Developing countries aiming for fast development of their economies through manufacture typically create the automotive business as a strategic sector to be promoted. The sector goes on to occupy a big proportion in economy because of its intensive upstream and downstream linkages to various industries and sectors.
In their pursuit of automotive business promotion, the six major Asian economies of China, Republic of Korea, Thailand, Taiwan, Malaysia, and India used incentive policies viz. protection of domestic markets as well as discriminatory treatment for vehicle makers.
The total vehicle production in the above mentioned countries rose hugely during the period 1980-1993. Moreover, the pace is continuously increasing after 1985, with Korea, Taiwan and Thailand reporting a huge four to five fold increase during the period. Maximum increase was recorded in Korea, whose ranking rose year by year. This rapid growth in its automotive industry placed it as the world’s sixth largest producer of cars in 1993 with over 2 million units coming out of its factories annually.
China uses competition among foreign corporations to develop its automotive sector. The Chinese government imposes restrictions on the number of assemblers allowed to foreign capital.
Japan’s influence on Asian automotive industry is staggering. The country’s protective policies included import controls on assembled cars, high component tariff, restriction on new assembly factories, restrictions in the manufacture of certain vehicle types, and domestic production of components. Japanese corporations adopted new strategies and reduced prices to survive in the highly competitive automotive market.
Production of vehicles almost doubled for countries like Malaysia, China, and India. The increase in production in countries like Malaysia and India was dominated by Japanese corporations whereas it was US and Europe in case of China.
Taiwan drastically modified its automotive policy, moving from protection to deregulation in 1985. The new policy paved way for the free entry of assemblers, reductions in import tariffs, loosening of native content needs, and promotion of foreign capital inflows as well as technology transfers. As a result, Taiwan’s chief or major vehicle makers with monopoly on the domestic market were exposed to competition from international players. They were compelled to ask foreign capital, particularly from Japan, setup joint ventures of their own and tried to bring down costs while upping quality.
It began with Korea’s policy of opening up to Japan during the 80s and railroad car exports began. But its units faced difficulties in the international market on account of quality as well as worth.