AUTOMOTIVE\\\ The limits to automotive growth


On paper, worldwide consumption of cars is set to grow. In developing countries like China, car ownership, while surging ahead, is still way below European levels and there would appear to be plenty of scope for it to carry on at its current headlong rate. And yet, there are signs that


growth in the market may reach its limits. For instance, the size of some developing world cities is truly staggering. Shanghai’s population is 22 million, around three times the size of London. If all those people were to acquire cars and start driving them all the time, it would be Hell on Earth – with added gridlock. Even in some mature markets in Europe and North America, there are signs that people in major cities are falling out of love with the motor car. True, new technologies such as battery electric or hybrids may make the car a more attractive urban bedfellow, but the day will come when there is simply no more parking space in which to put all this metal. So it could be risky to simply


extrapolate current growth trends into the future. Nevertheless, says Stefan Brunner, vice president, automotive and tyre for Northern Europe at logistics giant Ceva,


automotive isn’t a bad segment to be in. Globally, it accounts for 28% of Ceva’s €6.9bn total annual turnover, or roundly €2bn. “I don’t think growth in


automotive will ever stop, but will it continue for years and years until countries like China reach the car ownerships levels of Europe or the US?” Probably not, is the answer; cars are not like soap or food, which we all need – and at the moment, sectors like fast-moving consumer goods are growing faster than automotive for Ceva. Needless to say, almost all the


recent real growth in automotive has been in the developing world, in the so-called ‘BRIC’ economies (Brazil, Russia, India and China) and in other ‘Asian Tiger’ countries, and with little or no market expansion, or even contractions, in many of the main European countries. “No one is building new production plants in Europe at the moment,” says Stefan Brunner. “And if you analyse the projected growth in global car production, from 75m units a year now to 100m in around ten years’ time, which equates to around 50-60 new car plants globally, none of those are likely to be built in the West, but in China, Mexico and so on.”


While there are the occasional


bright spots, such as General Motor’s announcement that it is to build a new Astra at Ellesmere Port, effectively rescuing the Merseyside plant from closure, overall growth in most European market can be measured in increments of 0.5% or perhaps 1% - and in southern Europe it has been declining. Ceva offers a complete range


of services to the automotive industry, including inbound transportation to production plants, spares and even finished vehicle distribution (though the latter is only available in China). It works with virtually all the main global manufacturers – with the exception of Hyundai, which runs its own logistics. It has developed a suite of smart solutions, allowing best practice anywhere in the world to be replicated in other places, or in other segments of the industry. “You could call it the ‘Big Mac’ approach,” says Brunner. “You can learn and copy best practice and combine everything any way you want, avoiding making the same mistakes everywhere else.” Standards are measured by the same set of global KPIs (key performance indicators) and it can all be tied into the manufacturer’s


lean production and ‘Kaizan’ (continuous


systems. “The process of cost improvement in this industry is never-ending,” Brunner says. However, the global car makers


did take a long, hard look at their extended supply chains in the wake of the Japanese earthquake and tsunami and the floods in Thailand. While they all routinely carried out risk assessments, this time the problems were for real and brought many issues into uncomfortably sharp focus. The main lessons learned, says Brunner was that “it makes sense to have a robust supplier base”. It also prompted car makers to


look more closely at the true costs of ultra-long-distance sourcing and in some cases led to near-at- hand places being used, with local manufacturers feeding local car plants.


Certainly, the pendulum


towards ever further-flung supplies of the past few years is swinging the other way now. As far as Ceva is concerned, that might mean less sea or air freight procurement, but as a broadly-based logistics organisation it stands to gain from increased land transport, not to mention all the other added value functions that it can provide.


Speed is everything for car makers


Lufthansa Cargo has a long tradition and experience in car transport. As they are regarded as “dangerous goods” the carrier’s special product for Dangerous Goods, “Care/td”, is mandatory for car transport and also for all car parts and components that qualify as Dangerous Goods. Lufthansa can offer lower deck positions - if the car fits - but


also main deck positions within its extensive freighter network. Many of the cars carried are of very high value like


prototypes, racing cars, classic vehicles or luxury automobiles but also cars for fairs and exhibitions which need to be somewhere at the right time and in perfect condition. However, says Brigitta Ebeling, product manager of


Lufthansa product care/td: “Our experience shows that automobile production logistics chains make regular use of airfreight, especially when


time is important. Today,


components of a car are often produced in many different countries and just one missing part could stop a whole production. For our customers our Express product, Flash/ td can save a lot of money if a part is needed to continue the production process.”


Bringing it all back home


DHL is offering a logistics solution for car manufacturers that need to issue recalls for their vehicles. The DHL Recall Solution


offers a pool of experts, specialised IT tools and a flexible network of key service


providers, geared up to support a fast deployment and effective execution of automotive recalls. Fathi Tlatli, president of the automotive sector for DHL Customer Solutions said: “The developments of sourcing and manufacturing in the


automotive industry, as well as the strengthening of regulations, have raised the likelihood of product recalls.” The DHL Recall Solution


is available worldwide and includes a dedicated recall expert team for the customer, with comprehensive experience in the automotive sector and knowledge of the regulations.


Customised information


platforms such as registration websites and flexible call centre capacity can be deployed at very short notice. DHL can also manage the exchange of the replacement parts, their transport and warehousing, as well as supervising third party providers


such as carriers and recyclers. external improvement)


Issue 4 2012


33


Trains are key to car industry in South Africa


Getting automotive cargo off the road and onto rail should be the immediate priority of the new Automotive Production and Development Programme (APDP), says Safmarine South Africa’s key account manager, Dave Everett. South Africa’s rail


infrastructure needs immediate development. Dave Everett says that unless manufacturers, their suppliers, service providers and freight forwarders have access to an efficient, cost-effective rail transport solutions, it is hard to see how the South African automotive industry can compete against other growing automotive export markets. He says: “South


Africa’s


automotive industry needs to be globally competitive in terms of the overall vehicle unit production cost and this cost has to factor in the cost of landside transport. Because of the typical distance involved in getting cargo to assembly plants, it is important to realise economies of scale by moving large volumes at the same time and rotating containers in a cost effective way. This can’t be done by road; rail is, and should be, the only option, especially if we also want to use a greener transport solution.” Given its importance to


the South African economy, Everett believes it would also be prudent to consider automotive’s specific rail requirements. The industry, which employs around 36,000 people and accounts for about 10% of South Africa’s manufacturing exports and around 7% of South Africa’s GDP, has, since the implementation of the Motor Industry Development Plan (MIDP) in 1995, increased production volumes, exports and investment, all of which have had a positive impact on employment in, and the economy of, South Africa. “Ideally the needs of the


automotive industry should be considered in isolation and a specific, industry-focused rail solution identified that will help the industry increase its global competitiveness and fully realise the benefits of the new APDP,” says Everett. The APDP comes into effect in


Dave Everitt


early 2013 and is aimed at boosting all levels of the local automotive industry. The new automotive industry programme - which replaces the current MIDP - offers, amongst other things, moderated import tariffs, a local assembly allowance for production volumes above 50,000


units per annum,


production incentives, rebates and investment allowances. Everett states: “While the new


APDP is focused on growing local automotive supply and production by addressing the MIDPs major shortcomings, the automotive industry and Government need to jointly consider whether


the


objectives of the APDP can be successfully achieved if the global competitiveness of OEMs is compromised as a result of higher inland transportation costs.” Everett also believes that while


the incentives offered by the APDP are welcome, such as the Automotive Incentive Allowance - which promises a return direct grant of 20-30% over a period of three years on investments in new plant and machinery – will have only limited attraction to car makers without also addressing issues that directly affect their sustainability and global competitiveness. In February this year, the


South African Government’s did announce a plan to invest R200 billion in rail projects. Everett believes: “This is a clear indication that the South African Government realises the importance of rail in growing its manufacturing base and economy.”


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