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TEDA: Driving Smart Auto Manufacturing in China

A big investment by German car giant Volkswagen in northern China’s Tianjin Economic-Technological Development Area (TEDA) earlier this year

28-Dec-2018
TEDA: Driving Smart Auto Manufacturing in China
A big investment by German car giant Volkswagen in northern China’s Tianjin Economic-Technological Development Area (TEDA) earlier this year shows the direction of travel – towards smarter, greener and more innovative auto manufacturing.

Last year automotive firms in TEDA – including VW, Toyota and China’s own Great Wall Motors – built 810,000 cars and the overall industrial output of TEDA’s auto sector reached $18.9bn. By 2020 TEDA aims to be making 1.5m cars per year.

“Our automotive sector has grown from practically nothing about 20 years ago into an entire ecosystem. From global megabrands to Chinese domestic elite brands, we are developing a well-rounded automotive cluster,” Zheng Weiming, Secretary of TEDA’s Work Committee and Chairman of TEDA Administrative Committee, said.

TEDA itself – a development area encompassing a range of different industrial clusters from automotive to petrochemicals, information technology and financial services – is growing at more than 7% a year.

The presence of the three big German, Japanese and Chinese manufacturers has enabled a complete automotive ecosystem to develop around them, including component and equipment manufacturing as well as R&D and service provision.

It is part of China’s shift to a “high-quality development” model, which means a focus on sophistication and sustainability rather than the breakneck pursuit of GDP growth of previous decades.

VW invests
In August, Volkswagen announced that it was setting up a plant in TEDA to make SUVs, providing increased production capabilities and cutting-edge sustainability measures.

Reflecting TEDA’s desire to be at the forefront of smart manufacturing, VW’s new Tianjin plant features state-of-the-art sustainability measures including world-leading volatile organic compounds emissions control technologies and solar photovoltaic technologies. Manufacturing at the plant will be nearly 80% automated and will use about 1,000 robots.

Mr Zheng says the new plant could also trigger up to $5.8bn of extra production in TEDA’s wider automotive ecosystem.

“There is an inspiring spill-over effect and it will make Tianjin a stronger and more competitive automotive hub all the way along the industrial chain,” he said.

TEDA’s automotive ambitions have also received a further boost with news that car paint specialist firm PPG announced it was setting up its first overseas paints and coatings R&D centre in TEDA, due to be completed in 2021.

PPG joins other specialized auto sector multinationals such as Liszt Technology Center, Hyundai Mobis, Kumho Tires and Morimoto Precision in having a presence in Tianjin.

Taking the hi-tech route
Automotive firms are facing increasing competitive pressure both domestically in China, where there has already been strong investment in electric vehicles, and internationally, where firms such as Tesla have achieved high valuations thanks to their investment in emissions-free vehicles.

Liang Jun, chief of TEDA’s Development and Reform Bureau, says he is focusing on nurturing “source enterprises”, which are companies deeply rooted in TEDA that increase industrial development and trigger innovation across the whole ecosystem.

“Bringing in big firms from elsewhere continues to be a good approach, but we are also dedicated to hothousing new technologies, new creations, new models and innovations in the automotive industry,” said Mr Liang.

Such investments should also help TEDA progress. Ministry of Commerce rankings show TEDA’s auto industry is ranked No.1 in northern China for its industrial environment.

In the meantime, TEDA is seeking to be one of the first hubs in China for the development of intelligent connected vehicles (ICVs) and new energy vehicles (NEVs).

Officials say they plan to help these industries develop quickly and are paying close attention to advances in the areas of sensors, decision-making, control, human-computer interaction and high precision mapping.

Our focus on ICVs and NEVs is representative of how the auto industry is changing,” said Mr Zheng.

“It is now driven less by capital and more by technological innovation. It is less about single factories creating entire products and more about collaborations all the way along the industrial chain.

“We are seeing the emergence of a form of networked development. This requires a holistic change on our part, including the transformation of our mindset.”


First mover advantage
Jin Xianghua, chief of TEDA’s newly set up Intelligent Manufacturing Promotion Bureau, says TEDA is well placed to develop ICVs and NEVs because it is already home to a number of semiconductor firms and new generation power companies, such as the Samsung SDI power battery project and three Volkswagen power projects, all expected to provide key parts and components.

TEDA has also forged links with several bodies, including the Tianjin Research Institute for Intelligent Connected Vehicles, which has carried out research in in-demand areas such as perception, decision-making, control, human-computer interaction and high-precision maps for vehicles. It has been working with Sinomach, the Chinese auto industry’s engineering corporation, to carry out automotive engineering design and intelligent manufacturing upgrade projects.

Funding is available, with Tianjin Municipality setting up a $1.4bn intelligent manufacturing support fund, while TEDA itself has a raft of new incentive policies covering manufacturing, supply chain management and post-market services for ICVs and NEVs. It also offers full business lifecycle support, from plant set-up to operational support, productivity upgrades, expansion, tech innovation and human resources.

Networking events and conferences, forums and innovation exchange platforms have also been created.

One of the biggest such events is the TEDA International Forum on China Automotive Industry Development, which has been running for 14 years. The latest forum took place in September and was attended by more than 600 industry professionals, mostly executives with power over investment decisions but also regulators and think tank experts.

Building a smarter city
“China understands the manufacturing of connected and autonomous vehicles as an opportunity to break the century-old dominance of Western vehicle manufacturers, build up national automotive champions and solve the transportation, environmental and technical challenges resulting from rapid urbanization,” said Dr Ulf Henning Richter, an award-winning professor, author and independent adviser for global strategy, former visiting scholar at INSEAD and visiting fellow at Harvard.

Indeed, ICVs and NEVs are merely part of a bigger picture sketching out an urban future with efficient and smart transportation and logistics that do not pollute or cause casualties.

TEDA has several other initiatives serving such a vision, says Ms Jin, including a city IOC (integrated operations center) program, an intelligent logistics center and cloud-based tenant firms such as smart logistics leader JD Logistics, ride-hailing company Didi and Huochebang, which matches shipping firms with trucks and drivers.

With efficiency comes lifestyle – and TEDA is transforming itself into a modern and livable city equipped with a full range of services, facilities, and recreational activities.

The prestigious Julliard School of Music has opened its only campus outside the US at TEDA and is set to open its doors next year. Work is also underway on the Chow Tai Fook Binhai Center, a landmark skyscraper for the area.

Such developments running in parallel to hi-tech investments such as Volkswagen’s new SUV plant are crucial to TEDA’s ability to succeed, says Mr Zheng.

“We are no longer just in the business of manufacturing, we are now also creating a new identity and culture.”

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