Hong Kong's large plastics manufacturing industry has built its reputation making components for the electronics and toy industries, but one local injection molder, Jing Mei Automotive Ltd., believes local firms can carve out a place in the global auto supply chain.
Jing Mei, which is part of plastic electroplating specialist Jing Mei Group, has spent the last 15 years building a substantial business as a Tier 1 and Tier 2 supplier of metal-plated plastic parts for global carmakers.
Its injection molding factory in mainland China, for example, supplies all the chrome-plated plastic door handles for Honda and Toyota cars in China and the United States, and it claims 60 percent of the market for those chrome-plated plastic door handles in North America.
“We are a fashioner to dress up the plastic,” said Ricky Chan, CEO of Hong Kong-based Jing Mei Auto.
Jing Mei built slowly, taking technology and expertise gained from electroplating plastic bath and kitchen fixtures for global companies and transferring those skills to the car business, where it also makes grilles, emblems and other metallic-coated parts.
Chan sat down recently with Plastics News in Hong Kong, to offer a picture of how one Chinese injection molder has changed its thinking and overcome obstacles to get into the global auto supply chain.
It's not been simple, said Chan, who said the firm met a lot of resistance when it first started cold-calling potential auto industry customers in the mid-1990s.
Besides Jing Mei's obvious challenge of not having automotive experience or projects to show, it also faced skepticism about the lack of experience Hong Kong has in the automotive industry.
“Some customers would say, ‘I thought you guys were really good at toys or electronics.' I never heard anyone from Hong Kong talking about automotive parts,” Chan said. “It was a really bad situation for us.”
Historically, he said, Hong Kong firms have specialized in markets with short product life cycles and short-term returns, like electronics, toys or clothing.
They are less well-known in industries with longer time horizons, like automotive, which require bidding on projects that may not see production for several years, Chan said: “It's hard for Hong Kong industries to get into the automotive industry.”
Today, however, the company has overcome those initial obstacles and built a US$51.5 million-a-year automotive molding business, all done from its factory in Guangzhou, where it has 900 employees and 75 Japanese injection molding machines.
But it's now facing increasing challenges that are complicating its business strategy, he said.
Those challenges include rapidly rising costs around its factory in China's south coast, tougher environmental standards and pressure from global customers looking for sourcing closer to home.
The uncertainty has the company scouting new factory locations in China and even considering for the first time having some production closer to its big markets in North America, said Chan, who has guided Jing Mei Auto since it was a three-person startup. His father Chan Lai Shun started the company more than 40 years ago, and his brother Raymond Chan is also an executive there.
“I don't see that a high percentage of manufacturing companies can maintain a huge profit margin right now,” said Chan. “Everybody is running a slim margin. With labor rates going up so rapidly, there is no time for us to react.”
Jing Mei Auto is very export oriented, sending about 70 percent of its production overseas, including to Ford Motor Co., General Motors Co. and Chrysler Group. But it's noticing that some of its foreign customers are looking for sourcing closer to home, he said.
“It's hard for China to maintain world factory status,” said Chan, who was interviewed in early March in the offices of the Hong Kong Plastics Manufacturers Association. “The global purchasing concept is kind of collapsing.”
High unemployment in the United States and Europe is making governments there more concerned about jobs, he said. It's making Jing Mei consider some form of production closer to some North American customers.
“I've been asked by my colleagues in the United States [about having manufacturing there], and I've changed,” said Chan. “Years ago I would say no. Now I say, ‘Why not?' But we have to do it very carefully.”
More local manufacturing in other markets would also help protect the company from China's rising currency, Chan said.
Sales in the United States have been strong this year, he said, as the market starts to recover and seems headed for vehicle sales of 12 million units in 2012. In the last few lean years, carmakers have also increased their use of metal-plated plastics as they look to spruce up models without adding a lot of cost, Chan said.
“We kind of enjoy the environment now,” said Chan, adding that the past four years had “not been good.”
Also, Jing Mei is increasingly looking to expand in China, both to set up another factory in the country and to tap into China's booming auto market, now the world's largest by unit sales, although Chan cautioned that much of China's domestic market remains too price conscious for Jing Mei.
“The China market was booming quite a lot after 2008,” Chan said. “It may not benefit us a lot simply because the booming of the automotive market in China is for the entry-level vehicles, which we have not positioned ourselves into. Still, when the market is hot, everyone else has jumped into that.”
The company is eyeing additional production in other auto centers, possibly in Guangzhou, or further north in Beijing and Tianjin, or in the automotive center of Changchun.
“We are carefully picking different spots to set up a new factory,” he said, although he noted that the company's core technology, electroplating, complicates some expansion possibilities as local governments, such as in Guangzhou, put more environmental restrictions on new factories.
“We are an electroplating company — there is not much area we can choose from,” Chan said. “It is hard for everyone. For us it's comparatively a bit easier because we have trace records and we have a system in place to show to the government. But in general, it's tight, no one wants a factory next to them.”
Jing Mei, which calls itself one of Asia's leaders in electroplating plastic auto parts, has roots in combining the two technologies that go back to the late 1960s, when Chan's father, Chan Lai Shun, started the company.
At that time it wasn't focused on car parts. As it grew in the 1970s and 1980s it expanded into electroplating plastic for the international kitchen and bath fixtures industry under Ricky Chan's older brother Raymond, who is chairman of the Hong Kong Plastic Manufacturers Association. Later, it joined overseas study missions sponsored by Hong Kong's government and added automotive production, and today has sales and engineering offices in the United States, Mexico and Switzerland.
The privately held company traces its roots back to experimentation by the elder Chan, who started working in Hong Kong's metal plating industry but saw growing opportunities in plating of plastics.
Like a lot of Hong Kong people of his age, Ricky Chan said, China's civil war in the 1940s and the difficult times afterward forced his father to drop out of school. He got a job as an apprentice at a metal-plating factory but decided at one point to strike out on his own.
“He foresaw that the future of plating would change from metal to plastics,” said Ricky Chan. “He played around with the chemicals, at home actually on the balcony, mixing the chemicals and seeing if he [could] find his own recipe.
“In doing so, he got this opportunity and started up Jing Mei back in 1968,” said Chan. “Since then we are majority involved in plastic molding and plastic plating.”