The Automotive industry

A Comparison of Korea, Brazil, China and India

Indian Institute of Management, Ahmedabad 380015, India

The automotive industry in Korea, Brazil, China and India is currently going through

impressive growth. Governments have played a key role in the evolution of the industry in all

these countries. The Korean industry has made the most significant progress, and is now

exporting cars to developed markets. It is the only country that invested in R&D for product

development, retained management control in joint ventures with multinational companies

(MNCs), and had ambitious export targets. The industry in Brazil is controlled entirely by

MNCs. Although this has led to growth and adoption of lean production, indigenous product

development is lacking. Tariff barriers have come down, forcing domestic production to

become more market responsive. Fluctuating tariffs and taxes, and cyclical demand have

characterized the industry. Indian industry is experiencing a revolution with rapid growth and

the entry of 9 MNCs and plans for 3 more to enter in the next two years. The Chinese industry

. . .
With stagnation in developed markets and huge additions of capacity in emerging

markets, monopoly of MNCs over car production could erode although they will continue to

dominate product development. The strategy was to

obtain foreign capital and technology, and they were forced to give managerial control to

international partners.

The development of the Brazilian automotive industry has been described by Ferro (1995). Previously, the

focus of government poilicy was on import substitution, as is typical of most developing

countries. OF

ASSEMBLERS

(%) (1985-95)

OUTPUT

SHARE OF

TOP 3 FIRMS

(%)

GROWTH IN

OUTPUT

SHARE OF

TOP 3

FIRMS

(%)(1985-95)

MNCs PRESENT

KOREA 6 100 95 -5 Mazda, Mitsubishi,

GM, Ford, Honda,

Mercedes

BRAZIL 5 28 95 15. Low

investment in R&D

Suppliers Moving towards world class

status.

MNCs have not chosen to enter on their own and have entered into joint venures with Indian

partners. Amsden and Kang (1995) call this group of countries `emerging economies or

manufacturers' and not just `emerging markets.

Implications and Conclusions

The table in the Appendix summarizes the comparison between these countries. 6

OEM:RM Split 80:20 50:50 50:50 20:80

Overseas

collaborations

Many

licensing

agreements

20% of firms

are foreign

affiliates

Many licensing

agreements

60% of firms

have Japanese

links

38% of

firms have

foreign tie

ups

Exports 10% of sales 15-20% of

sales

20% of sales 10% of sales

One of the reasons for the success of the Korean automobile industry is the closely knit

assembler-supplier structure.

Some are able to design

proprietary parts

Getting restructured for lean

production. Later they developed their

own models for the world market. This is because the Korean government has always supported as well as disciplined

the Korean industry through export targets and incentives and through price controls.

Common topics in this essay:
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Approximate Word count = 3697
Approximate Pages = 15 (250 words per page double spaced)

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