Tài liệu THE GLOBAL AUTOMOTIVE INDUSTRY VALUE CHAIN: What Prospects for Upgrading by Developing Countries ppt

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Contents
Acknowledgement iii
Abstract vii
Introduction 1
Mapping the global auto industry 2
The restructuring of value chains in the global auto industry 19
Strategies for developing countries’ auto industries 29
Competence formation for competitiveness in the global auto industry 43
Conclusion 45
References 46
Tables
Table 1 Unit sales and production of motor vehicles by country and region,
1990 and 1997 3
Table 2 Forecasts and outcomes of growth in vehicle sales in selected emerging
market regions, 1996-1998 4
Table 3 Recovery and stagnation of vehicle sales in selected emerging markets,
1996/1997-2001 5
Table 4 Vehicle production by company, 2001 6
Table 5 Main-light vehicle assembly plant investment in emerging markets
by Triad automakers, early 1990s 7
Table 6 Main light-vehicle assembly plant investment in emerging markets
by Triad automakers, late 1990s 7
Table 7 New companies and factories for light-vehicle production, Brazil, 1996-2001 8
Table 8 New ventures in the Indian car industry, late 1990s 9
Table 9 Production and sales of light vehicles in home region by company, 1997 10
Table 10 Automotive trade between Argentina and Brazil, 1990 and 1996 14
v


Table 11 Components trade between the ASEAN-4 countries by destination, 1995 16
Table 12 Sourcing in India by a transnational new entrant to the industry 28
Table 13 Use of follow sourcing for a particular component system in Brazil and India 32
Table 14 Major elements of the Motor Industry Development Programme
in South Africa 38

Boxes
Box 1 Over-investment in Viet Nam 8
Box 2 The reorientation of the Mexican auto industry 11
Box 3 The changing European division of labour 12
Box 4 Brazilian vehicle manufacturers and international division of labour 15
Box 5 Adapting passenger cars to the Indian market 19
Box 6 Capability requirements in the global auto industry 22
Box 7 Valeo's global expansion 24
Box 8 The rise and decline of Freios Varga 30
Box 9 Meeting complex testing requirements in India 33
Box 10 Integration of South African production into the global value chains
of German assemblers 39
Box 11 Export producers in India 42
Box 12 The role of local institutions in facilitating the access of domestic producers
to auto industry value chains 44
Box 13 Local support for small firms in auto industry value chains 45
Figures
Figure 1 The changing nature of the auto industry value chain 27
Figure 2 Global sourcing from developing-country partners 41
Figure 3 Radiator cap sourcing 41
vi


Abstract
The paper opens by mapping the changes in the global auto industry in the
1990s, showing how the rapid growth in sales and production between 1990
and 1997 came largely from the emerging markets rather than the Triad
regions (North America, the European Union and Japan). However, for some
of these markets the downturn that followed was substantial and prolonged.
The emergence of regional production systems resulted in regional
integration. This created opportunities for industrial upgrading in developing
countries with links to one of the Triad regions, where a major part of
production still takes place.
The paper then describes how the relationship between assemblers and
suppliers has changed. There is a growing preference for using the same
suppliers in different locations (follow sourcing), which limits the
possibilities for component supplying by local producers in developing
countries. However, opportunities in second-tier sourcing, where a global
reach is not required, do exist. The paper shows that developing countries can
increase the possibility of integration into the global value chains of
transnational automotive companies by opening up their domestic markets.
It concludes with emphasizing the importance of fostering networks of small
firms in developing countries as a means of entering new markets.
vii



The Global Automotive Industry Value Chain: What Prospects for Upgrading by Developing Countries?


1
Introduction
This paper discusses industrial development issues for the global auto
industry from the perspective of a global value chain analysis. It highlights
the way in which the impact of globalization processes on the auto industry
of developing countries in the 1990s was influenced not only by changes in
trade and investment policies and the globalization strategies of leading
companies, but also by changes within auto industry value chains themselves.
It is particularly concerned with the following selected countries and regions
including China, India, Mexico, four countries of the Association of
Southeast Asian Nations (ASEAN) (viz. Indonesia, Malaysia, Thailand and
the Philippines), Argentina, Brazil, and countries in Central Europe (Czech
Republic, Hungary and Poland).
1

From the 1950s onwards, various developing countries used import-
substitution industrialization policies to promote the development of their
domestic auto industries. By the early 1990s, there were substantial self-
contained vehicle industries in Latin America, the ASEAN region, India and
China, with limited imports of vehicles and components and with few
exceptions (most notably Brazil and Mexico), limited exports. Trade
liberalization began to change this situation in the 1990s. Quantitative
restrictions were phased out and tariffs reduced, while Trade-Related
Investment Measures (TRIMs) like local content requirements and foreign
exchange balancing were under increasing attack. At the same time, the
global production and sales strategies of leading multinational auto
companies were also shifting and developing countries were becoming more
integral to their plans. This paper argues that while these changes were most
evident in the assembly sector, even more significant changes were taking
place in components production, driven as much by the alterations in the
nature of value chain relationships between assemblers and suppliers as by
the industry’s globalization.
These changes have had a profound effect on the structure and characteristics
of the auto industry in developing countries. This paper analyses the position
of the emerging markets in the global auto industry in the 1990s, their rapid
expansion in the period of 1997 and stagnation following the East Asian
crisis. It considers how the industry changed in this period, what implications
are for the policy options open to the governments of developing countries,
and what kinds of policies will be adequate to create viable auto industries in
the new environment of lower levels of protection and increasingly
globalized production systems.


1
Five countries, Indonesia, Malaysia, the Philippines, Singapore and Thailand, established the Association
of Southeast Asian Nations (ASEAN) in Bangkok, in 1967. In 1984, Brunei Darussalam joined as the sixth
member, followed by Vietnam in 1995 and by Lao People’s of Democratic Republic and Burma/Myanmar
in 1997. Cambodia joined in 1999, forming a group of 10 South East Asian Member Countries.
1
The Global Automotive Industry Value Chain: What Prospects for Upgrading by Developing Countries?


2
Mapping the global auto industry
The auto industry is often thought of as one of the most global of all
industries. Its products have spread around the world, and it is dominated by
a small number of companies with worldwide recognition. However, in
certain respects the industry is more regional than global, in spite of the
globalizing trends evident in the 1990s. This section considers the global
spread of vehicle sales and production, ownership in the assembly sector and
the transformation of the component sector.
The spread of vehicle production in developing countries increased markedly
in the boom years of rapid expansion in the emerging markets in the 1990s,
as can be seen from Table 1.
2
Global vehicle production rose by nearly 7
million units between 1990 and 1997, although the increase in sales over the
same period lagged considerably behind this, at just under 4 million units.
Much of this growth was concentrated in developing countries. In the Triad
regions (the United States of America and Canada, i.e. North America, Japan
and Western Europe), the vehicles industry is mature and has been plagued by
overcapacity, cost pressures and low profitability. Of the three Triad
economies, only North America was buoyant at the end of the 1990s. This
resulted from the long boom of the United States’ economy, the substitution
of imported Japanese cars by cars built in transplant factories, and the
remarkable and profitable shift of consumer demand from passenger cars
towards light trucks. In contrast, vehicle sales in both Western Europe and
Japan were less in 1997 than they had been in 1990. Overall, vehicle sales in
the three Triad regions rose by only 0.6 per cent between 1990 and 1997, and
production rose by 4.2 per cent.
The stagnation of production and sales in the Triad regions was in marked
contrast with the growth of the industry in the rest of the world. While both
production and sales of vehicles remained concentrated in the Triad
economies, which still accounted for more than 70 per cent of global vehicle
sales in 1997, a remarkable feature of the period 1990-1997 was that in
absolute terms the increases in production and sales of vehicles in the rest of
the world far outstripped the increases in the Triad regions. In the Triad
regions, vehicle sales rose by 230,000 units in this period. In the rest of the
world (World total minus Triad countries), sales increased by 3.8 million
units. For vehicle production, the respective figures were 1.7 million units
and 5.1 million units.
A considerable part of this rapid growth was concentrated in a small number
of developing countries. The Republic of Korea continued its rapid growth in
vehicle production and exports, but perhaps the most noteworthy feature of
the 1990s was the growth of what became known as the emerging markets.
These included Latin America (mainly Brazil and Mexico), which emerged
from the stagnation of the 1980s, the ASEAN countries, Eastern Europe,


2
Vehicle production is a heterogeneous category. It includes everything from the smallest passenger cars to
the heaviest goods vehicles and buses. An overview of the production of the world’s biggest vehicle
manufacturers taking this distinction into account can be found on the website of the Organisation
Internationale des Constructeurs d'Automobiles (www.oica.net) (International Organization of Motor
Vehicle Manufacturers).
The spread of
global vehicle sales
and production
Rapid growth came
from a few
developing countries
2
The Global Automotive Industry Value Chain: What Prospects for Upgrading by Developing Countries?


3
China and India. The fast-growing emerging markets (see the definition of
this group of countries in Table 1, note c), taken together, increased vehicle
sales by 80 per cent and production by 93 per cent. In other words, while
vehicle sales in the fast-growing emerging markets grew at a rate of almost 9
per cent per year in the seven years up to 1997, sales in the Triad economies
increased at less than 0.1 per cent per year. It is hardly surprising that the
attention of the auto industry was focused on the potential of the emerging
markets to offset the industry’s maturity and stagnation in the Triad
economies and, in this way, to achieve increased economies of scale and
spread the costs of developing new models.
Table 1 Unit sales and production of motor vehicles by country and region, 1990 and 1997 (thousands)
Unit sales Production
a

Country or region
1990 1997 1990 1997
United States/Canada 15 464 16 922 11 704 14 690
Western Europe 15 005 14 829 15 568 16 825
Japan 7 777 6 725 13 487 10 975
Mexico 550 503 821 1 338
South America 1 201 3 270 1 121 2 803
Eastern Europe (excluding Russia) 1 090 1 060 1 266 1 686
Republic of Korea and Taiwan Province of China 1 437 1 995 1 674 3 199
ASEAN 848 1 347 841 1 325
China 704 1 616 509 1 583
India 357 761 364 770
Other
b
3 367 2 752 3 275 2 407
World Total 47 800 51 780 50 421 57 257
Triad regions 38 246 38 476 40 759 42 490
Fast-growing emerging markets
c
4 750 8 557 4 922 9 505
Other markets 4 804 4 747 4 740 5 262
Growth, 1990-1997 (%)
World
Triad
Emerging markets
c

Other markets

8.3
0.6
80.1
-1.2

13.6
4.2
93.1
11.0
Source: Fourin (1998).
Notes:
a
The substantial difference between global production and global sales is probably accounted for by sales in countries for which data
are not available and by the counting of completely knocked-down kits (CKD) or semi-knocked-down kits (SKD) as production in both
country of origin and country of destination.
b
Russia, the whole of Africa, Oceania and other unspecified producers.
c
ASEAN, China, Eastern Europe, India, Mexico, South America.

Following the crisis in East Asia, optimism about the prospects for emerging
markets dampened considerably. Rising interest rates, recession and
collapsing consumer confidence led to a 69 per cent decline in vehicle sales
across the ASEAN region between 1997 and 1998. The East Asian crisis also
had a direct impact on Brazil, where interest rates were doubled to defend the
currency and vehicle sales fell by one-third. Not all emerging markets were
affected directly by this international financial instability, but even those
markets insulated by exchange and investment controls showed lacklustre
performance in 1998 and 1999.
3
The Global Automotive Industry Value Chain: What Prospects for Upgrading by Developing Countries?


4
The extent of the downward trend can be seen in Table 2. In 1996, the
Economist Intelligence Unit forecast strong sales growth in all of the
significant emerging markets. However, actual sales fell in the ASEAN
region, Brazil, and India, while in the Central Europe, the actual growth of
the sales was only 5 per cent less then the one predicted. The rate of growth
of vehicle sales in China was less than half that predicted, while in Argentina
and Mexico actual sales were above those predicted. Furthermore, in both
Argentina and Mexico, rising vehicle sales were merely recouping losses
suffered in 1994-1995. Argentine vehicle sales in 1998 were still below the
level recorded in 1994, and in Mexico, domestic sales for 1998 were only 9
per cent above the 1994 level.
3

Table 2 Forecasts and outcomes of growth in vehicle sales in selected emerging
market regions, 1996-1998 (Percentage)


Country or region
Forecast growth
1996-1998
Outcome
1996-1998
ASEAN
a
+10 -68.5
Argentina +10 +21.0
Brazil +14 -11.4
China +22 +10.7
India +38 -25.3
Central Europe
b
+29 +23.6
Mexico +75 +93.5
Sources: Forecasts: EIU (1996a, 1996b). Outcomes: Argentina (ADEFA, 2002), Brazil (ANFAVEA, 1999),
ASEAN, China and India (ANFAVEA, 2001), Central Europe (Automotive Emerging Markets, 1999) and
Mexico (AMIA, 2002).
Notes:
a
Indonesia, Malaysia, Philippines and Thailand.
b
Czech Republic, Hungary and Poland.

For a number of the emerging markets, the downturn in the domestic market
was substantial and prolonged. A comparison of sales in the domestic market
in 2001 with sales in the peak years of the 1990s for a small number of the
emerging markets for which data are available is presented in Table 3. In the
cases of Argentina and Brazil, sales in 2001 were substantially below those in
1997, and in the case of Thailand, they were substantially below those in
1996. In India, sales increased only slightly between 1996-97 and 2001-2002.
Mexico is the sole country where 2001 sales were substantially higher than
the peak year in the 1990s.




3
Data on domestic auto sales in Mexico based on retail sales, as presented on the AMIA website.
4
The Global Automotive Industry Value Chain: What Prospects for Upgrading by Developing Countries?


5
Table 3 Recovery and stagnation of vehicle sales in selected emerging markets,
1996/1997-2001 (Percentage)


Country

Base year
2001 sales in relation
to base year
Argentina 1997 -58.6
Brazil 1997 -18.2
India 1996-1997 +4.7
a

Mexico 1994 +55.8
Thailand 1996 -49.4
Sources: Argentina (ADEFA, 2002); Brazil (ANFAVEA, 1998, 2002); India, (ACMA, 1999 and India
Infoline, 2002); Mexico (AMIA, 2002); Thailand (Bangkok Post, 2002).
Note:
a
Data for financial year April 2001 to March 2002, compared with financial year 1996/1997.

The geographical spread of vehicle output and sales in developing countries
has not been accompanied by a spread of ownership in the assembly sector.
4

Globally, the auto industry remains concentrated, with a small number of
companies accounting for a significant share of production and sales. While
there were some new entrants to the assembly sector in the 20-30 years up to
the late 1990s (including firms like Hyundai in the Republic of Korea and
Proton in Malaysia), the effect of the East Asian crisis was that the prospects
of these challengers to the dominance of the established manufacturers were
undermined. Competition between the Triad producers has led to further
concentration.
The degree of concentration in the global auto industry in 2001 is shown in
Table 4. In 2001, 13 companies produced more than 1 million vehicles each.
Taken together, these 13 firms accounted for around 87 per cent of the
world’s vehicle production. In fact, the figures underestimate the degree of
concentration. First, a number of leading companies have significant
shareholdings in smaller vehicle producers, and over time this has led to
increasing cooperation in both vehicle development and production. For
example, GM, has a 49 per cent stake in Isuzu and a holding in Fiat, and
Renault owns nearly half of Nissan and further concentration is inevitable.
5

One feature of the auto industry in the 1990s was the way in which leading
vehicle manufacturers extended their operations in developing countries. In
part, this was driven by the sales growth shown in Table 1. For the global
producers, rapidly growing markets in developing countries were meant to
provide for spreading vehicle development costs; for establishing cheap
production sites for the production of selected vehicles and components; and
for access to new markets for higher-end vehicles, which would still be
produced in the Triad economies. The extent to which leading firms have
expanded their production capacity in developing countries is shown in
Tables 5 and 6. These provide data on light-vehicle assembly plants owned by
the top ten vehicle companies in 11 major developing countries. At the
beginning of the 1990s, the ten largest vehicle assemblers had 28 light-
vehicle assembly plants in the leading emerging markets. The North


4
The auto industry is divided between the assemblers, firms such as GM and Toyota, and component
manufacturers, who supply many of the parts for vehicles.
5
“Global joint ventures and affiliations for 1999”, available on the Automotive Industries website at
www.ai-online.com.
Ownership in the
assembly sector
Investment in the
assembly industry in
developing countries
5