SupplierBusiness reports that PSA’s Manager for Global Sourcing Project, Denis Monguillet told an audience at this week’s Paris Equip Auto that PSA is aiming to increase its low cost country content in its total purchasing spend from 23% in 2007 to 47% in 2010.
This share has already grown rapidly over the last two years from 15% in 2005 to 19% in 2006. One of the reasons for the fast growth is a rise in production outside the company’s traditional European markets. This is expected to continue.
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PSA’s light vehicle sales in traditional European markets are expected to see 10% growth between 2006 and 2010 from 2.965 million to 3.27 million units. But other markets are expected to see growth of 100% in the same period, although from a much lower base (401,000 to over 800,000).
PSA’s growth in these new markets is going to be underpinned by an acceleration in new model launches which are expected to double to twelve each in the Mercosur and China.
One of new markets for PSA is Russia. The company is aiming to assemble 100,000 units by 2010, with the possibility of extending to 300,000 in the medium term. The project “project Russia” will concentrate on framing, painting and vehicle assembly only. PSA plans to invest 300 million euro’s in the project, for a new car based on the M1 like car segment platform (308/C4 model). The company is looking to purchase €1 billion a year locally for a 45% local sourcing content. They have plans to choose a factory location by the end of the year and start assembly is due to start in September 2010.
PSA is still reviewing whether to invest in India and Mexico. “A strategic assessment” is currently underway says Monguillet.
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By GlobalDataPSA not planning global low cost car (yet)
PSA’s total spend in traditional European markets is expected to grow from €22.3 billion in 2007 to €25.8 billion in 2010 – but in Russia, the Maghreb and China PSA’s spend is expected to grow from €1.6 billion to €3.3 billion.
PSA has rapidly grown its international purchasing activities over the last three years, starting with an office in Shanghai in 2004, for China, Taiwan and South Korea; a new purchasing office in Trnava in the Czech Republic for Poland, Hungary, the Czech Republic and Slovakia and another office in Turkey in 2005, and more purchasing offices in Pune, India and Tehran, Iran in 2006.
PSA opened a purchasing office in South Africa in 2007.
As part of the process PSA is also looking to widen its supply base to include more low cost country suppliers and to move them up the experience curve from producing just copies of existing mass produced parts to taking on RFQs for series production of new and more complex components.
However, Monguillet expects new low cost suppliers joining PSA’s supplier panels to contribute only a small part of the new low cost country purchasing – he is looking for between 600 million and 1 billion euro’s more of parts from that source. Most of the growth in low cost country sourcing will come through ships in the manufacturing foot print of existing first tiers and resourcing by them at the second tier level – as well as some growth of existing local PSA suppliers in low cost countries into the global supply network. Monguillet expects the biggest growth in local country sourcing from new suppliers to come from central and Eastern Europe followed by the Maghreb (North Africa), and Mercosur.
Monguillet says there are limits to the extent to which localised parts operations in China or South America can be appropriate for export to more mature markets. Firstly there may be technical specification differences. Many parts are modified to reflect the available materials in low cost country markets, and need to be tested before they can be shipped internationally. Secondly, many of the parts were chosen to be made locally because of the high cost of shipment, which adds a huge logistic burden to their ex works costs.
Overall Monguillet also expects a more than doubling of the share of components supplied to PSA’s western European plants to come from low cost countries – primarily Eastern Europe – between 2007 and 2010.
LCC country sourcing For Europe is expected rise from current 15% to 32% “we may not be the most aggressive, but we are not the last ones either” he says.
However, Monguillet says that PSA is not aiming to introduce a global low cost car. He says that PSA believes there is room for both premium and low cost versions of its existing and planned cars in most segments.
