Eyeing Europe's automotive sector

WHAT goes more into a vehicle these days, along with a greater reliance on sophisticated back-up services in making it, play to Singapore's industrial strength - and can give a boost to the country's economic planners' ambiton to carve a niche in the global automotive business.

But it may be an uphill task for Singapore to convince some of the biggest customers that it has got what it takes to handle a big job in helping to produce vehicles for the global market, according to International Enterprise Singapore.

Andrew Khaw, acting director of corporate group for electronics and precision engineering at the agency, which is pushing Singapore companies to go international, notes that the electronics content in a vehicle is increasing. At the same time, manufacturers are depending more on teamwork with suppliers in research and development and engineering to produce a vehicle.

Given these developments, Mr Khaw says Singapore manufacturers can leverage - and many have done so - their experience, know-how and ties in the electronics and precision engineering industry 'to build a highly competitive automotive supporting sector'.

He says many here have ventured into the automotive business and proven themselves, especially in five key areas - electronics (eg hybrid circuit for sensors); telematics (metal stamped and plastic moulded parts); interior and passenger restraints (die-casted, stamped and plastic parts); body structure (stamped and plastic parts for door locks, wipers, climate control); and transmissions (seals, gaskets and stamped parts).

But Mr Khaw suggests that Singapore companies can and should do more in Europe. Only a few like CFM, Amtek and Hi-P have a direct presence there. The European automotive market, despite its maturity, is reportedly the world's largest and thus offers the biggest opportunities, he points out.

Automotive is certainly a key industry in Europe, accounting close to 8.0 per cent of total manufacturing value added and about 6.0 per cent of total direct manufacturing jobs.

According to Mr Khaw, the European automotive industry is among the biggest R&D spenders in the European Union. Nearly a fifth of R&D expenditure in manufacturing is made in the automotive sector. For Singapore companies, making it there will, it's suggested, put them at the cutting edge of the business.

IE Singapore has pinpointed three areas Singapore can excel in, in the European automotive market - tooling; electronics and precision engineering components (safety, emissions control and infotainment); and supplying from lower cost Eastern European production bases.

'Export opportunity exists in tooling as European suppliers are expensive and have long delivery lead times,' Mr Khaw says. 'Currently, Eastern European suppliers have not reached a satisfactory level of skills. The shipping of tooling is more cost-effective than shipping of moulded parts. Consequently, European suppliers are looking for tool and die suppliers, which Singapore automotive suppliers are well positioned to provide.'

Yet, with their manufacturing plants concentrated mostly in low-cost Asia, he says Singapore companies are being lumped with the local manufacturers where their plants are located and seen by European players as cheap, unsophisticated producers.

Mr Khaw says Singapore companies, component suppliers especially, can differentiate themselves in three areas in particular - they have a world-class manufacturing capability that can meet the rising demand for safety, a clean environment and infotainment; they have a global reach by virtue of their widespread presence and extensive alliances; and, increasingly, they are able to take part in the early product development stage of production.

'Getting involved in the product development phase of the product life cycle - this is crucial as the supplier wants to be secured as the first or preferred source of components, rather than the second or third source as margins would then be thinner,' Mr Khaw says. 'Once the supplier can become the first source of components, there is a high possibility of gaining access to new projects.'

In addition to the manufacturing capability, he says Singapore automotive players are well equipped to ride on the sourcing opportunities 'because best sourcing takes into account risk, and not just cost'.

'In this regard, the Singapore electronics and precision engineering industry offers three key advantages for best global sourcing: our professional pedigree in such areas of expertise as reducing material waste, minimising re-work, high process efficiency and adherence to industrial and environmental standards, sound intellectual property management practices,' Mr Khaw says.

Recognising that European automakers may not be familiar with what Singapore can offer - and their limited knowledge of the different types of Asian suppliers - IE Singapore is stepping up its efforts to get them acquainted with Singapore companies. It will embark on 'mindshare capture initiatives through various platforms, such as public relations efforts in publications and automotive newsletters, as well as business missions to Europe'.

The agency is targeting especially Austria and Hungary for Singapore companies.

'Austria is deemed to be the gateway to Central and Eastern Europe (CEE),' Mr Khaw says. 'And the Austrian companies have traditionally had business links to CEE and hence can be a knowledgeable partner for Singapore companies seeking to supply or expand or set up operations in low-cost European countries.'

He says Austrian plastics companies have been forced by rising costs to look east, and they are seeking reliable and competitive Asian suppliers to cut cost. 'With Singapore being the gateway to Asia, Austrian companies can use Singapore plastics players' manufacturing capabilities and knowledge of Asean and China to find their way in Asia.'

Hungary, on the other hand, is a potential logistics or production hub because of its ideal location in Europe, according to Mr Khaw. It has direct access to the Balkans and Eastern Europe.

'Hungary - as one of the 'Detroit East' countries - can supply the manufacturers and the customers in the whole of Europe,' he says. 'Renault and Porsche have chosen Hungary for their part centres and from where they can supply to not only the Central and Eastern European markets but Romania, Ukraine, Russia or the Balkans as well.'

Still, largely as a mature market, exports are rising to become the main growth engine for Europe's automotive industry. Even then, Mr Khaw says the outward thrust of the industry offers opportunities for Singapore companies.

Asia, the Chinese market in particular, is a main draw for German automobile producers. He says Singapore companies, reputed to be reliable partners in the region, can offer themselves to European automotive players seeking a presence in Asia.