Globalization and New Centers of Automotive Manufacturing : the Case of Brazil, Mexico, and Central Europe

Abstract

The globalization of the automotive industry in the last twenty years has manifested itself ina rapid increase in the assembly of automobiles and the production of automotive components and spareparts outside of the traditional centers of automotive manufacturing. On the basis of contemporary researchand literature, we can distinguish two types of emerging centers of automobile manufacturing.First are potentially large domestic markets with a low level of motor vehicle ownership and rapidlygrowing economy such as Brazil. The second type of new automobile manufacturing center consistsof the peripheries of automotive core regions such as Mexico in the case of the North American coreregion and Central Europe in the case of the Western European core region. These new growth centershave benefitted from their lower production costs compared to those of core regions and their geographicproximity to the largest automobile markets. These emerging centers of manufacturing havebecome attractive locations, especially for export-oriented manufacturing facilities operated by largetransnational automotive corporations attempting to improve their global competitiveness. The purposeof this paper is to evaluate the effect of foreign direct investment on the development of automobile productionin these three emerging regions. The paper reviews post-1990 production trends and changes inthe geography of automobile production, especially new greenfield investments in the three analyzedregions. We examine changes in international trade in Brazil, Mexico and Central Europe with a focuson automobiles and automobile parts. Based on the results of our research, we determine the effects offoreign direct investment and industrial upgrading on the role of these emerging production centers inthe global production system.