Global Automotive Players Raise Their Profile in Singapore

(SINGAPORE) Thailand may be a regional automotive manufacturing hub, but Singapore is fast emerging as a key logistics, distribution and after-market products node in the automotive industry in the region.

According to the Economic Development Board (EDB), leading global automotive industry players have been steadily increasing their presence here via regional headquarters, logistics & distribution centres, and R&D facilities ahead of the implementation of the Asean Free Trade Area (Afta).

'Companies have been reconfiguring their activities in the region to reposition themselves ahead of Afta,' said Manohar Khiatani, EDB's director for the Logistics and Transport Cluster. Under Afta rules, which start kicking in next year, products with 40 per cent local content will not attract taxes and duties. This means that a Singapore-based maker of car navigation systems, for example, can export its product to a Bangkok car assembly plant without incurring any Thai import duties.

But why Singapore? After all, other Asean countries are cheaper to operate from. Mr Khiatani attributes this to the attraction to leading multinationals of Singapore's logistics connectivity, strong supplier base, excellent service infrastructure and good intellectual property protection.

The MNCs that have been drawn to Singapore include BMW, DaimlerChrysler, Delphi, Siemens VDO, General Motors, Volkswagen and Sanden.

These and other automotive products and components makers employ about 5,600 people in Singapore and produce some $1.7 billion worth of products, which is around one per cent of Singapore's annual manufacturing output.

But the benefits of their operations have even wider ripple effects.

EDB estimates that when logistics, services, OEM operations, R&D and other services are included, the economic output is more than doubled.

In addition, the industry oversees transactions worth another $5 billion to $10 billion every year.

Mr Khiatani points to Singapore's strong domestic electronics industry as a strategic advantage for the republic.

'The importance of electronics in cars has increased tremendously, and now accounts for about 30 per cent of the value of a modern vehicle,' he said.

'Singapore's strong base in electronics enables us to reach out to new companies looking for a regional base for manufacturing and R&D.'

Singapore's land transport policies and initiatives also make the republic a living laboratory for test-bedding new systems before they are implemented elsewhere in the world.

These include electronic road pricing, fuel cell development, road navigation systems and traffic management.

'We have the whole of Singapore wired up for intelligent transport systems,' Mr Khiatani said.

With the Asean car market growing at about 3.5 per cent per year and the region's output of motor vehicles growing at 10 per cent, EDB reckons Singapore is on to a good thing.

'Singapore offers a 'double blessing' for after-market automotive industry products and services,' said Mr Khiatani.

'First, they get the benefit of being within the Afta zone. Second, they reduce their operating cost by locating here. Our mission is to remain competitive and our tax structure has been adjusted to help do this.'

He added that EDB would come up with additional cost-saving measures and incentives for 'projects which fulfil the right requirements'.