The example of the automobile industry
ECON 3730 –Economic Geography
William H. Warren
When I think of Globalization, I always have the car companies in mind as pioneers in many aspects of globalizing. This paper is going to examine the reasons why automobile companies are shifting production from Germany in particular to foreign countries. I will also compare the major locations for manufacturing, China and Eastern Europe, and show how those regions qualify for as production locations.
Reasons for shifting production to a foreign country:
The relocation of production facilities to foreign countries is a very costly and time consuming endeavor, however more and more companies take this crucial step, which can have several reasons. But why is the trend going more and more away from domestic production?
The sales figures in many western countries such as Germany and the US are pointing down. This can be due to economic reasons such as stagnating levels of income, with a high inflation at the same time. Other factors include that people can drive their cars longer as quality goes up and cars last longer. The cars manufactured today last longer and the streets are getting better which can make a major impact. In Germany the average durability of cars rose from 7 years in 1991 to 11, 9 years in 2006 (automotiveworld, 2006). Clearly every country has to be examined individually, as there are too many unique traits defining each country. For Germany for example, the typical “German canniness” in times of recession or stagnation of the economy plays a major role when looking at sales figures.
Simultaneously the competition in the car industry is getting more intense. The Chinese manufacturer Jiangling, for example, came out with a 17,000 $ SUV called “Landwind” in 2006, which added a major player to the car industry (Depner 2006). The car manufacturers try to react to those trends with expanding to new markets. Emerging... [continues]
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