - - Thaco (Chu Lai) 25Mazda - - Thaco (Chu Lai) 10

Page 69: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Shift to cars as a means of transportation is incompatible with current infrastructure

• High population densities and sparse road networks are incompatible with the demand for road space created by a shift to individual cars

• Even if a fraction of the current trips made by motorcycles switch to cars the result would be total gridlock

Page 70: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Where is Vietnam positioned and where might it be going?

DENSE / URBAN / CITY ENVIRONMENT (OF THE NEAR

FUTURE)

SPRAWLING / RURAL / SPARSELY POPULATED

Movement of People

Individual Strategic Segment 1 Strategic Segment 2

Groups Strategic Segment 3 Strategic Segment 4

Movement of Merchandise

Light Strategic Segment 5 Strategic Segment 6

Heavy Strategic Segment 7 Strategic Segment 8

• Little / no congestion

• Parking no problem

• Pollution less acute

• Road availability

Page 71: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

ROADS

RAILS

CAPVEHICLE

DESIGN &

TESTINGKNL

TOOLING

EXT/INT

CAP

CHASSIS

336330

336340CAP

INTERIOR

336360

LAB

ELECTRONI

CS 336320

CAP

TOOLING

CHASSIS

CAP

TOOLING

PWTRAIN

CAP

OTHER

336390

CAP

PWTRAIN

DESIGN &

TESTINGKNL

ELECTRON.

DESIGN &

TESTINGKNL

POWERTRAIN

336310

336350

CAP

SHIP

LAB

NETWORK

MNGMT

KNL

MAINTENANCE

LAB

RECYCLING

LAB

EXTERIO

R 336370

336211CAP

FINANCIAL

SERVICES

KNL

ASSEMBLY

CAP

Local/Cluster Value Chain

Global Value Chain

Regional Value Chain

STRATEGIC SEGMENT 3: DENSE / URBAN ENVIRONMENT – PEOPLE

Optimal Sub-optimal Not present

Where could Vietnam go?

Page 72: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Mid/Heavy Commercial Vehicle Production and Statistics

MakerType of vehicle

Production Installed capacity EmployeesCar Light CV Mid CV Bus

IVC (Isuzu) - - x - 3,629 5,000

Hino - - x - 3,058 4,000

Samco - - - x 1,040 4,000

Thaco x x x xBus: 1,400

Truck: 20,000Bus: 3,000

Truck: 25,0003,800

Vinamotor - - x x 2,693 Bus: 3,000

Truck: 5,000

VEAM - x x - 2,269 3,000

Mid/Heavy Vehicle Production (2014)

Page 73: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

GlobSTR. SEGMENT 4: SPRAWLING/ RURAL/SPARSELY

POPULATED– PEOPLE GROUP– Regional – Cluster

Automotive Value Chains flowchart

VEHICLE

DESIGN &

TESTINGKNL

TOOLING

EXT/INT

CAP

CHASSIS

336330

336340CAP

INTERIOR

336360

LAB

ELECTRONI

CS 336320

CAP

TOOLING

CHASSIS

CAP

TOOLING

PWTRAIN

CAP

OTHER

336390

CAP

PWTRAIN

DESIGN &

TESTINGKNL

ELECTRON.

DESIGN &

TESTINGKNL

POWERTRAIN

336310

336350

CAP

SHIP

LAB

MAINTENA

NCE

LAB

RECYCLI

NG

LAB

EXTERIO

R 336370

336211CAP

FINANCIAL

SERVICES

KNL

ASSEMBLY

CAP

Local/Cluster Value Chain

Global Value Chain

Regional Value Chain

IDEAL VALUE CHAINS

Page 74: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Global – Regional – Cluster Automotive Value Chains flowchartSTR. SEGMENT 6: INTERCITY– MERCHANDISE MEDIUM/HEAVY

VEHICLE

DESIGN &

TESTINGKNL

TOOLING

EXT/INT

CAP

CHASSIS

336330

336340CAP

INTERIOR

336360

LAB

ELECTRONI

CS 336320

CAP

TOOLING

CHASSIS

CAP

TOOLING

PWTRAIN

CAP

OTHER

336390

CAP

PWTRAIN

DESIGN &

TESTINGKNL

ELECTRON.

DESIGN &

TESTINGKNL

POWERTRAIN

336310

336350

CAP

SHIP

LAB

MAINTENA

NCE

LAB

RECYCLI

NG

LAB

EXTERIO

R 336370

336211CAP

FINANCIAL

SERVICES

KNL

ASSEMBLY

CAP

Local/Cluster Value Chain

Global Value Chain

Regional Value Chain

Page 75: GVC AUTOMOTIVE INDUSTRY FINAL PRESENTATION Automotive... · FINAL PRESENTATION. INDUSTRY-SPECIFIC GLOBAL VALUE CHAINS STRATEGIC SEGMENTATION. Analysing the “Automotive” Industry

Conclusions

• OEM presence in the car segment was due to high tariffs and unable/unlikely to develop a local industry

• Economies of scale and regional integration in ASEAN make it very hard to compete in car segment

• Bus and truck segments already have developed some capabilities and MSE constraints are not binding

• Potential to develop full range of software, hardware and service design and implementation skills that could be exported (networked bus)

• Emergent digital transportation services ecosystem building on congestion solution dataset and APIs