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Showing posts with label VW. Show all posts
Showing posts with label VW. Show all posts
Tuesday, 9 April 2019
Manufacturing and Germany's Conundrum.
Having read today that we will likely stay within the confines of the EU regulatory network for perhaps another year. That's provided we take Benzodiazepines or some other form of bad boy behavioural suppressant, in order that we do not disrupt the day to day business. For me when dissenting voices such as Marine LePen are ordered to undergo psychiatric assessment. Now we are told to pay up and shut up. One has to ask is Mikael Gorbachev correct in his statement “The European Union is the Soviet Union in Western Clothes?”
Impacts on Manufacturing
Most notably the car Industry. The UK exports of cars and parts is equal to 12% of our GDP of which half of that heads to the EU. But, this is not the whole story, the UK imports far more from the EU by way of cars and car parts than we export to them, only with the rest of the world we have a surplus.
The car industry is dominated by oversupply, which means prices are already under pressure. It is also important to note that the UK is 13th on the list of countries that are car manufacturers, it may also come as a surprise Germany is 3rd, after China and Japan, followed by Korea, India, the United States, Brazil, France, Spain, Russia, Mexico, Iran – and the UK, which is in thirteenth place.
Car companies have for a long time been shifting their manufacturing capacity to emerging markets. If you read my blogs about Asia you will know that Indonesia offers shop floor workers at a third of the price of China for example. Given the glut of manufacturing, the pressure on prices it's no surprise if some of our manufacturing shifts. This will depend on two areas. 1) The EU look to devastate the German car Industry by making UK exports to the EU more difficult which in turn impacts German manufacturers as the UK is their largest market. This would be folly! 2) The whim of the manufacturers and their desire to use Brexit as the reason to get their bad news out. Much like Jo Moore as she pushed the then labour transport minister to publish councillors excessive expenses during the 911 terrorist attack. That's perhaps an extreme analogy but I'm sure you understand where I'm coming from.
If no agreement comes then the UK will face “Common External Tariff”, 10% on cars and 5% on components. That would present an interesting conundrum for Germany should the UK apply the same rules, given we run a car industry deficit. For sure this would devastate Mercedes, BMW, VW etc. at a time when German manufacturing are squeezed by recession. Such tit-for-tat measures would be foolish for both sides. The UK needs to be open to import from the ROW, under WTO we can not remove tariffs from one WTO supplier and apply them to another. The UK needs to buy more cheaply to start the benefits of leaving the EU. However, at a consumer level it could easily be seen that a boycott could emerge should Germany or the EU slap CET tariffs.
Of course, I relate only one side of the argument the tariffs and free flow of cars and parts. But the other side perhaps equally important is the supply chains. Supply chains that our manufactures rely on, “just in time manufacturing” here could well be an issue, tariffs at borders, extra paperwork, slower movement etc. But, even here we have a “silver lining” as in such a scenario this would form the catalyst for manufacturing to rise within our shores, supply chains could be homegrown. A renaissance; like a phoenix rising from the 70s ashes.
The automobile industry due to its size is a special case but there is a wider issue. It has been argued that once the UK leaves the EU, particularly if it follows a policy of zero tariffs on imports from the rest of the world as well as the EU, the doomsayers claim its other manufacturing sector would be hit heavily. It has even been suggested that the UK’s manufacturing sector could collapse, project fear perhaps. In fact, there are no reasons why UK manufacturing cannot thrive after Brexit, even after a declaration of unilateral free trade (UFT). However, it is important to note that UK manufacturers are enjoying a bonanza with the pound depreciation. Even if, tariffs are applied across the EU these have been more than offset by the pound's depreciation.
Thank you once again for reading my ramblings, if you have comments or wish to add or contradict this story please comment below. Thanks!
Having read today that we will likely stay within the confines of the EU regulatory network for perhaps another year. That's provided we take Benzodiazepines or some other form of bad boy behavioural suppressant, in order that we do not disrupt the day to day business. For me when dissenting voices such as Marine LePen are ordered to undergo psychiatric assessment. Now we are told to pay up and shut up. One has to ask is Mikael Gorbachev correct in his statement “The European Union is the Soviet Union in Western Clothes?”
Impacts on Manufacturing
Most notably the car Industry. The UK exports of cars and parts is equal to 12% of our GDP of which half of that heads to the EU. But, this is not the whole story, the UK imports far more from the EU by way of cars and car parts than we export to them, only with the rest of the world we have a surplus.
The car industry is dominated by oversupply, which means prices are already under pressure. It is also important to note that the UK is 13th on the list of countries that are car manufacturers, it may also come as a surprise Germany is 3rd, after China and Japan, followed by Korea, India, the United States, Brazil, France, Spain, Russia, Mexico, Iran – and the UK, which is in thirteenth place.
Car companies have for a long time been shifting their manufacturing capacity to emerging markets. If you read my blogs about Asia you will know that Indonesia offers shop floor workers at a third of the price of China for example. Given the glut of manufacturing, the pressure on prices it's no surprise if some of our manufacturing shifts. This will depend on two areas. 1) The EU look to devastate the German car Industry by making UK exports to the EU more difficult which in turn impacts German manufacturers as the UK is their largest market. This would be folly! 2) The whim of the manufacturers and their desire to use Brexit as the reason to get their bad news out. Much like Jo Moore as she pushed the then labour transport minister to publish councillors excessive expenses during the 911 terrorist attack. That's perhaps an extreme analogy but I'm sure you understand where I'm coming from.
If no agreement comes then the UK will face “Common External Tariff”, 10% on cars and 5% on components. That would present an interesting conundrum for Germany should the UK apply the same rules, given we run a car industry deficit. For sure this would devastate Mercedes, BMW, VW etc. at a time when German manufacturing are squeezed by recession. Such tit-for-tat measures would be foolish for both sides. The UK needs to be open to import from the ROW, under WTO we can not remove tariffs from one WTO supplier and apply them to another. The UK needs to buy more cheaply to start the benefits of leaving the EU. However, at a consumer level it could easily be seen that a boycott could emerge should Germany or the EU slap CET tariffs.
Of course, I relate only one side of the argument the tariffs and free flow of cars and parts. But the other side perhaps equally important is the supply chains. Supply chains that our manufactures rely on, “just in time manufacturing” here could well be an issue, tariffs at borders, extra paperwork, slower movement etc. But, even here we have a “silver lining” as in such a scenario this would form the catalyst for manufacturing to rise within our shores, supply chains could be homegrown. A renaissance; like a phoenix rising from the 70s ashes.
The automobile industry due to its size is a special case but there is a wider issue. It has been argued that once the UK leaves the EU, particularly if it follows a policy of zero tariffs on imports from the rest of the world as well as the EU, the doomsayers claim its other manufacturing sector would be hit heavily. It has even been suggested that the UK’s manufacturing sector could collapse, project fear perhaps. In fact, there are no reasons why UK manufacturing cannot thrive after Brexit, even after a declaration of unilateral free trade (UFT). However, it is important to note that UK manufacturers are enjoying a bonanza with the pound depreciation. Even if, tariffs are applied across the EU these have been more than offset by the pound's depreciation.
Thank you once again for reading my ramblings, if you have comments or wish to add or contradict this story please comment below. Thanks!
Wednesday, 20 March 2019
Trump's Naughty List Drives Asia Growth
Trump's cross hairs, there's a pun but not intended. China, South Korea and India on Trump's naughty list it's not difficult to see who the beneficiaries are: For sure Indonesia but not just Indonesia, Vietnam has benefited. Asia have redoubled their efforts to increase trade and trade relationships, 28 from 44 FTAs “Free Trade Agreements” proposed are between Asian nation states. Cohesive active even pro-active dyads, trade relationships have grown significantly since the global crisis, weathered, even ignored the Trump doctrine, this is set to only improve further.
I bring you back to an earlier note of mine, one where I talk about Asia's third wave, it's worth a read, click here. The other where I cover PWC, their forecast for the World Economic growth, in a few short years PWC claim on a measure of GDP that 4 of the top 5 countries will be Asia. China, USA, Japan, India and Indonesia.
Two situations are emerging, in reality they are already upon us. One technology is no longer the domain of the USA, perhaps it's too early to write the US off, for innovation or R&D. For several decades North Asia has maintained the industrial mantle for mass production with labour split between Japan, South Korea and China adding Taiwan and Hong Kong at a later stage. From these five countries they account for $4.2 Trillion Asian exports, this is equivalent to North America, the European Union combined.
In the year 2000 China represented less than 10% of Asia's technology exports, today 44%. Huawei, Lenovo, Haier, and BYD Automobile Company all rank ahead of their Asian peers and Western rivals in categories such as telecom equipment, laptops, appliances, and electric cars. But of course their manufacturing links are all highly integrated as China relies on South Korea and Japan for their semi-conductors.
What Asia is aware of, their markets were once primarily the West this is no longer the case, their markets today are other Asian countries. Hence, the dawning of an age in shifting manufacturing to the south productivity grew, whilst opening new markets to export too.
Cost of labour to the north has increased as has the cost of living. I've mention in an earlier document that average daily rate on the manufacturing shop floor is $30, Indonesia and Vietnam are still able to maintain $10 per day, with a substantial workforce, a median age below 30.
Indonesia has vast Industrial parks one of which can be seen in the image above. Companies from the west such as Siemens, ABB are already established, but, also from Asia Foxconn, JVC, Omron etc. Pegatron will invest $300M opening a 2 hectare manufacturing plant in just one of Indonesia's industrial zones. Foxconn and Pegatron manufacture in excess of 80% of the world's iPhones. Hyundai announced in Dec 2018 plans to move electric car manufacturing to Indonesia with an investment of $800M. Hyundai anticipate 53% of their cars will head to Asia and Australia, the remainder serving the Indonesian domestic market. Not to be out done VW will build the Tiguan in Indonesia with a €50M investment.
Japan since the 1970s have invested in Southeast Asia but in recent years has increased its investment to $20billion, they are looking to manufacture Nissan electric and flexfuel (Ethanol and other biofuel) vehicles.
I reaffirm the west should look to join their compatriots, explore the possibilities of cheaper markets for manufacture. Positioning for a burgeoning middle class able to consume at the rate that a westerner used to be able to.
Since 2014, US, European, and even Chinese companies have outsourced to Asian nations, Japan and South Korea have led the way in moving manufacturing to this region. South East Asia has attracted more annual investment than China. Asian’s total annual trade amounts to nearly $2.2 trillion, one-quarter of which is within Asian, 15 percent with China, and 10 percent with Japan.
Since the Asian-China Free Trade Area (ACFTA) established in 2000 this created by population (combined population of 2.5 billion people) the largest free-trade agreement in the world, South East and East Asia has become China’s third largest trading partner with $400 billion in annual trade. Don't be surprised if Asia displaces Europe and North America as the primary destination for Asia exports.
Whilst Europe squabbles over regulation and authoritarianism Asia is racing ahead.
Whilst Europe squabbles over regulation and authoritarianism Asia is racing ahead.
Can you afford to miss Indonesia in the 21C.
Trump's cross hairs, there's a pun but not intended. China, South Korea and India on Trump's naughty list it's not difficult to see who the beneficiaries are: For sure Indonesia but not just Indonesia, Vietnam has benefited. Asia have redoubled their efforts to increase trade and trade relationships, 28 from 44 FTAs “Free Trade Agreements” proposed are between Asian nation states. Cohesive active even pro-active dyads, trade relationships have grown significantly since the global crisis, weathered, even ignored the Trump doctrine, this is set to only improve further.
I bring you back to an earlier note of mine, one where I talk about Asia's third wave, it's worth a read, click here. The other where I cover PWC, their forecast for the World Economic growth, in a few short years PWC claim on a measure of GDP that 4 of the top 5 countries will be Asia. China, USA, Japan, India and Indonesia.
Two situations are emerging, in reality they are already upon us. One technology is no longer the domain of the USA, perhaps it's too early to write the US off, for innovation or R&D. For several decades North Asia has maintained the industrial mantle for mass production with labour split between Japan, South Korea and China adding Taiwan and Hong Kong at a later stage. From these five countries they account for $4.2 Trillion Asian exports, this is equivalent to North America, the European Union combined.
In the year 2000 China represented less than 10% of Asia's technology exports, today 44%. Huawei, Lenovo, Haier, and BYD Automobile Company all rank ahead of their Asian peers and Western rivals in categories such as telecom equipment, laptops, appliances, and electric cars. But of course their manufacturing links are all highly integrated as China relies on South Korea and Japan for their semi-conductors.
What Asia is aware of, their markets were once primarily the West this is no longer the case, their markets today are other Asian countries. Hence, the dawning of an age in shifting manufacturing to the south productivity grew, whilst opening new markets to export too.
Cost of labour to the north has increased as has the cost of living. I've mention in an earlier document that average daily rate on the manufacturing shop floor is $30, Indonesia and Vietnam are still able to maintain $10 per day, with a substantial workforce, a median age below 30.
Indonesia has vast Industrial parks one of which can be seen in the image above. Companies from the west such as Siemens, ABB are already established, but, also from Asia Foxconn, JVC, Omron etc. Pegatron will invest $300M opening a 2 hectare manufacturing plant in just one of Indonesia's industrial zones. Foxconn and Pegatron manufacture in excess of 80% of the world's iPhones. Hyundai announced in Dec 2018 plans to move electric car manufacturing to Indonesia with an investment of $800M. Hyundai anticipate 53% of their cars will head to Asia and Australia, the remainder serving the Indonesian domestic market. Not to be out done VW will build the Tiguan in Indonesia with a €50M investment.
Japan since the 1970s have invested in Southeast Asia but in recent years has increased its investment to $20billion, they are looking to manufacture Nissan electric and flexfuel (Ethanol and other biofuel) vehicles.
I reaffirm the west should look to join their compatriots, explore the possibilities of cheaper markets for manufacture. Positioning for a burgeoning middle class able to consume at the rate that a westerner used to be able to.
Since 2014, US, European, and even Chinese companies have outsourced to Asian nations, Japan and South Korea have led the way in moving manufacturing to this region. South East Asia has attracted more annual investment than China. Asian’s total annual trade amounts to nearly $2.2 trillion, one-quarter of which is within Asian, 15 percent with China, and 10 percent with Japan.
Since the Asian-China Free Trade Area (ACFTA) established in 2000 this created by population (combined population of 2.5 billion people) the largest free-trade agreement in the world, South East and East Asia has become China’s third largest trading partner with $400 billion in annual trade. Don't be surprised if Asia displaces Europe and North America as the primary destination for Asia exports.
Whilst Europe squabbles over regulation and authoritarianism Asia is racing ahead.
Whilst Europe squabbles over regulation and authoritarianism Asia is racing ahead.
Can you afford to miss Indonesia in the 21C.
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