San Jose, California (PRWEB) May 10, 2012
Follow us on LinkedIn Globalization has played a critical role in the development of automotive component outsourcing by encouraging OEMs and their suppliers to develop and define new international division of labor. The trend has also been partially fueled by the international re-location of auto demand from mature developed countries like North America, Europe and Japan to emerging markets such as, Brazil, India and China. With OEMs adopting a produce where you sell strategy as is reflected by the growing number of supplier and OEM partnerships and shifting of manufacturing plants to overseas markets, opportunities for component outsourcing has been on a commensurate rise. Also, protectionist policies of governments in developing countries that impose constraints and incentives on auto trade and manufacturing coupled with cross border labor cost differentials have been encouraging complete end-to-end outsourcing of component design, development and manufacturing. The growing magnitude of outsourcing by auto OEMs still continue to result in power shifts in favor of suppliers.
In the upcoming years, growth in automotive component outsourcing will continue to be encouraged by the competitive need to cut time to market, given its potential to help OEMs steal a march on competitors. In this regard, outsourced manufacturing of automotive subsystems will rise in importance given its key benefit which is reduction in total time required to develop, manufacture and launch a new vehicle. In other words, reduction in lead times and higher execution speeds will help enhance the flexibility of OEMs to rapidly adjust to changing external market stimulants, giving them increased levels of new product development abilities. As the automotive industrys clockspeed continue to accelerate, cutting down on the traditionally long Concept-to-Car time will emerge to be the sharpest competitive edge for automakers in the upcoming years. And outsourcing in this regard is poised to benefit. As a case in point, the growing electronic content in an automobile, of late, has pushed the automobile industry into a more dynamic environment characterized by rapid change, and this thereby has pushed outsourcing into a tool to stay on top of the opportunities.
In this regard, given the relatively higher clockspeeds of automotive electronics than in comparison with engines and transmissions, outsourcing of automotive electronic subs-systems is growing in popularity. With electronics taking over more and more of a car’s controls, and with it the consumers preferences as well, traditional electronics manufacturers are now joining the automotive supply chain as OEMs increasingly outsource electronics and related hardware and software components of the vehicle. Another major factor governing the outsourcing trend in this space is the fact that shorter lifecycles associated with electronics make OEMs unwilling and hesitant to invest knowledge, technology and capital in dedicated facilities, which run the risk of being underutilized as technologies evolve and processes improve. Outsourcing in this regard takes the uncertainty out of the equation.
The 2007-2009 recession interestingly also encouraged manufacturers to steadily shed full line production processes and step up outsourcing in an attempt to free investment capital. Given the current scenario where business disaggregation and splintering of the value chain is the norm, outsourcing stands as a strategic tool wielded by OEMs to increase production efficiencies and in the process, profitability.
While the automotive industry in most regional markets is steadily recovering, the industry in Europe is running into fresh set of challenges. The industry in the region currently continues to vacillate between optimism and fear, marring sentiments in an otherwise recovering market. Nervous over the play out of the sovereign debt crisis drama, the domestic industry is facing immediate hurdles, such as, credit restriction, consumer indecisiveness, anticipated slowing of vehicle sales, high labor costs, and possible collapse of consumer confidence in the event of escalation in the severity of the debt crisis. The heat raised by the Euro debt crisis in the auto industry in the EU is reflected by the growing concerns voiced by auto majors like Ford, General Motors, Fiat, over the volatile and fluctuating profits being recorded in the region.
At the extreme pessimistic end of the spectrum, bearish market sentiments indicate that multiple defaults by debt ridden economies could trigger a collapse of the Euro as a common currency. The return to local currency, although currently not seen as likely, can spell doom pushing the automobile industry into a complete meltdown like the one witnessed during the 2007-2009 recession.
While no easy and immediate solutions exist for Europes macroeconomic imbalances, current economic data leaves room for hope. For instance, Germanys relative resilience in handling the euro zone crisis is helping strengthen confidence levels. Given the yet encouraging outlook for the German economy, the largest in the euro zone, it is not all gloom and doom as pessimists might view. Also forced austerity measures implemented in Greece to reduce the countrys widening deficits, are less likely to be adopted in relatively stronger economies with lower debt loads like in Germany, Spain and Italy. This is primarily because of the growing acceptance of the counterproductive implications of such a strategy on GDP growth in an economy.
Immediate production cutbacks in the region are not seen as likely, given the yet patchy slowdown in auto sales. Currently, production continues to hold up even in the face of weaker than expected growth and optimism remains with no downgrade in the outlook for auto production. Although short-termed, concerns of the automobile industry are currently alleviated with news about the governments in EU legislating additional bailouts which in effect kicks the EU debt can further down the road. Although these short-term measures do not provide a permanent solution to the crisis and in reality indicates deferring of conclusive, corrective action, market sentiments are nevertheless encouraged.
As stated by the new research report on Automotive Component Outsourcing, Asia-Pacific is the fastest growing regional market with revenue from the region waxing at a CAGR of about 12.07% over the analysis period.
Major players in the marketplace include Meritor Inc., Amtek India Limited, AGC Flat Glass Europe, Benteler International AG, Autoliv Inc., Bharat Forge Limited, BorgWarner Inc., BorgWarner Turbo Systems GmbH, Continental AG, Cummins Inc., Delphi Automotive LLP, Denso Corporation, Faurecia SA, Honeywell Turbo Technologies, Johnson Controls Inc., KIRCHHOFF Automotive GmbH, Lear Corporation, Magna International Inc., Michelin Group, Rane Group, Robert Bosch GmbH, Shriram Pistons & Rings Ltd, Sundaram Fasteners Limited, Takata Holdings Inc., Tenneco Inc., ThyssenKrupp Steel Europe AG, TRW Automotive Holding Corp, Visteon Corporation, Valeo Group, and ZF Friedrichshafen AG.
The research report titled Automotive Component Outsourcing: A Global Strategic Business Report announced by Global Industry Analysts, Inc., provides a comprehensive review of market trends, issues, drivers, company profiles, and key strategic industry activities. Market estimates and projections are presented for all major geographic markets including US, Canada, Japan, Europe (France, Germany, Italy, UK, Spain, Russia and Rest of Europe), Asia-Pacific (Australia, China, India, South Korea, Thailand & Rest of Asia-Pacific), Latin America (Argentina, Brazil, Mexico, and Rest of Latin America) and Rest of World.
For more details about this comprehensive research report, please visit
http://www.strategyr.com/Automotive_Component_Outsourcing_Market_Report.asp
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