Auto investment avoids the crash

Falling consumer expenditure, stricter credit control and commodity price volatility have deeply affected the automotive industry in the past year.

News headlines have been dominated by bail-outs for large automotive companies, scrappage schemes to boost car sales, company takeovers and plant closures. However, despite these reports, global FDI in the automotive industry has not come to an emergency stop. Since January 2003, fDi Markets recorded 2218 FDI projects in the automotive industry, involving a combined capital investment of $311bn and creating an estimated 1.2 million jobs.

The number of FDI projects in the sector peaked in 2008 at 358, with the average project involving an investment of $139m and the creation of 582 jobs.

Despite the trouble in the automotive sector, a drastic decline did not materialise in 2009 as some expected. Project numbers were down 10% in the first nine months of 2009, compared with the same period in 2008.

Unlike other sectors, companies investing in FDI in the automotive sector did not extensively reduce the resources put into each project. The average project in 2009 was only slightly lower than in 2008, with an average investment of $134m and 562 jobs created per project.

Although the automotive industry is currently facing some difficulties, many believe that eventually it will pick up again, with car ownership set to increase in the long term.

By the numbers

Between January 2003 and September 2009, fDi Markets has recorded 2218 FDI projects in the automotive sector. These projects consisted of a combined $311bn of capital investment, creating an estimated 1.2 million jobs.

Over the past six years, the top destination for automotive FDI was China, attracting 12% of global FDI projects in this sector. India and the US ranked second and third, respectively, both attracting 7% of projects. Although the US ranked third, the country attracted more automotive FDI projects in the first nine months of 2009 than in previous years, making the country the top destination for automotive FDI in 2009 to date. When intrastate figures are included, the US attracted 9% of all FDI projects between January 2003 and September 2009 and more than one-fifth of all FDI projects set up in the first nine months of 2009.

Companies from Germany and Japan account for nearly half of all FDI projects in the automotive sector between January 2003 and September 2009. Together, companies from the top two source countries have invested $142bn and created an estimated 554,567 jobs. In the first nine months of 2009, companies from Germany and Japan remained the most active investors in this sector; however, companies from China and South Korea set up more FDI projects in the automotive sector in the first nine months of 2009 than in 2008 overall.

Two of the top four investing companies are from Japan and one is from Germany. Since 2003, Volkswagen has invested in 213 FDI projects, Toyota in 179 FDI projects and Nissan in 132 FDI projects in the automotive sector.

Nearly half of automotive FDI projects set up since 2003 were involved in manufacturing activities. Due to the labour-intensive nature of the automotive sector, manufacturing projects were responsible for 90% of all capital invested and 91% of all jobs created in this sector. Since January 2003, one-quarter of projects set up in the automotive sector were made up of expansions and co-location projects rather than new projects.

Dr Henry Loewendahl is product director for fDi Intelligence.