Automotive Industries in Developing Countries

Abstract

The relative cost and efficiency of manufacturing various types of transport equipment under the conditions that prevail in newly industrialized economies are examined. Specific attention is directed at the comparative costs of production, the adaptation problems of manufacturing affiliates, and the impact of economic policy upon market structure. Quantitative aspects of supply and demand, recent changes in the market structure of developing economies, and relevant characteristics of automotive products and production techniques are analyzed. Inefficiency in automobile production is largely due to the inefficiency of small-scale production of components and parts. Average total costs increase proportionally to the diseconomies of scale imposed by the domestic content requirement. Models to improve sector efficiency should assure adequate growth at reasonable resource costs for foreign exchange savings. This may be achieved by reducing domestic content for the more expensive part of local procurement. National programs aimed at the standardization and interchangeability of components and parts can advance production efficiency through longer production runs.

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