Makers are in the driving seat
Local companies perfectly positioned for a profitable future thanks to mainland's fast-growing vehicle industry. Reports by Andrea Li
Hong Kong manufacturers could play a key role in the mainland's burgeoning vehicle industry by supplying well designed parts and electronic components to carmakers. They expect soaring growth in the next decade as the country's rapidly emerging middle class swaps bicycles for vehicles.
'China is now the world's third largest motor producer so there is huge demand for parts and components, especially electronics products,' said Chan Kei-biu, chairman of the Hong Kong Electronic Industries Association. Professor Chan said the central government had also been backing the hi-tech car industry to shift the country away from low-end processing and assembly work.
Lawrence Ang Siu-lun, executive director of Hong Kong-listed Geely Automobile, which manufactures cars and parts in the mainland, said: 'Most of China's car manufacturers started less than 10 years ago and they have only really begun growing in the past five years. Right now, there could be a Toyota or Honda in the making in China.'
One of the biggest prizes to a flourishing homegrown vehicle market is that the central government lowered the entry barrier for parts makers across the board.
'The fact that China's car manufacturers have been open to sourcing from new parts suppliers has put everyone on an equal playing field,' Mr Ang said. 'In contrast, it has been very hard for new parts makers to get into the more established markets of Japan and Europe because they already have suppliers they have worked with for years, so there is very little reason for them to use someone new.'
Hong Kong-listed Norstar, one of the few part makers producing brakes and suspension systems in the mainland, said the country's dependence on imported components would reduce with time. The firm's vice-president for global marketing, Charlie Zhou Xiaochun, said: 'There are few parts and components companies in China because the vehicle industry was not considered sizeable until early 2000. It takes years to build up such a company with the right talent and technological development. There is ample room for growth and this is an area Hong Kong companies can focus on in the long run.'
Though parts and components will be required for high- and low-end vehicles, industry sources believe it is the value-added components that hold most promise.
Mr Ang said: 'Value-added in the industry used to mean how good you were at metal casting and processing, but it is much harder to make money from these components now as there are already well established suppliers doing this. Instead, the value-added focus is now more on design and electronics. That's where you can turn profit.'
The trend for car manufacturers to use more electronic components in their vehicles spells good news for Hong Kong, which already has a strong track record in the production of consumer electronics.
'It wouldn't be too difficult for Hong Kong's consumer electronics manufacturers to switch over to the production of electronic car parts. This is where Hong Kong has its strength,' Mr Ang said. He said for this to work, businesses must adjust their mentality towards focusing more on research and development, and design.
After years of research, Hong Kong-based Moletech Global's chief executive, Andrew Kelly, believes his company's patented fuel saver technology is a case in point in demonstrating how competitive advantage can be created.
The company's fuel saver product, which restructures fuel molecules in a vehicle and consequently reduces harmful pollutants, greenhouse gases and improves fuel consumption, is being launched at the fair in Hong Kong with the mainland market to be a dominant focus.
'The challenges faced locally for the industry are that products have to create a competitive edge. With the Moletech Fuel Saver, we improve the performance of cars and lower emissions so we feel we have met the challenge of the market,' Mr Kelly said.