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"Green" Sunrise or "Brown" Sunset Industry Response? - The Impact of the Global Economic and Financial Crises over Developing Countries' Automobile Industry

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image for OpenScout resource :: "Green" Sunrise or "Brown" Sunset Industry Response? - The Impact of the Global Economic and Financial Crises over Developing Countries' Automobile Industry

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In the Global South automobile production evolved behind protectionist walls and was promoted by infant industry policies and outright national automotive projects from the 1950s. In recent decades, many developing countries have liberalized their automotive markets and allowed automobile TNCs to take majority control over joint ventures, transforming domestic automotive industries into foreign controlled sectors while leaving a few national automakers in India, Malaysia and China. Decomposing and reorganizing the national value chain into regional and global automobile value chains OEMs and TNC original equipment suppliers (OESs) have off-shored and outsourced component and parts production to developing countries. Again, local auto suppliers have been acquired or relegated to lower 'tier' positions if not forced out of the market. However, with economic growth and development in the Global South during the 1990s and 2000s automobile sales have boomed, and the automobile sectors in Latin America and Asia have become „brown sunrise‟ industries generating investment, technological upgrading and employment. The present global financial and economic crisis has not profoundly changed this trajectory. The global crisis did not impact automotive markets in developing countries severely, except for automotive exporting countries like Mexico, Thailand and South Africa. Only in 2009 automotive sales and production declined across the board in the Global South, but key markets turned around in the end of the year. Thus, the automobile crisis is a downward business cycle, not a structural crisis of the industry. Companies in the automotive industry responded with traditional crisis management (temporary downsizing, cost reductions, retraining, consolidation, innovation), and governments launched traditional stimuli packages (cash-for-clunkers, tax reductions on smaller and/or cleaner cars etc). Strategic initiatives were taken to improve the competitiveness of the domestic industry (consolidation, liberalization) on the one hand and to transform it from a brown industry to a „greener‟ industry on the other hand (tightening environmental regulations, fuel efficiency and emission standards, subsidizing purchases of smaller and „greener‟ cars, investing in appropriate infrastructure and green technology R&D). Thereby, some developing countries and their surviving local automakers and parts makers are leapfrogging into „clean‟ technology frontiers competing head-to-head with global automakers or partnering with foreign firms in their common endeavor to manufacture green automobiles.

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Peter Wad

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eng

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application/pdf

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http://hdl.handle.net/10398/8180

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