Autoliv has started the construction of a new facility in China that will manufacture propellant for its airbags in the Asian markets. The cost for the new plant is estimated to amount to US$33m, making it the single largest capital expenditure in the company’s history.
“This new plant will be key in our strategy to localise sourcing of components to China,” said Jan Carlson, President and CEO of Autoliv Inc, speaking at a China seminar today in Stockholm.
The propellant plant will be Autoliv’s twelfth manufacturing facility in China.
Autoliv says the new plant is needed to meet the strong long-term growth for automotive safety products in China and other Asian markets. This growth is driven by higher vehicle production and the ever increasing trend toward more airbags in each vehicle. Autoliv says that frontal airbags have become common in new vehicles sold in China. However, most new vehicles in China still do not have side-impact airbags, and the other emerging markets in Asia have not even come as far as China in their automotive safety developments. This will drive a strong demand for airbags in Asia and is the main reason for this significant investment by Autoliv, the company says.
“We are already at a 70% localisation rate in China with only 30% of our component need being imported from other countries. The Chinese propellant plant will increase our localisation rate and align our manufacturing capacity to the market demand while simplifying our supply chain,” Carlson said.
The propellant is the pyrotechnic material that produces the gas when an airbag is deployed. Since the propellant (or “gas generant”) is an explosive, the manufacturing process is rigorously controlled and requires expensive equipment. Therefore, high volumes are required to make propellant operations profitable. Currently, propellant manufacturing for Autoliv and its propellant suppliers is concentrated in the USA and France. The addition of the new plant in China will increase this propellant capacity by approximately 25% and enable Autoliv long-term to produce 25-30m more airbags, depending on the size of the airbags.
The new plant is being constructed on an almost 200,000 square meter site, 200 km from Shanghai.