Spatial shifts and major trends in the global automotive industry: a spatial and quantitative approach

Résumé:

Purpose

In this paper I study the spatial and structural changes that happened in the automotive industry since the beginning of the 20th century. The ongoing globalization decreased significantly the transportation costs of goods, people, and ideas and changed the spatial configuration of car assembly quite drastically. I analyze the distribution of car plants in two steps. In the first step I look at how plants are distributed between national countries, between developed/developing countries, and between countries along the core-periphery continuum as defined by Mordue and Sweeney (2020). The spatial formation of car firms has also been studied in the literature using duration analysis (Boschma & Wenting, 2007; Klepper, 2007). In the context of this study, I analyze whether plants have different survival rates based on their time of entry, mode of entry, foreign ownership status, and regional affiliation. In a second step I study the spatial evolution of assembly plants in North America, Europe, and Asia-Pacific. There have been studies that looked at the footprint of assembly plants (Klier & Rubenstein, 2010), but none have studied the footprint in all three major car regions.

Data and methodology design

The hardest part of this paper is getting the right data, which is either unavailable or prohibitively expensive. Therefore, I hand-collected longitudinal data about car plants that assembled passenger vehicles between 1899 and 2018 from various secondary sources. I recorded for every plant its geographic location, its national/regional affiliation, its subsidiary name, whether it is foreign owned, the type of entry, when it started assembling and when it idled (if applicable), and car models produced. Methodologically, I use a combination of semi-parametric and non-parametric methods. As semi-parametric method I use a Cox proportional hazard regression model. The variables of interest are time of entry, entry mode, foreign ownership status, and the regional affiliation (Asian, North American, or European). As non-parametric method I use spatial point-pattern tools to visually detect significant clusters (spatial heterogeneity) and clustering (spatial dependence) of car assembly plants in North America, Europe, and Asia-Pacific. To find statistically significant spatial shifts between time periods, I use Andresen’s (2011) spatial point pattern test (Steenbeek et al., 2020).

Findings

In 2018 most assembly plants were in developing (57%) and peripheral countries (61%). This change showed a gradual but structural shift of car assembly capacity from developed core countries to developing peripheral countries. The growth of new assembly capacity is mainly located in developing countries. We found entrance after 1960 (p <0.1) and North American affiliation (p <0.001) to have a statistically significant negative impact on plant survival. The spatial assembly footprint in North America was rooted around the Great Lakes and extended to the East and West Coast until the 70s. The current North American footprint resembles a corridor that runs from the Great Lakes states to central Mexico. The European footprint is a result of historical incidence rather than economic rationale. The current footprint has a core in Western Europe and extensions to the South and East of Europe. The Asian footprint was initially located in Australia and New-Zealand, but drastically shifted to Eastern and Southeastern Asian countries. The current footprint has a core in East Asia and several local clusters in Southeast Asia. I found significant spatial shifts in North America, Europe, and Asia-Pacific that are correlated with changes in market liberalization, market integration through trade agreements (e.g. NAFTA) or institutional arrangements (e.g. European Union).

Practical and theoretical implications

Although there are no direct practical implications, there are several interesting implications to policymakers. Some countries, such as South Korea, were able to leverage their large domestic or regional markets to implement an industrial policy that creates an internationally competitive domestic industry. Other countries, such as Australia and New Zealand, saw their domestic industry disappear due to the rise of lower-cost Asian countries. Given the disruptive impact of COVID-19 on the supply of semi-conductors and the ongoing electrification of cars, peripheral countries should consider industrial policies that favor investments in electric car components and assembly to safeguard the future of their domestic industry.