Automobile Industry in Asia

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Asia-Pacific Research and Training Network on Trade Working Paper Series, No. 37, July 2007

Changing Features of the Automobile Industry in Asia: Comparison of Production, Trade and Market Structure in Selected Countries

Biswajit Nag * Saikat Banerjee* Rittwik Chatterjee*

*

Biswajit Nag, Saikat Banerjee and Rittwik Chatterjee are associate professor, assistant professor and research fellow, respectively, at the Indian Institute of Foreign Trade (IIFT), New Delhi, India. This paper owes to the original research report prepared for IIFT on this topic. The views presented in this paper are those of authors and do not necessarily reflect the views of IIFT, ARTNeT members, partners and the United Nations. Any remaining errors are the responsibility of the authors. The authors may be contacted at biswajit@iift.ac.in

The Asia-Pacific Research and Training Network on Trade (ARTNeT) aims at building regional trade policy and facilitation research capacity in developing countries. The ARTNeT Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about trade issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. ARTNeT working papers are available online at: www.artnetontrade.org. All material in the working papers may be freely quoted or reprinted, but acknowledgment is requested, together with a copy of the publication containing the quotation or reprint. The use of the working papers for any commercial purpose, including resale, is prohibited.

Executive Summary
The global automotive industry, increasingly characterized by global mergers and relocation of production centers to emerging developing economies, is in the grips of a global price-war. The industry is subject to imperfect competition which has resulted in too much of everything — too much capacity, too many competitors and too much redundancy and overlap. The industry is concerned with consumer demands for styling, safety, and comfort; and with labor relations and manufacturing efficiency. In this context, the study examines the growth patterns, changes in ownership structures, trade patterns and role of governments of selected Asian countries (viz. China, India, Indonesia and Thailand) in the automobile sector. Thailand is a major automobile exporting country from Asia. The sector is mainly driven by Japanese FDI. Chinese automobile sector is growing very fast and is poised to make its dent in the international trade arena very soon, with a particularly strong position in the component sector. India, on the other hand, is consolidating its position with strong domestic and external demand. The Indonesian automotive industry is essentially an assembly industry dominated by the major Japanese car manufacturers, but also increasing its exports. The developing countries studied are making efforts to develop their automobile sector through different paths with direct and indirect influence of government through innovative policies and trade liberalization programmes. Government policies towards investment liberalisation brought significant benefits to the selected countries as private players stepped in with modern technology and FDI started pouring in mainly through the hands of Japanese automobile majors. Different countries adopted different policies to handle the overcapacity problem in the sector. Chinese has promoted consolidation of the industry through mergers and acquisition while Indians sought overseas market. In both these countries, government policies have been towards development of the indigenous automobile sector through strengthening the national players while Thailand focused entirely on the export market through Japanese companies. Domestic players in Indonesia remained as partners to MNCs in assembling activities. Protection in automobile sector earlier was mainly through high tariffs, import bans on Completely Build...
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