The Automotive Industry in Asia: The Great Leap Forward?
Spot Survey
No.3
Developing
countries
aiming
for
rapid
development
of
their
economies
through
industrialization
often
make
the
automotive
industry
a
strategic
sector
to
be
promoted
because
it
can
occupy
a
significant
proportion
in
an
economy
due
to
its
extensive
upstream
and
downstream
linkages
to
many
diverse
industries
and
sectors.
In
their
promotion
of
the
automotive
industry,
the
majority
of
the
six
Asian
countries
in
this
report
(China,
Repubic
of
Korea,
Thailand,
Taiwan,
Malaysia,
and
India)
used
incentive
policies
such
as
protection
of
domestic
markets
and
preferential
treatment
for
vehicle
manufacturers.
Total
vehicle
production
in
the
six
countries
rose
tremendously
between
1980
and
1993,
and
the
pace
has
been
accelerating
since
1985.
In
particular,
production
in
such
countries
as
Korea,
Taiwan,
and
Thailand
increased
four-
to
five-fold
between
1985
and
1993.
The
most
rapid
increase
was
recorded
in
Korea,
whose
ranking
rose
year
by
year
and
which
became
the
world's
sixth
largest
producer
of
passenger
cars
in
1993
with
over
two
million
units
annually.
The
situation
in
the
automotive
industries
of
the
six
countries
can
be
summarized
as
follows:
- During the 1980s Korea opened its doors to Japanese capital and began passenger car exports. Although Korea actively introduced the Japanese system of component procurement to improve quality standards and lower costs, its vehicles faced difficulties in international competitiveness in terms of price and quality.
- Taiwan completely changed its automotive industry policy from protection to deregulation in 1985. The new policy included the free entry of assemblers, reductions in import tariffs, the loosening of local content requirements, and the promotion of foreign capital inflows and technology transfers. As a result, the major Taiwanese vehicle manufacturers, which had previously monopolized the domestic market, were exposed to competition from joint ventures located overseas. In order to survive, they were compelled to invite foreign capital, especially from Japan, and form their own joint ventures. Many of these introduced the Japanese system of components procurement and made efforts to improve quality and lower costs.
- Japan's influence dominates in auto-related capital in Thailand, just as it does in Taiwan. The Thai government's promotion of the automotive industry had been based on a policy of import substitution since the 1960s. Protective policies included import controls on assembled cars, high tariff rates for components, the prohibiting of new assembly factories, limitations in the manufacture of certain types of vehicles, and the promotion of the domestic production of components. In response to the last of these, Japanese-affiliated manufacturers in Thailand assisted in the development of the Thai components industry. Since 1990, however, Thailand has switched its policy to one of gradual liberalization, influenced by the worldwide free trade paradigm which began in the mid-1980s. To survive in the competitive market, Japanese-affiliated companies launched new strategies, which led to price reductions.
- Vehicle production almost doubled between 1985 and 1990 in countries such as Malaysia, China, and India. In terms of capital and improved competitiveness, Japan's influence dominated in Malaysia and India; while in China, European and U. S. participation stood out.
- China intends to use competition among foreign companies to foster its automotive sector. The Chinese government limits the number of assemblers allowed to foreign capital. Its method of promoting the industry is quite different from that of other Asian counties, where the number of films is increasing due to liberalization.
On
the
demand
side,
the
rapid
increase
in
vehicle
production
in
the
six
countries
since
1980
can
be
explained
by
the
increases
in
per
capita
income
that
followed
their
rapid
economic
growth.
From
the
supply
side,
the
Japanese
capital
outflow
caused
by
the
rapid
appreciation
of
the
yen
against
the
U.
S.
dollar
since
the
1985
Plaza
Accord
overlapped
with
the
period
of
liberalization
in
the
Asian
countries.
Sustained
economic
growth
has
led
to
an
increase
in
automotive
production,
and
because
vehicle
demand
quickly
reflects
per
capita
income
growth,
it
is
expected
that
the
struggle
for
market
share
in
Asia
will
intensify
among
vehicle
manufacturers
from
both
advanced
and
developing
countries.
Chapter1
China's Automotive Industry: Heading for the 21st Century / Tomoo Marukawa
Chapter2
Chapter3
The Automotive Industry in Thailand: From Protective Promotion to Liberalization / Shigeki Higashi
Chapter4
Chapter5
The Automotive Industry in India: Developing Motorization / Mitsuru Takahashi