Automotive Manufacturing – The Changing Landscape and the New Production Hubs in Asia Pacific

Automotive Manufacturing – The Changing Landscape and the New Production Hubs in Asia Pacific

Guest Author: Zhao Jizheng, Siemens PLM Software 

The global automotive industry has reached a stable state in a new growth cycle. The demand for vehicles is growing – Asia Pacific being the fastest growing region with the biggest global potential. According to a global auto report by Scotiabank, Asia was the biggest automotive producer from 2012 to 2014, with 31.69 million vehicles sold in 2014.As a production hub, China leads, followed by Japan and South Korea according to the Organisation Internationale des Constructeurs d’Automobiles (OICA) auto production statistics for 2014. Total production in Asia Pacific reached 46 million in 2014, accounting for more than 51% of global auto production.

McKinsey & Company predict that the next 7 years will be profitable for the industry in Asia Pacific with emerging markets driving the majority of gains with massive growth expected. The surge in domestic demand and Government initiatives supporting the manufacturing sector are key factors for the future of the automotive sector. But where does that place manufacturers in Asia when we look at the global value chains? Can automakers in Asia continue to benefit from operating in such a large consumer market in the face of increased domestic competition?

Some things never change

Even at a time when consumer expectations and manufacturing processes are seeing a tremendous amount of evolution, one fact remains unchanged – automakers still need to meet the expectations of customers on two counts – safety and quality. But with growing complexity, the pressure to maintain quality while lowering costs is constantly increasing. The automaker, be it local or a multinational, is expected to respond to the local market quickly, offer fuel economy and emission reductions, top level safety whilst meeting stringent regulations.

For manufacturers in Asia, operating in a price sensitive market has never been more difficult than it is today. Many are struggling to maintain a good reputation for their brand and product quality. Several automakers in India and China that have already purchased existing brand and development teams from Europe or North America, are finding it challenging to manage and integrate those new resources within their systems and utilizing them to their full potential.

 

But the rules do

 

Major technological shifts in the automotive industry over the last few years have had a strong impact in ways that were previously unthinkable. Vehicles are no longer limited to being the core elements of the automotive industry.  Given the size and potential of the automotive market, technology companies are jumping in the fray. Google’s driverless car and Tesla’s e-car are prime examples of non-traditional entities entering and catalyzing the automotive industry.  BYD in China and Reva in India (both leading Automotive OEM suppliers) are examples of similar game changers from our own backyard. These new players come without the common burdens or constraints that automakers have to factor in. They work on an open platform with strong capacity to integrate their success with top offerings of other industries. With this aggressive approach and malleable, quick-to-adapt business model, they are rewriting the rules of production and consumption.

 

Another critical factor affecting the manufacturing budget and strategy is the increasing requirement for a greater variety of customization options from consumers. In an era where personalization is at the heart of every buying decision, a significant investment such as a vehicle is a carefully considered one. With the young generation treating their vehicles as a sign of success, character and lifestyle, manufacturers have to come up a product that can be adapted to various tastes and requirements. With electrical devices and software features being an integral part of a vehicle design, several additional costs are incurred even before the vehicle is ready to hit the market.

 

Survival of the most adaptable

With the increase of manufacturing in Asia, we are witnessing the marketplace go beyond innovation – the key to surviving and thriving in this complex scenario is transformation. Automakers need to transform not only their materials and processes, but also the business landscape, operating model and legacy advantage that once gave them a competitive edge. This transformation can be achieved by Digitalization – a concept that entails establishing a new business operation foundation and implementing a digital process that ties all phases (ideation, realization and utilization) together. This digital thread that has the intelligence of the products and its lifecycle processes then connects to smart devices which are part of the production facilities to interpret and react to the information. A digitalized environment is the foundation of establishing a Digital Enterprise that fosters product and business innovation which is necessary for providing future automakers a sustainable competitive advantage.

 

Realize innovation with digitalization

 

Digitalization across the entire value chain can help automakers in Asia manage the complexity of processes and products in four areas:

  • Establishing a simple yet compelling environment that meets the unique needs of each member of the vehicles value chain including OEM and all suppliers.
  • Building highly intelligent digital models which accurately reflect the real vehicles’ manufacturing environment and response to market.
  • Seamlessly connecting the digital and physical worlds of vehicles and production to meet quality and cost targets, when making ideas come to life.
  • Delivering a foundation that can evolve with new tools, technologies and business models ensuring the long term return on the automaker’s investment

 

A digital enterprise that is open and collaborative can usher in a new automotive ecosystem. One which will include all aspects of the traditional products, services and the relationships between consumers, the vehicle and the enterprise in both virtual and physical form.

With a transformative new mechanism resting on a strong foundation of the digital enterprise, there is no reason why production hubs in Asia can’t be one of the top rated centers of the world. Digitalization is coming fast and the increasing complexity of business and technology is changing the landscape of automotive manufacturing in Asia. What appears to be a tough situation today is a golden opportunity for a brighter tomorrow.  With the right tools available and waiting to be leveraged, automakers in Asia are uniquely positioned to shine on a global stage.

 

Author Bio -

Jizheng Zhao - Marketing Manager in Asia Pacific at Siemens PLM Software

Jizheng Zhao – Marketing Manager in Asia Pacific at Siemens PLM Software

Jizheng Zhao is Marketing Manager in Asia Pacific at Siemens PLM Software, where he is responsible for the Planning and Execution of Automotive Industry Marketing Program and Teamcenter Product Marketing Program in Asia Pacific.

Prior to his current position, Jizheng was with the Teamcenter product marketing manager in Greater China at Siemens PLM Software.

Jizheng have 15  years experiences in PLM area. In the past, Jizheng had worked as implementationtechnician, business consultant, project manager for many key customer deployments in China. He has experience about business process, IT management process in manufacturing industry.

Jizheng published more than 10 technical papers in IT and PLM areas.

Jizheng graduated from the Northwestern Polytechnical University in China.

 

About Guest/blogger

Guest/blogger posts belongs to respective authors. The articles/tips are summarized here, if interested in reading the complete blog post, please follow the links given under each post.