Integration of Production Networks in the Automobile Industry in the ASEAN Countries. A Comparison with the Automobile Industry in the EU.

Résumé:

In 2015 the ASEAN member states founded the ASEAN Economic Community. One basic objective of the ASEAN Economic Community is to establish a common production base and a single market.
One of the industries that is always ahead in establishing international production networks, trying to optimize the value chain is the automobile industry. When looking at the formation of organizations for regional economic cooperation or integration it was in general the automobile manufacturers that often already long before an economic community or free trade area was established (or in the case of the EU new countries were given member status) invested in these prospective countries. This held especially true for the new Central Eastern European member countries of the EU, which already immediately after the collapse of the socialist economic system became favored targets for automobile related investments.
Against this background, it is especially interesting to observe the evolvement of automobile production networks in ASEAN, and compare this with the developments in Europe, especially the new EU member states in Central Eastern Europe. As will be seen, production networks are also slowly evolving in the ASEAN countries that are also becoming increasingly integrated into the networks with the ASEAN +3 countries. However, there are considerable differences between the two regions at least at the moment. Whereas Central Eastern Europe foremost developed into low cost production sites and export hubs for West European manufacturers, with the local car markets only slowly increasing, we observe a complete different picture in ASEAN. There, production is directed much more to local automobile demand, while exports are only playing a minor role in automobile related investments. However, this could change in the mid to long-term, when the lifting of custom restrictions lead to more integrated markets and fiercer competition between production locations.
One other interesting aspect is, that like in the new member states of the EU also in ASEAN there is only one country with an own national car industry. In case of CEE it is the Czech Republic, where Skoda (although belonging to the Volkswagen Group) is located. In the case of ASEAN it is Malaysia, where Proton and Perodua, a Japanese-Malaysian joint venture are producing ‘national’ cars. So the question is, whether there are differences observable in industry structure, integration of local companies and in market performance of the national vs the international manufacturers.

Methodology:
Quantitative and qualitative research, historical based research, data analysis.

Expected Results:
The analysis will show that the car industry in ASEAN is in many respects developing in a different way than in the countries of Central Eastern Europe. However, the conditions are also very different. While ASEAN integration just begins to take off, the integration of CEE countries into the EU economy already has more than 25 years of history. Therefore we still see less integrated networks in ASEAN or ASEAN +3 than in Europe. However, at the same time we observe by far much more market oriented developments in the ASEAN countries than in CEE, where car manufacturers are much more focused on optimizing their cost structures and by this increase the competitiveness of the company.

Implication and Relevance for the GERPISA program:
The car industry (still) is setting the pace with regard to globalization and forming international production network. Therefore the study of the car industry in ASEAN will give valuable insight how the region as a whole will proceed to integrate in the future.
The paper especially aims at contributing to the GERPISA research on regional automobile industry development, which has a long tradition at GERPISA.