Fdi in Automobiles in India

Topics: Automotive industry, Volkswagen Group, Suzuki Pages: 80 (26103 words) Published: March 13, 2013
Globalisation, Foreign Direct Investment and the Restructuring of Supplier Networks: the Motor Industry in Brazil and India*

John Humphrey, Institute of Development Studies, University of Sussex Avinandan Mukherjee, Indian Institute of Management, Ahmedabad Mauro Zilbovicius, Department of Production Engineering, University of São Paulo Glauco Arbix, Department of Sociology, University of São Paulo

In M. Kagami, J. Humphrey and M. Piore (Eds), Learning, Liberalisation and Economic Adjustment, Tokyo, Institute of Developing Economies, 1998.

1. INTRODUCTION The automobile industry in developing countries is experiencing a rapid transformation. Three key influences govern the change. Firstly, the global geography of the industry is being

transformed by the rapid growth of automotive production and consumption in emerging markets. Over the next two decades, the major auto companies are expecting much of the growth in the world auto industry to theme in the larger emerging markets: China, India, Indonesia (and the ASEAN countries more generally), Brazil (and the Mercosur region) and Russia. They are positioning themselves to take advantage of the opportunities offered by these markets. Secondly, relationships between assemblers and suppliers are being restructured and globalised. The development of global supplier networks is increasing the centralisation of

design activities in the core operations of the leading component producers while decentralising production activities around the world. These developments are having a significant impact on the distribution between countries and companies of the various activities involved in the production and consumption of automobiles (design, components, assembly, finance, and marketing). Thirdly, liberalisation policies have greatly freed up the flow of capital and products into and out of developing countries. While the automotive industry still remains subject to a high degree of policy regulation, the formerly protected and inwardly focused industries of the developing world are being integrated into broader regional and global networks of design, production and consumption. This report examines the transformation of the automotive industries in two of the major emerging markets, Brazil and India. Governments in both countries adopted policies of trade liberalisation and deregulation of the economy at the beginning of the 1990s. In both countries,


the automotive industry has shown enormous dynamism in the 1990s.

Growth has been

accompanied by major restructuring as huge inflows of foreign direct investment transform the assembly and components sectors. New relationships have been developed between assemblers and suppliers, and the importance of global and regional networks has increased. The auto industry is potentially an important driver of technological capability in developing countries. It is keenly promoted by governments and is the subject of continuing government intervention in many countries, including those often considered to pursue marketoriented industry and trade policies, not only because of its impact on the balance of trade, but also because of its potential for upgrading the many different industries which feed into it and which sustain motoring activities. 1 This paper discusses the development of the auto industry in Brazil and India under import substitution industrialisation policies and the extent to which local component manufacturers were able to acquire capabilities as a result of their relationships with assemblers. The paper then considers the reshaping of the global automotive components industry resulting from the development of global sourcing networks. Following this discussion, the

transformation of the auto industry in the 1990s is examined and its consequences for the automotive component sector discussed. The paper argues that in the global auto industry Design

relations between suppliers and assemblers have...

References: 1985 1986 1987 1988 1989 1990 Average, 1981-90 Source: ANFAVEA.
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