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Global Value Chains in a Postcrisis World
The chapter’s second section summarizes government responses to the 2008–09 economic crisis, focusing on mature markets, especially North America and Europe. These interventions underscore the influence politics has on the industry, and vice versa. Government interventions will continue to affect the industry as market growth, and hence production, shift to less-developed countries (LDCs) and local firms begin to compete more directly with multinational firms in developing-country and world markets. Section three analyzes the position and role of developing countries in automotive industry GVCs by comparing the development paths of China, Mexico, and India. While these three countries have relied to varying degrees on foreign direct investment to jump-start their industries, we see a gradual deepening of GVC integration in all three. However, outcomes and prospects for the future are variable. Two features of the Chinese industry—the leveraging of a well-developed supply base, both locally in Shanghai and abroad, and a domestic market large enough to justify the development of vehicles tailored to local tastes—position that country best for future development. The fourth section summarizes our insights and provides policy recommendations for the automotive industry in developing countries. Global Value Chains in the Automotive Industry In previous publications1 we have argued that the automotive industry is neither fully global, with interlinked, specialized clusters, as is the case in the electronics industry, for example; nor fully local, tied to the narrow geography of nation states or specific localities, as is the case for some cultural or service industries. Instead, the degree of global integration differs at various stages of the value chain. Global integration has advanced least at the design stage, as firms have sought to leverage engineering effort across products sold in multiple end markets. Because centrally designed vehicles are manufactured in multiple regions, however, lead firm–supplier relationships typically span multiple production regions. Increasingly, lead firms demand that their largest suppliers have a global presence and system design capabilities as a precondition to being considered as a source for a complex part or subsystem (Sturgeon and Florida 2004). As suppliers have taken on a larger role in design, they have established their own design centers close to those of their major customers to facilitate collaboration. On the production side, the dominant trend is regional integration, a pattern that has been intensifying since the mid-1980s for both political and technical reasons. In North America, South America, Europe, southern Africa, and Asia, regional parts production tends to feed final regional assembly plants that produce largely for regional markets. Political pressure for local production has driven automakers to