Scania Expanding into Asia with New Factory in China
, one of Sweden’s leading manufacturers, will be establishing a wholly-owned truck productive facility in Jiangsu Province, around 100 miles northwest of Shanghai. Production is set to start in early 2022, and the move is seen as an important step in the company’s strategy to grow in China and the wider Asian market.
President and CEO Henrik Henriksson said: “Our expansion in China will be made step by step and in pace with the positive development of market conditions and the increasing demand for modern vehicles with a higher technology content that will follow. Until the end of the 2020s, we will make significant investments in order to benefit from this development as well as to establish China as the third leg in our global production structure.”
Vision for the Future
The rapid transformation into a more open and market economy-based system, which is currently taking place in China, has prompted Scania's decision to invest in the country. In order to increase competition, China is now opening up for foreign-owned companies to carry out operations in the country; and thereby also contribute to the major sustainability initiatives that are being implemented.
Henriksson said: “Increasing the presence in the Chinese market is crucial for Scania and the TRATON Group’s global growth. Our operations in the country will gradually be expanded and developed into a full-scale unit in Scania’s global production and supplier structure. The goal is not only to make China our third industrial leg but also to a regional centre for sales to other Asian markets,”.
Sweden and Brazil already house Scania’s first two production centres, so this latest move is seen as a springboard for further investments into the Asian continent. Although most research and development takes place in the headquarters in Sweden, some R&D operations are carried out in India currently. Scania's investments in China also include establishing research and development in the country, furthering strengthening the group’s foundations in the region.
“This will strengthen the international competitiveness and ability of Scania to be a leader in sustainable transport, as our presence provides increased access to leading technologies and expertise in areas such as electrified and autonomous vehicles,” added Henriksson.
- Scania has 60,500 vehicles registered in in 100 countries
- Expansion into China made possible by acquiring Nantong Gaokai Auto Manufacturing
- China will eventually become the third global production hub along with Sweden and Brazil
China is the world’s single largest market for commercial vehicles and currently accounts for 40 per cent of global sales. The market is dominated by national manufacturers, but the demand for modern vehicles with higher technology content, better performance and higher availability is increasing with the need for more efficient logistics and sustainable transport. Scania’s entire product range of combustion engine technology for renewable biofuels as well as electrified products are therefore a good fit for the Chinese market.
“We are aiming for sales in China at the end of the 2020s of at least the same volume as that of our current single largest market, Brazil.” concludes Henriksson.
Scania's establishment of its own industrial operations in China has been made possible through the acquisition of Nantong Gaokai Auto Manufacturing Ltd.
IHS Markit/CIPS: UK Manufacturing PMI near-record high
UK manufacturing trends
For the UK manufacturing sector, growth of output and new orders were both reported by IHS Markit and CIPS as among the best seen over the past seven years, which in turn has led to a strong increase in employment. Despite this, the sector continues to face supply chain delays and input shortages, which resulted in increased purchasing costs and record selling price inflation.
UK Manufacturing IHS Markit/CIPS Purchasing Managers’ Index® (PMI®)
Seasonally adjusted, IHS Markit/CIPS Purchasing Managers’ Index® (PMI®) rose to 60.9 in April, which was an increase compared to March (58.9) and above the estimated 60.7 for April.
Increasing for the eleventh consecutive month, the latest readings are the highest since July 1994 (61.0). The output growth for April has been attributed to the loosening of lockdown restrictions, improving demands and a rise in backlogged work.
“The manufacturing sector was flooded with optimism in April as the PMI rose to its highest level since July 1994, bolstered by strong levels of new orders and the end of lockdown restrictions opened the gates to business. It was primarily the home market that fuelled this upsurge in activity though more work from the US, Europe and China demonstrated there were also improvements in the global economy. This boom largely benefited corporates as output growth at small-scale producers continued to lag behind,” said Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply.
In addition to expanding production, total new orders rose for its third consecutive month, which was attributed to a revival of domestic market conditions, stronger client confidence, parts of the economy reopening and improving global market conditions.
While new exports rose in April, the rate was reported as weaker in comparison to new orders. “Companies reported improved new work intakes from several trading partners, including mainland Europe, the US, China and South-East Asia. Large-sized manufacturers saw a substantial expansion in new export order intakes, compared to only a marginal rise at small-sized firms,” said IHS Markit/CIPS.
UK Manufacturing’s outlook
Remaining positive at the start of the second quarter, 66% of companies forecast that output will be higher in a year's time, which is attributed to expectations for less disruption related to COVID-19 and Brexit, economic recovery, improved client confidence and new product launches.
“Further loosening of COVID-19 restrictions at home and abroad led to another marked growth spurt at UK factories. The headline PMI rose to a near 27-year high, as output and new orders expanded at increased rates. The outlook for the sector is also increasingly positive, with two-thirds of manufacturers expecting output to be higher in one year’s time. Export growth remains relatively subdued, however, as small manufacturers struggle to export,” said Rob Dobson, Director at IHS Markit.
Adding to comments from IHS Markit and CIPS, , Managing Director of Freight and Logistics at Accenture Global said: “While today’s figures are positive overall, the worsening supply situation is still a concern, with rates of both input costs and selling price inflation running far above anything previously seen. Shipping delays and material shortages are driving huge backlogs of uncompleted work and the surge in manufacturing orders is leading to many firms struggling to boost operating capacity to keep up with demand. With business expectations becoming even more optimistic as the economy rebounds, the big question will be whether firms will be able to cope with the surging inflows of new orders.
“As ongoing supply chain issues are still at large, companies with wide international footprints should look to reassess their logistics strategies by running supply chain stress tests and simulations in order to respond quickly to upswings and variability in demand. A flexible and resilient supply chain will be a key way for businesses to remain both competitive and stable as we emerge from the pandemic”