No-one disputes anymore that the
world’s motor industry is carrying far too much capacity and it is largely this that
has placed so many of today’s manufacturers in jeopardy. Yet WAIT can reveal that
there are still plans in place to add almost a further 9 million units, if manufacturers
do in fact proceed with their stated intentions.
According to our estimations, there is
already installed capacity world-wide for some 50.4 million cars per annum and 18.6
million commercial vehicles. Yet sales in 1998 totalled an estimated 36.0 million cars and
16.4 million CVs. That implies that there is already over-capacity for an incredible 14
million per annum cars and 2.2 million CVs, with plans in place to increase those numbers
by over 6.6 million per annum cars and nearly 2.2 million CVs.
The last time that we carried out the
installed capacity analysis, it was not a surprise to learn that most of the planned new
capacity was intended for emerging countries. It was also very revealing to note that the
established manufacturers were choosing mostly to invest in developed countries, with
companies like Daewoo and Hyundai opting for the riskier and less developed markets. The
last year or so has seen something of a shift in those intentions. It is now expected that
Europe will gain as much fresh capacity as the Far East will, unless there are
compensatory plant closures, and the larger, more established companies have changed
direction considerably in the past two years and have developed clearer and more
determined plans for the emerging markets.
It would surprise no-one to learn that
China and Brazil are earmarked for the biggest slice of the growth potential (when
circumstances finally allow) but it probably would surprise many to know that the United
Kingdom is the country that is expecting the third highest round of investments.
According to our estimations, North America
has established capacity for 11 million pa cars and 7.5 million CVs. There is actually a
reduction in capacity expected in Canada for car assembly, but even in the USA we are
expecting to see some increases. In the USA there are still plans for further expansion,
primarily from the Japanese manufacturers who are already established there. Honda can
currently build some 640,000 units per annum but plans to raise that to 800,000 pa when
their new assembly plant comes on stream in 2001. Toyota is also in the process of
boosting build levels, from the current 400,000 to 600,000 pa with fairly immediate
In Brazil there are stated intentions to
lift capacity for cars to 2.6 million pa from the current 1.7 million, and for CVs to
716,000 pa from 400,000. GM and Chrysler are planning increases for light truck
production, but it is mainly the Europeans and the Japanese who are laying down plans for
increases in car build levels. Volkswagen and Fiat were close at one stage recently with
regard to installed capacity levels, but the German company has plans to significantly
boost capacity, from 500,000 pa cars to 900,000, but will maintain light CV output at
100,000 pa, although Volkswagen could well use Brazil to cut its teeth on the manufacture
of heavier trucks, especially now that Volvo have jumped in and scooped up Scania.
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In the United Kingdom there is actually
planned reduction in capacity levels for Ford, but those are more than offset by increases
that will come from the likes of Toyota, Honda, Nissan, and Rover – if they ever get their
house in order. Honda has just begun construction work on its new assembly plant at
Swindon, Nissan can boast that its Sunderland plant is the most efficient in Europe, and
Toyota clearly has the space to double output at the Burnaston plant in Derbyshire. Rover
is subject to a massive $3 billion redevelopment programme from BMW and could eventually
build up to 700,000 vehicles a year, although the threat remains in place that BMW will
shift some assembly overseas if Rover does not show substantial improvement very quickly.
Eastern Europe is subject for considerable
investments, in particular Poland, Russia, the Czech Republic and the Ukraine, whilst
Turkey has also been spotted as being the potential gateway into North Africa, the Middle
East and Southern Europe.
Progress in China is slowing as the country
has developed at a much slower rate than originally anticipated. A number of plans are on
hold, although they stay in place because China is still seen to be the land of most
promise for the long-term development of the industry, and those who have already been
allowed in are frightened to step too far backwards in case they get pushed out of line,
as Ford was by the Fiat Group. Three years ago, South Korea was showing the largest
potential increases and at that time of a planned 9 million unit boost in world-wide
capacity, more than 4 million of that was down to Korean manufacturers. Those days are
quickly gone and we now expect to see a reduction in capacity in South Korea when Samsung
reaches the inevitable decision to cease attempts to build motor vehicles. The plant is
brand new, but entices no-one as it is not even built on stable foundations and would be
seen by most to be a pig in a poke.
Full details of all investment intentions,
by country, manufacturer and plant are to be found in the WAIT 1999 Data Yearbook.