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Auto Industry Developments China

Auto Industry Developments China



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Published by: baijnathc on Aug 18, 2009
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Munich Personal RePEc Archive
The automotive industry, developmentsin China and implications for LatinAmerica
Kamiya, Marco and Ramirez, CesarESAN Peru, Graduate School of Business AdministrationSeptember 2004Online at
MPRA Paper No. 14328, posted 28. March 2009 / 14:57
Graduate School of Business Administration ESAN Peru, – Journal of Business
The Automotive Industry, Developments in China and Implications for LatinAmerica
Marco Kamiya
Senior development consultant of PADECO Co., Ltd., and Graduate School of Asia-Pacific Studies at the University of Waseda in Tokyo.
César Ramírez
cramirez2@ifc.org]Global Manufacture Department, International Financial Corporation – World Bank, inWashington DC.Summary
 Due to its dimensions and global scope the automotive industry is often asubject of debate when investment promotion policies, insertion strategies for  productive chains, and mechanisms of technology transfer are being discussed. Theautomotive industry combines three important elements: (i) it is leading theglobalization of production (e-commerce, subcontracting, and commercialization), (ii)the production of vehicles in China and East Asia is vitalizing the market and provokingchanges in strategies, and (iii) the division between original producers and suppliers isconsolidating the number of producers but increasing the number of subcontractors.These new trends, which include productive globalization, China and new productionchains, make necessary the formulation of a production strategy by private businessesand appropriate promotion by governments.
The automotive industry is one of the most important in the field of manufacturing in developed countries where, including services and production of automotive spare parts, it accounts for almost 10 percent of industry in the United States,Japan, and several Western European countries. Furthermore, it is also an enormoussource of investment for developing countries, due to the peculiar characteristics of theindustry which oblige it to establish numerous industrial links and organize productionso as to enable it to reduce costs and take advantage of economies of scale so as topenetrate new markets. Building an automobile requires 10,000 parts, more than 800people working as a team, and decades of research and development.This industry is also considered strategic by governments promoting industrialpolicies. In Asia, where industrialization is a joint responsibility of government and
business, countries such as Malaysia, Indonesia, India and China have grantedprivileges for the creation of a national automotive industry. In Latin America,Argentina and Brazil are competitors in this field, especially the latter which, since the1950s has defended the development of the vehicle and auto-parts industry.Countries such as Japan,South Korea, the United Statesand several Western Europeannations have supported, to agreater or lesser extent, thedevelopment of this industry,where interventionism has beengreater in support of the Japaneseand Korean manufacturers, andlower in the case of the USmanufacturers, but today anypolicy which affects this industryis part of the negotiations of thegovernments which consider itstrategic for development and acomponent of national security.This study covers the current situation of the Automotive Industry, and the recenttrends in Asia and principally China where the industry ids growing at accelerated rates,which will have profound effects on the strategies of private companies in LatinAmerica, and will make necessary the formulation of proposals of industrial insertionand public policies.
The Automotive Industry and the Global Production Networks
The Automotive Industry is one of the best examples of globalization. It is led bymanufacturers from the United States, Japan, Western Europe and South Korea. Whereeach company has international production and assembly plants from which they supplyproducts to local markets or export abroad. The three major US manufacturers,
General Motors, Ford and Chrysler 
, are still global leaders but closely followed by Toyota,which may become the leading producer in the near future
The net profits of Toyota are already the highest in the automotive industry, 6.7 percent in 2004
Table 1. Main Automotive CompaniesManufacturersSales(millions of units)
General Motors 8.59Toyota 6.78Ford 6.54Volkswagen 5.02Daimler-Chrysler 4.36PSA/Peugeot/Citroen 3.29Hyundai 3.05Nissan 2.97Honda 2.91Renault 2.39Source: Automotive News (2004)

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