Lars Holmqvist, CEO

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Lars Holmqvist, CEO CLEPA European Association
of Automotive Suppliers Relocation in the
Automotive Industry, EESC 29 June 2006
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• Facts about CLEPA
• 3000 member companies in total, representing
  2500 SMEs
• 3 Million employees
• 300 billion Euro sales

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CLEPA, the European umbrella membership
organisation for the global automotive supply
industry

• 20 National Trade Associations
• 69 Corporate members

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Facts about the automotive suppliers

• 75 of the value of the car comes from the
  suppliers
• 50 of the R and D spending from the suppliers
• A majority of patents are from suppliers

Some examples

• ABS
• Airbags
• Electronic stablility programmes
• High pressure injection systems
• Diesel particulate filters
• Navigation systems

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Automotive Key Figures
Vehicle Production 2003 2008
2013 p.a. Europe 16.8 18.0
18.9 1.2 Nafta 16.3
17.5 18.5 1.3 Asia
21.1 26.1 30.2 3.3
World 60.1 69.4
76.4 2.4
Supplier Potential 2.4 per annum growth in
world production 1.3 per annum growth
through outsourcing 0.4 per annum growth
through new technologies 4.1 per annum total
potential growth
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The European Automotive Manufacturing Industry
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(No Transcript)
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Move to New Countries

• New potential markets
• China, India, Russia, Poland
• Low cost production
• Baltic States, other Eastern European
  countries

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RELOCATION The Automotive way

• Most components are unique to a specific model
  of a car i.e. VW Golf 1.8 TDI 2002-2007
• For each new model (5-7 years) a new purchasing
  contract is negoitiated
• This lead-time is 2-3 years
• Re-location is a way to meet the price pressure
  from the VMs
• Re-location is gradual and progressive
• Made in Germany could mean that 75 of the
  car is made outside of Germany

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Automotive Manufacturing in Western Europe under
threat?

• Currently, 33 of Western European Supplier
  (WES) has operations in Eastern Europe and 15 in
  China
• Soon, 50 of WES will be operating in Eastern
  Europe and/or China
• 39 of all WES intend to transfer parts of
  production process to Eastern Europe in the next
  5 years
• 23 of all WES planning similar investments in
  China

Source Ernst Young
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VMs moving eastwards

• Hyundai informal agreement to invest approx
  1.2 billion in a new 300,000-a-year Czech
  assembly plant, adding 10,000 jobs
• Toyota and Peugeot new plant in Czech
  Republic, having capacity to make 300,000 cars a
  year, investment of approx 1.5 billion
• Slovakia set to be the worlds biggest car
  producer per capita
• Slovakia home of PSA Peugeot-Citroëns newest
  European plant, forecast to make 1million cars a
  year by 2008
• Kia will invest 835m in Slovakia, production
  should reach 300,000 cars a year from 2008
• Peugeot will invest 1.1bn in Slovakia,
  production should reach 450,000 cars a year by
  2009

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VMs moving eastwards

• Hyundai, Toyota have set up car assemblies in
  Turkey
• General Motors rapidly expanding its
  manufacturing operations in Russia, also
  expanding in Kalingrad GMs 2006 target in
  Russia is 100,000 sales, up from 76,578 last year
• Ford has an assembly plant in St. Petersburg
• Toyota will open its assembly plant in St.
  Petersburg this year
• Renault has a joint venture in Moscow that
  began building the Logan last year
• Sales of foreign automakers in Russia more than
  doubled to 600,000 units last year
• in 2005, total unit-sales volume in Russia was
  1.6 million expected to reach 2 million before
  2010

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Key location factors

• low production costs
• low wage costs
• sound employee qualifications
• good engineering skills
• flexible and motivated labour markets
• good working attitudes
• proximity to attractive sales markets
• demand for cars set to grow swiftly
• political and economic stability

Source Ernst Young, FT
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Parts market
growth and manufacturing attractiveness
2003-2010 (100 best in peer group)
Average 47.1
100
China
55
United States
50
40
Cumulative automotive parts market growth 2003-201
0e1
30
Germany
Brazil
Japan
South Korea
Russia
France
Italy
20
India
Czech Republic
1
3
Mexico
Canada
Average 12.8
Turkey
2
4
United Kingdom
10
Slovakia
Poland
Indonesia
Argentina
Slovenia
Philippines
Malaysia
Hungary
Ukraine
Lithuania
Spain
Romania
Latvia
Vietnam
Bulgaria
0
Portugal
Estonia
Colombia
15
30
45
60
75
90
0
Manufacturing attractiveness rating2
1 Combined OEM and aftermarket for automotive
parts 2 Based on manufacturing opportunity
weighted with political/financial stability and
investment flexibility
Source Roland Berger Strategy Consultants
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• Conclusions
• The automotive industry is a growth market
• The outsourcing continues
• The growth comes from new markets and new
  technology
• Investment and employment moves to Eastern
  Europe and Asia
• The Competition is truly global both for
  carmakers and suppliers