Japanese suppliers in Mexico and Brazil: Expanding capacity for local demand

Recent developments at Aisin Seiki, Calsonic Kansei, Keihin, JTEKT, and others



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 This report is the second part of the trend report on Japanese parts suppliers in Central and South America. It summarizes the trends of production capacity improvement in Mexico and the trends in Brazil (for ten months until mid-September 2014). For the trends of new business operations started in Mexico, please refer to the first report.

 Three Japanese OEMs, Nissan, Mazda and Honda, have started operations at their new plants, from the end of 2013 to the beginning of 2014. Also in 2015 and later, new plants are expected to be constructed by a JV between Nissan and Daimler as well as independently by Audi and BMW.

 Under such circumstances, many Japanese parts suppliers are rapidly expanding their production capacities. Other developments include sales to new customers and expansion of production items.

 In Brazil, not so many Japanese parts suppliers are building new plants, although some are enhancing their production capacities to expand their product lineups.

Japanese suppliers Related Reports:
* Mexico (Part 1) (Oct. 2014)
* Thailand (Sep. 2014)
* Indonesia (Jun. 2014), Vietnam, Malaysia, Laos, and Myanmar (Jun. 2014), Europe (Jul. 2014), the U.S. (Apr. 2014)
* China (Part 2): Northern, Northeastern & Southern regions (Mar. 2014),
  China (Part 1): Eastern and Central China (Mar. 2014)
* Latin America (Part 2) (Mar. 2014), Latin America(Part 1) (Mar. 2014),
* India (Sep. 2013)

Expansion of production capacities in Mexico (production items in parentheses)

Expansion of facilities and production lines at existing plants  Ahresty (aluminum die-casting parts), Imasen Electric Industrial (seat adjusters), Kasai Kogyo (trims), Sumitomo Wiring Systems (wiring harnesses), Denso (new line for transmission parts), NHK Spring (suspension springs), Nanjo Auto Interior (interior parts), Nifco (fasteners), Furukawa Electric (battery state sensors), and Yamashita Rubber (rubber products)
Expansion of plant buildings and plants  Expansion of plant buildings: Calsonic Kansei (cockpit modules) and Keihin (new lines for condensers and injectors)Second plants: G-Tekt (CVT parts) and Pacific Engineering (metallic parts)Third plant: Hitachi Automotive Systems (pistons and aluminum die-casting parts)

New business developments in Brazil (production items in parentheses)

Establishment of new companies and operations started at new plants  Aisin AI (manual transmissions), Advics (brake boosters and master cylinders), TPR (cylinder liners), Mitsui & Co. (steel material processing), Yorozu (suspension parts), and Furukawa Electric (automotive parts sales company)
Enhancement of production capacities  Aisin Seiki (new equipment for engine and die-casting parts), JTEKT (new line for column-type power steering systems), and Tachi-S (integrated production of seats)

Mexico: Expanding production capacity in Guanajuato, Jalisco, and Mexico


Company Activities
Imasen Electric Industrial
Makes additional investment in March 2014 to add adjuster production line
In March 2014, Imasen Electric Industrial invested an additional JPY 1 billion in Imasen Mexico Technology S.A. de C.V. in Guanajuato as part of capital investment. A seat adjuster production line will be added to meet growing demands from Japanese automakers in North, Central, and South America. In addition, the company aims to increase the ratio of in-house production in Mexico.
Kasai Kogyo
To expand facility at existing plant in FY 2014; also considering building third plant for door trims
Between the end of 2014 and 2015, Kasai Kogyo will introduce a press machine for producing headliners to an existing plant of Kasai Mexicana, S.A. de C.V. in Leon, Guanajuato. Within FY 2014, the company is also studying feasibility of establishing a third plant for producing door trims to meet expected production increase at automakers.
To construct new plant for precision CVT parts; operations expected to start at end of 2015 or in 2016
G-Tekt will construct a new plant to produce precision parts and small stamping parts for CVTs. The new plant is scheduled to start operations at the end of 2015 or in 2016. The establishment was decided because Honda, which is the company's main customer, starts producing CVTs in Mexico in the latter half of 2015. Another customer, Jatco, is also expanding its CVT production in Mexico. The plant will be constructed on a different site from its existing plant in Guanajuato, possibly near Honda's CVT plant in Guanajuato or Jatco's plant in Aguascalientes.
Pacific Engineering
Starts producing metallic seat parts at second plant in September 2014; fuse production to start in 2015
In September 2014, Pacific Engineering started producing metal components at the second plant, which is located in Guanajuato, of PEC de Mexico, S.A. de C.V. in Baja California. JPY 2 billion was invested in this plant. In 2015, additional equipment will be introduced to this plant to start producing automotive fuses. In combination with the first plant, the total monthly capacity to produce fuses will be doubled to 10 million units.
Daido Metal
To further expand plan for increasing engine bearing production
In July 2013, Daido Metal started producing engine bearings at Daido Metal Mexico S.A .de C.V. in Jalisco. Initially, the plant had capacity to produce bearings for 250,000 vehicles per year. The company's original plan was to increase the capacity to 5 million vehicles by FY 2016. Daido Metal, however, will revise the plan to make additional investment because the company is receiving more orders from Japanese and U.S. automakers than originally expected.
NHK Spring
To issue bonds to strengthen suspension spring business
In September 2014, NHK Spring announced that it will issue bonds worth of USD 100 million to raise funds for operational and capital investment by December 2015. The raised funds will be spent as follows: USD 14 million as capital investment for the suspension spring (stabilizer and coil spring) business of NHK Spring Mexico, S.A. de C.V. in Guanajuato; USD 8 million on another Mexican subsidiary; USD 65 million on four U.S. subsidiaries as capital investment; and USD 5 million on research and development of next-generation lightweight coil springs.
Makes additional investment in local subsidiary to meet growing demands
In November 2013, Nifco made additional investment of USD 3.6 million in Nifco Central Mexico S. de R.L. de C.V., which is a subsidiary that produces fasteners and interior parts, in Guanajuato. The investment was made to meet growing demands in North America and to enhance the company's synthetic plastic product business. The subsidiary's capital was increased to USD 9.6 million through this investment.
Hitachi Automotive Systems
Constructing third plant for pistons and aluminum die-casting parts; to start production in May 2015
Hitachi Automotive Systems is constructing a new plant for producing pistons and aluminum die-casting parts as the third plant of Hitachi Automotive Systems Mexico S.A. de C.V. in the state of Mexico. The plant will be located on a 180,000-square-meter site and start production in May 2015. The company plans to increase production items at the new plant gradually and to enhance its supply capacity to North, Central, and South America.



Mexico: Expanding production capacity in San Luis Potosi


Company Activities
Installing new production lines for condensers and injectors
In July 2013, Keihin started operations at a new plant of Keihin de Mexico S.A. de C.V. in San Luis Potosi. In a new building on the same premises, the company is installing a production line for automotive air conditioning condensers to start producing products for Volkswagen in summer 2014. The plant has a capacity to produce condensers for 750,000 vehicles per year. At this plant and at another plant in Indiana, U.S.A., Keihin will also establish new lines to start producing injectors for direct injection engines in 2015. The U.S. plant will cover processes that require high precision for parts, while the Mexican plant handles manual and other labor intensive processes. USD 40 million will be invested in these plants. In 2016, the company will produce 6.5 million units, as a total of its plants in Japan and the Americas.
Nanjo Auto Interior
Planning to enhance production capacity at new plant for interior parts
Nanjo Auto Interior will enhance the capacity to produce interior parts at its JV, Midori Nanjo Auto Interior in San Luis Potosi. The JV was established jointly with Midori Anzen and started production in January 2014. In addition to supplies to Mazda's Mexican plant, the company received orders from another Japanese automaker for interior parts. The parts will be used on a next-generation model whose production will start in North America in spring 2015. JPY 100 million will be invested to increase the production capacity by 30% from the current level.



Mexico: Expanding production capacity in Aguascalientes and Zacatecas


Company Activities
To expand production capacity for aluminum die-casting parts in FY 2015
Ahresty is investing JPY 4.8 billion in Ahresty Mexicana, S.A. de C.V. in Zacatecas to expand its plant and facilities. In FY 2015, the company plans to increase the annual production of aluminum die-casting parts for engines and transmissions by 20% from the FY 2013 level. Ahresty aims to increase sales not only to local Japanese OEMs but also to European and American parts suppliers in Mexico.
Calsonic Kansei
Expands existing plant to increase production capacity
In December 2013, Calsonic Kansei announced that the company expanded its plant building at the San Francisco plant of Calsonic Kansei Mexicana, S.A. de C.V. in Aguascalientes. The expansion was made to enhance its capacity to produce cockpit modules and other products. The company is increasing its supply capacity because Nissan is starting operations at its third plant. Calsonic Kansei has also started producing heat exchanger parts for Mazda. The company aims to supply products to Daimler as well in the future.
Second CVT plant starts operations in September 2014
In September 2014, Jatco started operations at the second plant of Jatco Mexico, S.A. de C.V. in Aguascalientes. JPY 20.5 billion has been invested in this plant. The plant can produce 400,000 units of CVTs per year and the total annual capacity is 1.7 million units, together with the first plant. The second plant is located near Nissan's second plant. The plant produces two types of CVTs, for midsize/large vehicles and hybrid vehicles.
Yamashita Rubber
Planning to start in-house production and increase production in Mexico
Yamashita Rubber plans to increase the ratio of rubber parts production in emerging countries to 80% or more in FY 2016 and later. This means to reduce the ratio of production in Japan and the U.S. Currently, production in the Americas accounts for nearly 50% of the global total. Out of the American total, the company aims to increase production in Mexico from the current 50% to 80%. Yamashita Rubber also plans to start in-house production of materials at Yusa Autoparts Mexico, S.A. de C.V. in Zacatecas. (Source: a press release in July 2014)



Mexico: Expanding production capacity in other states, including those along U.S. border


Company Activities
Considering producing high-resolution on-board camera modules
SMK will triple its annual production of on-board camera modules from the FY 2013 level to 100,000 units. This is because the company has received additional orders from its existing European and U.S. customer automakers for high-pixel, high-resolution on-board camera modules in 2014. To meet these orders, SMK is considering using its Mexican plant in Tijuana, Baja California, in addition to its plants in Japan. Production will be increased by installing new machineries for automating production processes.
Sumitomo Wiring Systems
Expanding capacity for producing wiring harnesses
In FY 2014, Sumitomo Wiring Systems will introduce new assembly facilities at three wiring harness plants of its group companies, Conductores Technologicos de Juarez, S.A. de C.V. in Chihuahua and Autosistemas de Torreon S.A. de C.V. in Coahuila. This will increase its production capacity by 20% from the FY 2013 level. The company aims to expand sales, in particular, to non-Japanese manufacturers. JPY 8 billion will be invested in this project.
Expanding first plant to start producing transmission parts in December 2015
Denso is expanding the first plant in Nuevo Leon, which is owned by Denso Mexico, S.A. de C.V., to add a new production line. The plant will start producing transmission components in December 2015. This will be the company's first production of these components in Mexico. USD 53.8 million will be invested in this expansion to meet increasing automobile production in North America. Meanwhile, its group company, Hamanakodenso, established a Mexican subsidiary, Hamaden Mexico S.A. de C.V. in Nuevo Leon, in April 2014. The new plant is scheduled to start producing engine control solenoids in August 2016. USD 35.8 million will be invested in the new plant. Products are expected to be supplied to North and South America.
Furukawa Electric
Planning to increase production capacity for battery state sensors in 2015 or later
Furukawa Electric produces battery state sensors (BSSs) at a plant of Furukawa Mexico, S.A. de C.V. in Baja California. BSSs are used to monitor the charging status of batteries for start-stop systems. Currently, only one production line is used for this product, but the company is planning to increase the production capacity in 2015 or later to meet growing orders.



Brazil: Construction of new plants and expansion of production capacity

 In Brazil, the automobile production volume between January and September 2014 was 2.38 million units (down 16.8% y/y), with the sales volume at 2.53 million units (down 9.1% y/y) and the export volume at 260,000 units (down 38.5% y/y). Vehicle sales have been affected by economic growth slowdown, inflation, and tight monetary policies, while exports have significantly been influenced by a large drop in those for Argentina. These have caused each automaker to adjust their production volume continuously. The government is implementing policies to protect domestic industries, such as extra tax rates on imported vehicles, to urge foreign manufacturers to increase investment for enhancing production capacities in Brazil.


Company Activities
Aisin Group
Production capacities to be increased at three group companies
Aisin Seiki will construct a new plant building on the premises of its body parts production subsidiary, Aisin Automotive Ltda. (AAL), in Sao Paulo. Die-casting equipment will be introduced to this plant to newly start producing engine and die-casting components in February 2016. Sales of JPY 7.3 billion are expected in FY 2016. Aisin AI established Aisin AI Brasil Industria Automotiva Ltda. within AAL's premises in September 2013 to start local production of manual transmissions in August 2014. FY 2016 sales are projected at JPY 6 billion. Advics established Advics Automotiva Latin America Ltda. within AAL's premises in March 2014. This new plant is scheduled to start producing brake boosters and master cylinders in October 2015. The plant is expected to generate sales of JPY 4.6 billion in FY 2016. Aisin AI and Advics both established their first plants in Brazil after receiving orders from existing customers.
Kasai Kogyo
Considering developing supply capacity in Brazil
As part of its FY 2014 plan to enhance global production capacities, Kasai Kogyo is conducting feasibility studies for starting operations in Brazil as well. The company, however, considers that local alliance is essential for it.
Starts integrated production of electric power steering systems
JTEKT expanded a plant of JTEKT Automotiva Brazil Ltda. in Parana to install a new production line for column-type electric power steering systems. The plant started integrated production in February 2014. Previously, column units were exported from Japan and assembled in Brazil. JPY 3 billion was invested in this plant.
To start integrated production of seat frames
Tachi-S will start integrated production of seats at Tachi-S do Brasil participacoes Ltda. in Rio de Janeiro as early as fall 2015. At present, frames are shipped from Mexico and assembled with trim covers and other components into seats in Brazil. The company aims to reduce costs by procuring frame components from a Brazilian supplier.
Establishes subsidiary to produce cylinder liners for aluminum block engines
In July 2014, TPR established TPR Industria de Pecas Automotivas do Brasil Ltda. in Sao Paulo to produce cylinder liners for aluminum block engines. The plant is expected to start production in January 2016 (or June 2015 according to a local report). In 2018, the plant will produce 3 million units annually to supply products to Toyota and other Japanese OEMs as well as to European and U.S. automakers. JPY 3 billion will be invested in total.
Nishikawa Rubber
To invest capital in its U.S. partner's automotive rubber subsidiary
Within FY 2014, Nishikawa Rubber plans to invest 40% of capital in a Brazilian production subsidiary of its U.S. partner, Cooper Standard Automotive, Inc. The investment will be made to meet requests from Japanese customers in Brazil for local production of automotive rubber products.
Furukawa Electric
Sets up first sales subsidiary in South America for automotive parts
In July 2014, Furukawa Electric established a sales company for steering roll connectors (SRCs) in Brazil. SRCs are used to connect air bags to sensors that detect shock in a car collision. This is the company's first sales base in South America for automotive parts. Initially, SRCs will be supplied from a plant in Mexico, but the company is considering starting local production in the future.
Mitsui & Co.
Commercial production starts at steel material processing JV in August 2014
Mitsui & Co., jointly with ArcelorMittal Gonvarri Brasil S.A, established a fifty-fifty JV in Rio de Janeiro to process and sell automotive steel materials. The JV, MAG Alianca Automoveis do Brasil SSC S.A., was capitalized at JPY 4.5 billion and started commercial production in August 2014. The JV supplies processed steel materials to Nissan's plant in Brazil and has an annual processing capacity of 160,000 tons.
Suspension parts plant starts production in July 2014
In July 2014, Yorozu started operations at a new plant of its suspension parts production subsidiary, Yorozu Automotiva do Brasil Ltda., in Rio de Janeiro. A total of JPY 7.4 billion was invested in the plant. Full-scale production is expected to generate sales of JPY 5.2 billion.

(Sources: Press releases by each supplier and newspapers)

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