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SW Group to boost machine tool biz in Hungary, Mexico

Move driven by Chinese customers' international investment strategy

By LIU YUKUN | China Daily | Updated: 2024-06-17 09:08

Visitors check out products at SW Group's booth during an expo in Shanghai. [Photo/China Daily]

German machine tool maker SW Group has unveiled plans to expand its facilities in Hungary and Mexico, following its Chinese clients which are setting up production bases in the two regions.

Stefan Weber, managing director of SW Group, said China is the company's most critical market and will remain so even in the future.

This has led to significant investments in local production plants, with an aim to manufacture all machines locally.

"Our approach mirrors what we did with our German customers when they expanded overseas. We leverage our existing global setup with subsidiaries in many countries and actively started new facilities. For example, our expansion in Hungary was driven by Chinese customers' investment plans. We established a subsidiary there to be close to the local market, supporting production and maintenance departments, while maintaining strong connections to our Chinese headquarters," Weber said.

"This collaboration creates a win-win situation, as successful Chinese customers help us secure more business and customers. We grow together with our customers," he said.

On Hungary as an investment hot spot, Weber said the country has a mature automotive supply chain, supported by major German original equipment manufacturers and European suppliers. The Hungarian government actively promotes new technologies and fosters good relations with China, making it an attractive destination for Chinese companies.

According to China's Ministry of Foreign Affairs, the bilateral trade volume between China and Hungary amounted to $3.53 billion from January to March. China's exports were valued at $2.47 billion, while imports stood at $1.06 billion.

The trade mainly consisted of high-value-added electromechanical and high-tech products, with four major sectors — electrical machinery and equipment and parts, boilers and mechanical appliances and parts, vehicles and parts, and optical, photographic, and medical equipment and parts — accounting for over 80 percent of the total trade volume.

"Mexico is also growing significantly. In the USA, labor is expensive and qualified employees are hard to find, whereas in Mexico, there is a motivated and well-educated workforce. This creates a strong foundation for expanding the supply chain. Many European and Chinese companies have established subsidiaries in Mexico over the past decade, driven by political reasons and the desire to supply the American automotive market," Weber said.

"We believe that Mexico will evolve from a trusted manufacturing base to a hub for engineering and development. This belief drives our decision to increase our capabilities and build a new factory in Mexico, focusing not only on sales and service, but also on applications, automation systems, and providing better local services," he added.

Weber said that the German automotive market, once one of the largest, is shrinking, making companies resort to desperately seeking new projects.

"In Europe, particularly in Germany, capital investments are focused on new technology and models. However, the market demand in Europe is insufficient, and the lack of infrastructure is a significant handicap. This hesitation among consumers to buy electric cars creates a challenging situation for manufacturers who have invested heavily in new models and technologies," he explained.

"We established a research and development department in China because we recognize that many technological advancements in the machine tools sector are driven by Chinese customers. We want to be close to them to effectively communicate, gather their information and demands, and deliver products and services at the speed expected in China," he said.

SW's Chinese business has grown substantially in the past few years. Entering the Chinese mainland market in 2010 with fewer than a dozen employees, it now has over 400 employees and more than 100 customers in China. Last year, about 40 percent of SW's global income came from China.

"Our next steps will involve increasing our capabilities in producing parts for our machines. This will include investments in our Chongqing branch's production technology, potential new buildings, and the expansion of our Suzhou plants. Additionally, we recently opened an office in Ningbo to be closer to our customers, enhancing our regional investment in China to better support sales and service," he said.

SW has factories in Suzhou and Chongqing, as well as offices in Beijing and Ningbo.

"We are very pleased with the investment conditions in China. Compared to Germany, the process is significantly faster. For example, building new facilities is much more efficient due to the excellent infrastructure and strong support from local governments," Weber said.

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