Contents
The Rush to Emerging Markets
The question then turns to where these US automotive jobs, and indeed industry jobs in other developed nations, are going. American, European, and Japanese firms have started a push towards opening factories in emerging economies such as Mexico and Southeast Asia. For example, three major Japanese firms, Honda, Nissan, and Toyota, have opened production facilities in the Chinese province of Guangzhou, expected to quickly become a key area of auto manufacturing. Guangzhou Toyota Company, Ltd. alone is expected to be producing one million automobiles per year by 2010.[11]
A table compiled by the International Organization of Motor Vehicle Manufacturers (OICA) charts the 2005 production of forty nations and includes the percent change from 2004.[12] It is presented below, edited to better illustrate the ongoing shifts in global production.
The blue lines indicate double-digit annual growth or very high levels of production in a developing nation. The red lines indicate stagnant or negative growth in developed economies or other traditional manufacturing centers. Clearly, many developing economies are fast on the rise while developed nations are watching their previously unchallenged dominance of automobile production slowly slip away.
Another table from the same OICA press release compiles the latest available employment figures for 39 countries.
Employment levels in several developing nations are reaching into the hundreds of thousands, rivaling those of traditional European centers of production. Most notably, China has overtaken the United States to be the world's leading employer of autoworkers, employing over 650,000 more laborers in vehicle and parts production than the US. It is worth noting, however, that workers in developed economies tend to be more productive, which explains why the United States currently manages to produce a greater quantity of cars despite lower employment levels.[13]
The reasons automakers have started to shift towards developing nations are two-fold. Most obviously, a dramatic wage differential exists between developed and developing nations. For example, in 2002 Mexican autoworkers earned 16% of what their US counterparts did. In lower-income economies, wages are less than 10% of those in developed nations.[14] In addition, most emerging economies have lax labor and environmental laws, allowing automakers to avoid the costs associated with union and environmental regulation in Western nations.
Secondly, many automakers are opening production plants in developing nations in the hopes of gaining an early foothold in emerging markets. Although developed nations still account for the vast majority of worldwide vehicle sales, most have reached a saturation point in terms of putting new vehicles on the road.[13]
Generally, a country with fewer than three people per car is considered saturated. From the chart we can see that this entails the United States, Japan, and most of Western Europe. Emerging economies, especially those in up-and-coming nations like China and India, offer much more potential for sales growth. They also hold the advantage of little competition compared to developed markets, in which more and more firms have started to sell cars. Thanks to the importance of proximity to the target consumer base in the industry, automakers hope that opening these factories will allow them to more easily capitalize on these virtual gold mines of untapped markets.
Team I, Spring 2007 | Site Map