1、This background paper has not been formally edited. The views expressed therein, the designations employed as well as the presentation of material in this publication do not imply the expressions of any opinion whatsoever on the part of the Secretariat of the United Nations Industrial Development Or
2、ganization concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. Designations such as “industrialized”, “developed” and “developing” countries are intended for statistical convenience and do not neces
3、sarily express a judgement about the stage reached by a particular country or area in the development process. Mention of firm names or commercial products does not imply endorsement by UNIDO. Material in this paper may be freely quoted but acknowledgement is requested, together with a copy of the p
4、ublication containing the quotation or reprint. Global Value Chains and Local Development in the Automotive Industry John Humphrey Institute of Development Studies University of Sussex 1 Introduction This paper discusses industrial development issues for the global auto industry from the perspective
5、 of a global value chain analysis. This perspective is not discussed or explained in this paper. It has been presented in other background papers for the World Industrial Development Report. The paper highlights the way in which the impact of globalisation processes in the auto industry of developin
6、g countries in the 1990s have been influenced not only by changes in both trade and investment policies and the globalisation strategies of leading companies in the industry, but also by changes within auto industry value chain themselves. It is particularly concerned with the following countries an
7、d regions: China, India, Mexico, ASEAN, Mercosur and Central Europe. From the 1950s onwards, various developing countries used import substitution industrialisation policies to promote the development of domestic auto industries. By the early 1990s these policies had created substantial vehicle indu
8、stries in Latin America, the ASEAN region, India and China. Import substitution policies created self-contained industrie s with limited imports of vehicles and components, and with few exceptions (most notably Brazil and Mexico) limited exports. Trade liberalisation began to change this situation i
9、n the 1990s. Quantitative restrictions were phased out and tariffs reduced. Trade Related Investment Measures (TRIMs) such as local content requirements and foreign exchange balancing were also under increasing attack at the end of the 1990s. At the same time, the global production and sales strateg
10、ies of leading multinational companies in the auto industry were also 2shifting. Developing countries began to become more integral to the strategies of transnational auto companies. It will be argued in this paper that while these changes were most evident in the assembly sector, even more signific
11、ant changes were taking place and components production, driven as much by the changing nature of value chain relationships between assemblers and suppliers as by the globalisation of the industry. These changes have had a profound impact on the structure and characteristics of the auto industry in
12、developing countries. This paper analyses these changes and considers policy options for developing country governments. What kinds of policies will be adequate to create viable auto industries in the new environment of lower levels of protection and increasingly globalised production systems? 2 Map
13、ping the Global Auto Industry The auto industry is often considered to be one of the most global of all industries. Its products have spread around the world, and it is dominated by a relatively small number of companies with world-wide recognition. However, in certain respects the auto industry is
14、more regional than global, in spite of globalising 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. 2.1 The Spread of Global Vehicle Sales and Production The spread
15、of vehicle production in developing countries increased marke dly 1990s, as can be seen from 3Table 1.1 Global vehicle production increased by nearly 7 million units between 1990 and 1997, although the increase in total vehicle sales lagged considerably behind this, at just under 4 million units. Mu
16、ch of this growth was concentrated in developing countries. In the Triad regions (the USA and Canada, Japan and Western Europe), the vehicles industry is mature, and it has been plagued by overcapacity, cost pressures and low profitability. Of the three Triad economies, only North America was buoyan
17、t at the end of the 1990s. This resulted from the long boom of the U.S. economy, the substitution of imported Japanese cars by cars built in transplant factories, and from the remarkable, and profitable, shift of consumer demand from passenger cars towards light trucks. In contrast, vehicle sales in
18、 both Western Europe and Japan were lower in 1997 than they had been in 1990. Overall, vehicle sales in the three Triad regions rose by only 0.6% between 1990 and 1997, while production rose by 4.2%. The stagnation of production and sales in the Triad regions was in marked contrast with the growth o
19、f the auto 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 75 percent of global vehicle sales in 1977, a remarkable feature of the period 1990-97 is that in absolute terms the increases i
20、n production and sales of vehicles in rest of the world far outstripped the increases in Triad regions. Outside the Triad regions, vehicle sales rose by almost 40% between 1990 and 1997. Production in the Triad regions grew by under 2 million vehicles in the period, compared to more than 5 million v
21、ehicles in the rest of the world. A cons iderable part of the rapid growth in vehicle production and sales was concentrated in a small number of developing countries. Korea continued its rapid growth in vehicle production and export, but perhaps the most noteworthy feature of the 1990s was the growt
22、h of what became known in the auto industry 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, China and India. These countries take n together almost doubled vehicle production in sev
23、en years and increased vehicle sales by 91.8%. In other words, while vehicle sales in the Triad economies were increasing at the rate of 0.1% per annum, they were increasing in the fast-growing emerging markets at the rate of 9.2% 4per annum. It is hardly surprising that the attention of the auto in
24、dustry was focused on the potential of the emerging markets to offset the maturity and stagnation of the auto industry in the Triad economies and, in this way, to achieve increased economies of scale and spread the costs of developing new models. Following the crisis in East Asia, optimism about the
25、 prospects for emerging markets dampened considerably. Rising interest rates, recession and collapsing consumer confidence led to a 70 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
26、doubled to defend the currency and vehicle sales fell by one third. Not all emerging markets were affected directly by international financial instability, but even those markets insulated by exchange and investment controls showed lacklustre performance in 1998 and 1999. The extent of the shift in
27、expectations can be seen in Table 2. The only emerging markets to show positive sales growth in the period 1996-98 were Argentina and the peripheral regions of the Triad economies, Mexico and Central Europe. Even these growth figures are deceptive. In both Argentina and Mexico rising vehicle sales w
28、ere merely recuperating losses suffered in 1994-95. Argentine vehicle sales in 1998 were still below the level recorded in 1994, and in Mexico, domestic sales for 1998 were the only 9 percent above the 1994 level. 2 2.2 Ownership in the Assembly Sector The spread of vehicle production and sales in d
29、eveloping countries has not been accompanied by a spread of ownership in the assembly sector. Globally, the auto industry remains very concentrated, with a small number of companies responsible for a significant share of global production and sales. While there have been some new entrants to the ass
30、embly sector, such as the Korean assemblers and Proton in Malaysia, the effect of the East Asian crisis was to undermine the prospects of these challengers to the dominance of the established manufacturers. Competition between these established producers has led to further concentration. 5The degree
31、 of concentration in the global auto industry is shown in Table 3. In 1997 13 companies had total vehicle sales exceeding one million units. Collectively, these companies accounted for 80.6% of the worlds vehicle production. In fact, this table underestimates the degree of concentration. Firstly, a
32、number of leading companies have significant s hareholdings in smaller vehicle producers, and over time this has led to increasing co-operation in both vehicle development and production. For example, GM has a majority stake in Saab and a 49% stake in Isuzu.3 Secondly, there has been further concent
33、ration industry since 1997. In addition to the merger of Daimler and Chrysler, Renault has taken an important stake in Nissan, and General Motors has acquired a holding in Fiat. Thirdly, further concentration is inevitable as companies such as Daewoo and Mitsubishi lose their independence. One of th
34、e impacts of the financial crisis in East Asia was to undermine attempts to create new “national champions“ in the auto industry. Indonesia abandoned its attempt to build up a small car producer. In Malaysia, the smaller of the two national car producers, Perodua, will not remain independent, and th
35、e independence of Proton will depend on continuing subsidy from the State. In Korea, the prospects for the continuing independence of the countrys car manufacturers are poor. 2.3 Investments in the assembly industry in developing countries One of the features of the global auto industry in the 1990s
36、 was the way in which the worlds leading vehicle manufacturers extended their operations in developing countries. In part, this was driven by the sales growth shown in 6Table 1. For the global auto producers , rapidly growing auto markets in developing countries were meant to provide overall scale t
37、o spread vehicle development costs, cheap production sites for the production of selected vehicles and components and 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 cou
38、ntries is shown in Table 4 and Table 5. These provide data on light vehicle assembly plants owned by the top ten vehicle companies in 11 major developing countries. 4 At the beginning of the 1990s, the ten largest vehicle assemblers had 26 light vehicle assembly plants in the leading emerging market
39、s. The North American in European manufacturers were strong in Latin America, while most Japanese-owned plants were in Southeast Asia. There were few plants owned by the leading global companies in Eastern Europe, and none in India. The situation had altered dramatically by the late 1990s. Table 5 s
40、hows that the number of assembly plants had risen to 62, and all the assemblers had increased their global coverage: Established assemblers had opened up new plants and new firms had entered the market. North American and European manufacturers had opened up new plants in Eastern Europe. Smaller ass
41、emblers, such as Suzuki and Daewoo, also invested in Eastern Europe. There had been a massive entry of companies into India. More companies had entered the Chinese market. The North American producers had begun to challenge the dominance of the Japanese in the ASEAN markets.5 In many cases, these in
42、vestments exceeded the potential of the markets which they were meant to serve, even before the East Asian crisis had undermined growth prospects in the ASEAN region and Latin America. In part, these investments were driven by oligopolistic competition between global auto companies. This creates ove
43、r-investment so that capacity increases greatly exceeded any realistic short-term expectations for sales: “It is truly a global industry, as defined by Porter (1986): the competitive position of a company in any one market depends on its position in the other 7markets. In this case, a company which
44、is absent from the emerging countries, despite its vulnerability to their particular type of uncertainty, would be permanently penalised. It is very difficult to catch up with the first movers, and though the consequences of having decided not to set up in these countries might not be felt in the im
45、mediate future, they can be very costly over the long run. Moreover, staying away makes it easier for competitors to move into the new market and be in the privileged position of having an uncontested, dominant position: even if profits are not made in this new market, it may be possible to keep an
46、already established competitor from improving profitability, and thus reinforcing its global position” (Lung, 2000: 26). In other words, unfettered FDI leads to proliferation of producers and excess capacity. Only China avoided this fate in the 1990s by maintaining strict controls over FDI. The rush
47、 to invest in the emerging markets can be illustrated by the cases of Brazil and India. In Brazil, the existing vehicle manufacturers invested heavily after 1994-95, and a number of new entrants announced investment plans. As can be seen in Table 6, a large number of companies were making new invest
48、ments in light vehicle assembly capacity at the end of the 1990s. The four established light vehicle producers, Fiat, Ford, GM and VW were all building new plants in the late 1990s, and another nine companies had announced plans to build light vehicle plants in Brazil.6 Box 1: Over-investment in Vie
49、tnam The most extreme case of crowding in to a small market is probably Vietnam. According to Sturgeon and Florida, at the end of the 1990s, “eleven automakers have recently begun assembling passenger cars, sports-utility vehicles, utility vehicles, passenger vans, and freight trucks. Of these, about 75% were imported, leaving eleven manufacturers to battle for the share of about 5000 locally assembled vehicles” (Sturgeon and Florida, 1999: 49). It is worth noting that in Europe popular models such as the VW Polo and Golf, Fiat Punto and GM Corsa are each produced in vo
