Japan’s Big Three Driving to Grow Asian Powertrain Output

TOKYO – Japanese auto makers continue to expand powertrain capacity in Asia as they try to boost local content in the region.

Japan’s Big Three – Toyota, Nissan and Honda – all are aiming for more than 90% regional content in engines and transmissions in the next few years. And they are making substantial investments to achieve that goal.

In China, Nissan’s joint venture with Dongfeng will add 600,000 units of capacity in 2013 at a new plant in Zhengzhou, Henan province.

By 2015, the JV will double capacity at its Guangzhou facility in Guandong province to 1 million units, raising total Chinese engine capacity, including unspecified capacity at a 3-year-old diesel plant in Shiyan, Hubei province, to an estimated 1.8 million.

The expansions are part of Dongfeng’s latest 5-year business plan announced in July, in which the auto maker will invest RMB50 billion ($7.9 billion) to expand vehicle and engine capacity by 1.5 million and 1 million units, respectively.

In 2011, Nissan sold 1.25 million cars and trucks in China. Of those, an estimated 80% (1 million units) were cars.

The Dongfeng-Nissan JV produces HR, MR and VQ gasoline engines at its Guangzhou (Huada) plant, while its new Zhengzhou facility will make QR engines.

Nissan, by way of a second joint venture, Zhengzhou Nissan, produces ZD diesel engines at a RMB1.5 billion ($236 million) factory in Zhengzhou. The auto maker declines to provide details of any expansion plans. Initial capacity when the plant opened in 2009 was 100,000 units.

Meanwhile, Nissan’s main transmission supplier, JATCO, is in the process of expanding capacity at its Guangzhou facility. JATCO (Guangzhou) Automatic Transmission, a JATCO subsidiary, plans to raise continuously variable transmission capacity to 900,000 units in fiscal 2013, up from 730,000 at present.

The plant’s second expansion last year raised JATCO’s total investment to ¥16.6 billion ($209 million).

Elsewhere in China, GAC Toyota Engine began AR engine production on a new line at its Guangzhou facility in October 2011. Costing RMB607 million ($96 million), the line produces 4-cyl. AR engines in two displacements (2.5L and 2.7L) for the new Camry and Camry Hybrid also produced in Guangzhou at GAC Toyota.

Cumulative investment, including the plant’s older AZ engine line, stands at RMB3.15 billion ($498 million), according to the auto maker. Combined capacity is 500,000 units.

Toyota, which so far has installed an estimated 1 million units of engine capacity in China, is committed to raising local content to upwards of 95%. Thus, a similar capacity expansion by the auto maker’s main automatic transmission supplier, Aisin, is in the works.

Aisin, a subsidiary of Aisin Seiki, plans to open two new plants with combined annual capacity of 640,000 units by the end of 2014, raising total capacity in the Chinese market to 760,000. The supplier’s first factory, based in Tianjin and in operation since 2004, produces 6-speed automatics.

The first of the new plants, in Suzhou, Jiangsu province, is due to open next summer and will be able to produce 240,000 units. The second facility, in Tianjin, will open in late 2014 with reported annual capacity to manufacture 400,000 transmissions.

Aisin declines to disclose investment amounts.

Guangqi Honda is adding 240,000 units of capacity, both vehicles and engines, through a RMB3.56 billion ($557 million) investment in a third manufacturing line at its Zengcheng plant site. The new line becomes operational in 2013.

Dongfeng Honda in July opened a second engine line with capacity of 100,000 units a year.

When the third Guangqi Honda line reaches capacity in 2014, the Japanese auto maker will have capacity to produce 1 million engines annually including both 4-cyl. and V-6 units for models such as the 1.3L Fit, 2.4L CR-V and 3.5L Crosstour.

Chongqing Changan Suzuki plans to open a second plant in December 2013. The auto maker reportedly will add 150,000 cars and engines to current capacity of 250,000. Investment in the new facility, both engine and vehicle factories, is RMB5 billion ($785 million).

In India, Toyota Kirloskar Auto Parts opens a new powertrain plant this fall. To be constructed in a suburb of Bangalore, the facility will produce 1.5L NR gasoline engines for Toyota’s Etios model. Initial capacity will be 110,000 units.

In 2013, the Toyota-affiliated supplier will add a new manual transmission line with capacity to produce 240,000 units, raising total capacity to 410,000. Investment in new engine and transmission production is Rs5 billion ($90 million).

Maruti Suzuki, India’s largest auto maker, plans to build a Rs17 billion ($305 million) diesel engine plant in Gurgaon, Haryana state. According to media reports, the factory will have capacity to produce 150,000 engines when it comes onstream in 2013, then 300,000 in 2014.

Combined diesel engine capacity by Maruti Suzuki and Suzuki Powertrain India, since June a subsidiary of Maruti Suzuki, will grow to 600,000 units.

Maruti Suzuki currently produces 1.0L and 1.2L K-series gasoline engines at its Manesar plant, also in Haryana. Annual capacity is 750,000 units. The facility’s engines go into such models as the Estilo, Swift and Wagon R.

In fiscal 2011, the auto maker produced 1.1 million engines in India, including 873,000 units at Maruti Suzuki’s Gurgaon plant and 252,000 at Suzuki Powertrain India.

Elsewhere in India, Honda Siel has opened new cylinder-block and -head lines at its Tapukara powertrain facility in Rajasthan. Investment in the operation was Rs2.4 billion ($45 million). Before launching production in late 2010, the auto maker imported blocks and heads from Honda facilities in Thailand and Indonesia.

Renault Nissan Automotive India reportedly plans to add diesel engine capacity at its Oragdam plant this year, but no details are provided. When the auto makers opened their Rs43.6 billion ($808 million) vehicle factory in May 2010, they included facilities for making gasoline engines to be fitted in Nissan Micra and Renault Koleos and Fluence models.

In Southeast Asia, Siam Toyota will invest ¥14 billion ($176 million) in a new engine line scheduled to be operational in 2014. The line will have capacity to produce 100,000 ZR engines for Corollas built throughout the region. With the addition of the new line in Amata Nakom, plant capacity will increase to 840,000 units.

Also in Thailand, JATCO will open a TB7.6 billion ($241 million) factory in mid-2013. The plant, under construction in Chonburi, will be able to produce 500,000 CVTs mainly for Nissan and Mitsubishi facilities in Thailand.

Note that Aisin AI, another subsidiary of Aisin Seiki, opened a second Thai plant in 2009. With two factories in Thailand, one in China and two in Japan now online, the supplier delivered 1.5 million manual transmissions in fiscal 2011.

Elsewhere in the region, P.T. Honda Prospect plans to double engine capacity at its Kawarang Barat facility east of Jakarta, Indonesia. With the 2014 opening of a second plant inside the 126-acre (51-ha) site, the auto maker will be able to produce 120,000 units, up from 60,000 now.

Daihatsu’s main transmission supplier, Akashi-Kikai, plans to open a second facility in Seremban, Malaysia, at a reported cost of 222 million ringgit ($72 million). The factory, with capacity to make 150,000 automatic transmissions, comes onstream in November 2013. It will supply Daihatsu subsidiary Perodua, Malaysia’s second-largest auto maker.

Akashi-Kikai also operates a 6-year-old CVT plant in Jakarta, Indonesia.

In Japan, Toyota will launch a 1.5L gasoline engine facility late this year in the town of Taiwa, north of Sendai. The plant, run by Toyota Motor East Japan (formerly Toyota Motor Tohoku), will supply NZ engines for the Prius c and Aqua hybrids. Capacity will be 100,000 units annually.

In Hiroshima, Mazda will double Skyactiv engine capacity (including both diesel and gasoline versions) to 800,000 units by October to meet greater-than-expected demand for the new CX-5 cross/utility vehicle.

Honda opened a new ¥10.5 billion ($131 million) transmission line inside its Hamamatsu plant last year. The line has capacity to make 800,000 CVTs and automatic transmissions annually.