Background
Automotive manufacturing is not a major industry sector in Hong Kong but many local manufacturers have been supplying a wide variety of internal and external automotive parts and accessory systems (APAS) to overseas automotive assemblers, including storage batteries, electrical sound/visual signaling apparatus, plastic external trims and accessory systems.
APAS manufacturing involves over 50 industry sectors, ranging from sectors that are more related to foundation industries, such as manufacturing of plastics internal trims, to high value-added sectors, such as electronics and photonics. It is estimated that there are over 150 local companies in the APAS industry(1) and some of them are engaging in the manufacturing of high value-added automotive parts. However, very few local companies are first-tier suppliers of major automobile assemblers in the US, Europe and Japan. This is due in part to the fact that Hong Kong does not have an established automotive industry and most local companies lack track records of producing good quality automotive parts. Moreover, most foreign automobile assemblers have already had a well-established suppliers network in place and many Hong Kong manufacturers have found it difficult to enter the overseas markets.On the other hand, automotive manufacturing is a fast-growing industry in the Mainland. Several large foreign automobile assemblers have formed joint ventures in the Mainland and set up assembly lines in different Mainland cities, such as Guangzhou and Shanghai, to take advantage of the market opportunities and low production cost in the Mainland. Many local and overseas APAS suppliers are trying to gain early access to the booming market in the Mainland.
Potential Benefits
Hong Kong has a strong base of foundation industries with technological strengths in metals/plastics processing, surface finishing and electronics that are useful for the manufacturing of automotive parts and components. Setting APAS as a focus area and establishing an R&D Centre in this area could help local manufacturers adapt and further develop their technological capabilities to seize new opportunities in the automotive industry. A strong APAS industry would benefit many manufacturing sectors, and might lead to creation of new industry clusters as well as job opportunities in Hong Kong.
At present, there is no major testing platform for APAS in Guangdong Province. Establishment of testing and certification facilities for product quality validation and technology enhancement in Hong Kong may create new employment opportunities for local engineers and technologists.
Strengths and Opportunities
The ITF has supported many projects that are relevant to APAS manufacturing, mostly under the foundation industries programme and the electronics industry programme of the ITSP. Supported projects cover polymers/metals processing (magnesium and advanced plastics processing), surface coating, precision processing of printed circuit board (PCB), and display technologies.
In the Mainland, total vehicle sales grew from 5.76 million in 2005 to 7.2 million in 2006 at a growth rate of 25.1%. Total sedan sales grew to 3.8 million. China has already overtaken Japan to be the 2nd largest market for vehicle sales in the world in 2006, and is expected to be the largest by 2015.
Automotive is one of the key industry sectors supported under the national policy. The Guangdong Provincial Government has also identified the automotive industry as one of its pillar industries. As many smaller-scale automobile manufacturers in the Mainland are trying to catch up with the international standards in terms of design, technology and quality, there is a good opportunity for Hong Kong to provide the necessary technologies and components to support the development of the automotive industry in the Mainland.
Risks and Weakness
Given that APAS is a relatively new industry in Hong Kong, local manufacturers need to establish business relations with their overseas and Mainland counterparts, as well as to build up their reputation and image internationally. Moreover, it may be necessary to set up testing facilities for APAS products to support the development of the industry. This would require substantial input from local research institutions, possibly with support of overseas experts.
Recent Development
In line with the market-driven, demand-led approach of the new strategy, we have adopted the following criteria in selecting APAS as one of our focus areas for priority development: existing research capability, competitive advantage, industry needs and market potential, industry commitment and support, and clearly defined objectives for R&D Centres.
It is of general view that the rapid growth of the Mainland automotive industry has presented enormous opportunities for the Hong Kong industry. Given Hong Kong's strong base of foundation industries, there is clear potential for local manufacturers to provide the necessary technologies and components to support the development of the Mainland automotive industry. Taking into account the experience of the Hong Kong Productivity Council (HKPC) in this area and the strong industry support, we have invited the HKPC to host this R&D Centre in line with the requirement to have close collaboration with the industry and other R&D institutions.(1)Source: Hong Kong Productivity Council.
