In September, Bernd Martens took over Audi purchasing as a member of the Audi management board. Martens, 47, gave Automotive News' German-language sibling publication, Automobilwoche, a look at how he and his team explored sourcing in Mexico.
In six years, the planned factory in San Jose Chiapa will buy 90 percent of its components from local sources. So far no other Audi location has done that.
Q: You recently invited 120 suppliers to a workshop. When will you award contracts?
A: As a first step, we have mainly invited suppliers producing parts with very high investments, including press plants and paint facilities. We have to award these contracts first. The bid procedure will determine which of these companies is accepted. By the end of the year we want to have suppliers for the particularly costly components on board.
How many suppliers in total do you need to produce the Q5?
Several hundred if we are talking about the entire vehicle. But we need less than 120 suppliers for the main technologies and components, such as cable harnesses, pressed parts and plastic parts.
What countries are those companies coming from?
They are coming from the entire world.
Since 1967, Volkswagen has been manufacturing in Puebla, Mexico, and has an experienced supplier network. Will most deliveries come from VW suppliers?
That could be a good thing. But the bidding will determine this. In the bidding process, there is an inquiry list for each part, and it contains up to two dozen suppliers for a single part. So today I don't know which suppliers will be accepted.
What technologies does Audi need that suppliers cannot offer locally?
They include special technologies for the production of paint, chrome or leather. Think about interior equipment, control panels, door paneling, the typical Audi look and feel. We currently cannot create this quality in Mexico, and we're not making any trade-offs, not one millimeter. That's why local suppliers have to invest in new production technologies if they want to work with us.
You plan to source two-thirds of the parts locally when production is launched.
We are planning on 65 percent local value creation so we meet the targets specified in free-trade agreements. Japan, at 65 percent, has the highest of these targets. A company hoping to export duty-free to Japan must demonstrate that it has 65 percent local Mexican content. The figure is 62.5 percent for the U.S., 60 percent for Europe and 35 percent for South America.
Do you want to boost the local share of sourcing even more?
Our strategic goal is 90 percent. We want to purchase everything here that we can get at our quality level.
When do you want to reach that goal?
We want to reach 90 percent in about three years, figured from the production launch in 2016. We want to source as much as possible from Mexico. In the next step, what we don't get from here we want to obtain from North America, that is, the U.S. and Canada, because we want to purchase as much as possible in the dollar zone. But in isolated cases, it's possible that we would have to order a certain technology or components from Europe because it would not pay for the supplier to invest here at this volume.