Published on: 18-Aug-2020
S'pore has high land and labour costs, but EVs need less space to be built and have long-term growth potential.
Despite the relatively high cost of land and labour here, industry observers are cautiously optimistic that Hyundai's plans to make electric cars in Singapore will be viable.
They also said the venture will add value to the Singapore economy.
Last week, The Straits Times reported that Hyundai Motor will be setting up a plant here to make 30,000 electric cars a year, with most of the volume bound for export. Targeted to be up by 2022, the plant will be the first automotive assembly facility here in nearly 40 years.
Nanyang Business School Adjunct Associate Professor Zafar Momin said that while Singapore does not have a sizeable domestic car market in relation to other South-east Asian countries or an established automotive supply base, it has world-class logistics, a skilled technical and engineering workforce, a more developed infrastructure and a business-friendly government.
But Mr Say Kwee Neng, a 23-year motor trade veteran and now a business transformation leader, said that for any car manufacturing business here to succeed, finding "more creative ways of amortising the cost of investing in plants and facilities" is key.
"Labour costs can be offset by selling higher-margin products, such as electric vehicles, but not revising policies pertaining to how these investments can be treated would make the investments exorbitant, given our high land costs," he added.
Mr Say suggested creating a "Jurong Island for the car industry, and amortising this public cost over a longer period, given that it would bring significant benefits such as employment to Singapore".
Mr Ron Lim, sales and marketing head at motor group Tan Chong, which has an assembly business in Thailand, said Hyundai's assembly venture is feasible, given the long-term growth potential of electric vehicles (EVs) worldwide.
"If successful, it could also create a whole new supporting industry, if the Government can attract more like-minded manufacturers to invest here," he added.
Prof Zafar, previously an automotive analyst with Boston Consulting Group, added that the playing field is made more level since Hyundai will be making EVs here.
Electric vehicles have far less components than traditional internal combustion vehicles and are less labour-intensive to assemble... EV assembly requires relatively less capital and scale to be cost-effective. Investing in such a footprint in Singapore may also give Hyundai an inside track for future smart city contracts.
"EVs have far less components than traditional internal combustion vehicles and are less labour-intensive to assemble," he said.
He added that Hyundai's EV platform would incorporate a fair level of flexible and automated manufacturing and product customisation that require more technology and less labour.
"EV assembly requires relatively less capital and scale to be cost-effective," Prof Zafar noted.
"Investing in such a footprint in Singapore may also give Hyundai an inside track for future smart city contracts.
"This investment will not preclude them from making other such larger EV investments in South-east Asia."
He added that the plant "is clearly beneficial to Singapore as it may attract other manufacturers of EVs or auto components to set up shop here".
Other observers pointed out that EV assembly requires less space, too.
The plant is part of Hyundai's larger multi-function complex of 28,000 sq m - just about one-third the footprint of the Mercedes-Benz assembly plant in Hillview Avenue which Cycle & Carriage operated in the 1960s and 1970s.
Source: The Straits Times, 18 August 2020
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