The Evolution of Global Value Chains in the Automotive Industry

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Global value chains (GVCs) encompass all functions that companies and workers perform from the conception phase of a product to its actual use by the end consumer, including research and development, marketing and distribution, and after-sales service. This set of functions is performed within a single network that usually involves different and geographically distant companies (Antràs et al., 2013). Since the mid-1980s, GVCs have assumed an increasingly central role in international trade. The advent of new communication technologies and the progressive reduction of transport costs has led to the development of modern GVCs capable of generating competitive advantages through economies of scale and outsourcing mechanisms for production activities. In this regard, the free trade policies implemented by national governments and the Information and Communication Technology (ICT) revolution have played a key role, significantly reducing international coordination costs, allowing companies to specialise and develop economies of scale (Lema et al., 2018). In this context, automotive is a sector with important links between several companies often located in diverse geographical areas. This study aims to describe the globalisation path undertaken by the supply chain since the 1990s and investigate the actual structure that arises from the business relationships between its economic agents. Using Bloomberg source data, we map the automotive GVC; first, we identify the top automobile, motorcycle, truck and heavy-duty vehicle manufacturers worldwide, then we look at their main suppliers and customers, and finally we search for their business relationships. Thus, the final network we have is composed of direct and undirect trade links among firms involved in the automotive GVC. The sample consists of 3,323 companies based in 60 countries and covering 135 industries. They generated average annual revenues of nearly USD 27 billion between 2018 and 2020 and are connected by 11,182 business relationships. The construction of the global automotive supply chain network at the level of individual companies is a relevant element of originality compared to the literature on value chains. Much of the existing research is limited to the level of economic sectors -that is, aggregates of firms- in different countries (e.g., Bonadio et al., 2020; Espitia et al., 2021) or to the level of individual firms for a single country (e.g., Barrot and Sauvagnat, 2016; Inoue and Todo, 2020). The empirical analysis shows that, to date, the automotive market is dominated by Asian countries, whose 2,246 companies account for 67.6% of the global network with a revenue amount of USD 11,535,757 million. They are followed by North America (512 companies recording sales of USD 8,465,809 million) and the Eurozone - particularly Northern Europe, Germany and France (246 companies recording sales of USD 4,739,438 million). More than one-third of the companies in the network belongs to the sectors “Electronic Components”, “Auto Parts and Equipment”, “Steel”, and “Application Software”, and those from which the largest shares of revenues originate are “Automobile Manufacturers” and “Technology Hardware, Storage and Peripherals”. In order to consider a level of detail, we extract sub-networks to compare the supply chains of some of the world’s largest automobile manufacturers by location. We note that the corporate networks of General Motors and Ford (USA), Volkswagen (Germany), Stellantis (Northern Europe), Toyota (Japan), Hyundai and Kia (South Korea) and Great Wall (China) constitute more than 28% of the automotive GVC in terms of nodes and more than 32% in terms of revenue. Furthermore, when examining the business ties of some of them, we find a partial overlap in supply and customer relationships. It was thus possible to define differences and similarities between such companies regarding technology, industrial relations and vertical integration.