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TRANSCRIPT
The Global auTomoTive indusTry
automotive series
series editor Thomas Kurfess
The Global Automotive Industry Nieuwenhuis and Wells September 2015
Vehicle Dynamics Meywerk May 2015
Vehicle Gearbox Noise and Vibration Measurement Signal Analysis Signal Processing and Noise Reduction Measures
Tůma April 2014
Modeling and Control of Engines and Drivelines
Eriksson and Nielsen April 2014
Modelling Simulation and Control of Two‐Wheeled Vehicles
Tanelli Corno and Savaresi
March 2014
Advanced Composite Materials for Automotive Applications Structural Integrity and Crashworthiness
Elmarakbi December 2013
Guide to Load Analysis for Durability in Vehicle Engineering
Johannesson and Speckert
November 2013
The Global auTomoTive indusTryedited by
Paul nieuwenhuisCardiff University UK
Peter WellsCardiff University UK
This edition first published 2015copy 2015 John Wiley amp Sons Ltd
Registered OfficeJohn Wiley amp Sons Ltd The Atrium Southern Gate Chichester West Sussex PO19 8SQ United Kingdom
For details of our global editorial offices for customer services and for information about how to apply for permission to reuse the copyright material in this book please see our website at wwwwileycom
The right of the author to be identified as the author of this work has been asserted in accordance with the Copyright Designs and Patents Act 1988
All rights reserved No part of this publication may be reproduced stored in a retrieval system or transmitted in any form or by any means electronic mechanical photocopying recording or otherwise except as permitted by the UK Copyright Designs and Patents Act 1988 without the prior permission of the publisher
Wiley also publishes its books in a variety of electronic formats Some content that appears in print may not be available in electronic books
Designations used by companies to distinguish their products are often claimed as trademarks All brand names and product names used in this book are trade names service marks trademarks or registered trademarks of their respective owners The publisher is not associated with any product or vendor mentioned in this book
Limit of LiabilityDisclaimer of Warranty While the publisher and author have used their best efforts in preparing this book they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose It is sold on the understanding that the publisher is not engaged in rendering professional services and neither the publisher nor the author shall be liable for damages arising herefrom If professional advice or other expert assistance is required the services of a competent professional should be sought
Library of Congress Cataloging‐in‐Publication Data applied for
ISBN 9781118802397
A catalogue record for this book is available from the British Library
Set in 1012pt Times by SPi Global Pondicherry India
1 2015
Contents
Notes on Contributors xiSeries Preface xviiForeword xix
1 Introduction and Overview 111 Introduction 112 Continuity and Change 313 Overview 4References 6
2 Understanding Change and Difference in the Global Automotive Industry 721 Introduction 722 Socio‐Technical Transitions 923 Varieties of Capitalism 1224 Global Value Chains 1425 Change in the Automotive Industry A Synthesis 1526 Conclusions 16References 17
3 The Market for New Cars 1931 Introduction 1932 Market Fragmentation and Lack of Industry Consolidation 2033 Geography of Markets 2234 Mobility Services and the Emergent Automotive Ecosystem 2635 Conclusions 27References 27
4 Understanding People and Cars 2941 Influences on Travel Choices 2942 Influences on Vehicle Choice 33
vi Contents
43 Acceptability of Transport Policies and New Technologies 3444 Conclusions 36References 37
5 Car Manufacturing 4151 Background and Prehistory 4152 Ford Budd and Sloan The History of Mass Car Production 4253 Monocoque Construction Buddrsquos Impact on Car Design 4454 Toyotism 4555 Buddism in Crisis 4656 Lean v Agile 4757 Conclusions 49References 50
6 Recent Trends in Manufacturing Innovation Policy for the Automotive Sector A Survey of the United States Mexico European Union Germany and Spain 5361 Introduction 5362 A Changing Manufacturing Landscape 5563 Restructuring in the Automotive Industry 5664 Automotive Policies in the United States Mexico EU Germany and Spain 57
641 United States 57642 Mexico 59643 European Union 60644 Germany 61645 Spain 62
65 Conclusion 63References 64
7 Labour Relations and Human Resource Management in the Automotive Industry North American Perspectives 6771 Introduction 6772 From Fordist Production to Lean Production The Evolution of
Labour RelationsHuman Resource Management Systems in the North American Auto Industry Prior to 2000 70721 The Classic Fordist Industrial Relations System in the
US and Canadian Automotive Industries 70722 The Impact of Japanese Transplants and Lean Production
Methods on the North American Automotive Labour Relations System 72
73 Developments in North American Auto Labour Relations Since 2000 74731 Concession Bargaining 2003ndash2008 74732 The Impact of the Global Financial Crisis 76733 Post‐Crisis Developments 78
74 Conclusion 78References 80
Contents vii
8 Labour Relations and HRM in the Automotive Industry Japanese Impacts 8381 Introduction The Japanese Car Industry and Toyota Production System 8382 TPS and Japanese HRM 8583 lsquoJapanizationrsquo of the Global Automotive Industry 8884 Changes in Japanese Labour Relations and HRM 9085 Concluding Remarks 92References 93
9 The Rise of South Korean (or Korean) Automobile Industry 9591 Introduction 9592 A Brief History of South Korean Automobile Industry
and the Performance of HMC 96921 Brief History of South Korean Automobile Industry 96922 The Change in Performance of HMG 100
93 Considering Five Success Factors of HMC 102931 Vertical Integration 102932 Modularization of Production and Standardization 102933 Expansion of Overseas Production Capabilities
in Emerging Markets 104934 Product Strategy 104935 Quality Focused and Design Focused Management 105
94 Characteristics of HRM in HMC and Effects on the Management System 106941 Militant Trade Union Movement and Confrontational
Labour‐Management Relations 106942 Fragmentation and Automation of Work 106943 Internal Competition Systems 107
95 Conclusion New Challenges for the Korean Auto Makers as Multinational Enterprises 107
References 108
10 Chinarsquos Car Industry 109101 Background 109102 Pre‐History 110103 Chinarsquos Car Industry 111104 The Role of Government 114
1041 Traditional Automobile Industries 114105 New Energy Vehicles 118
1051 RampD Support 1181052 Industrialization 119
106 Bringing NEVs to Market 1211061 Demonstration and Pilot Projects Strategic Niche Management 1211062 Financial Incentives 122
107 Conclusions 124References 124
viii Contents
11 Forging Ahead or Stagnating An Analysis of Indian Automotive Industry 127111 Introduction 127112 History of the Indian Automotive Industry 128113 Statistics on Automobile Industry Performance 132114 Stagnation of Industry in 2013ndash2014 133115 Factors Critical to the Growth of the Indian Automotive Industry 133116 Challenges and Future of Indian Automotive Industry 134References 136
12 From Factory to End‐User An Overview of Automotive Distribution and the Challenges of Disruptive Change 139121 Shipping and Stocking Cars 140122 Retail and Distribution 143123 Changes to the Dealer Model 146124 The Changing Role of Fleets 148125 Delivering Integrated Services Means Rethinking Skills 150References 150
13 Impacts of Automobility 153131 Introduction 153132 Externalities and Automobility A Broad Perspective 153133 Death and Injuries from Road Traffic 154134 Environmental Impacts 156135 Toxic Emissions 157136 Current Concerns 159137 Role of the Consumer 160138 Conclusions 161References 161
14 Regulating the Car 163141 Regulating for Safety 163
1411 Development of Vehicle Standards 1641412 European Directives 1641413 US Federal Motor Vehicle Safety Standards 166
142 New Car Assessment Programmes 167143 Future Developments 168
1431 Impact of New Vehicle Technologies 169144 Legislating for a Cleaner Environment 170
1441 Fuel Economy Incentives and Disincentives 171145 Climate Change 172146 Future Developments 173References 174
15 Global versus Local Regionalism in a Global Industry 177151 The Old World 177152 Asia 179
1521 The Creation of Two Motoring Cultures India v China 179
Contents ix
153 Latin America 180154 Case Study On the Margins of Mass Production Australia 181References 184
16 The Impact of Electric Automobility 185161 Electric Vehicle Design 185
1611 Battery Electric Vehicles 1861612 Hybrid Electric Vehicles 186
162 Charging Infrastructure ndash UK Case Study 187163 Electric Vehicles in Europe 191
1631 Urban Electric Vehicles 1931632 Rural Electric Vehicles ndash The Welsh Case 193
164 Conclusions 197References 197
17 Alternatives to the Car 199171 Introduction 199172 Defining the Car Legislative and Market Boundaries 200173 The Hidden World of Non‐Car Automobility 202174 Transition by Stealth The 2W‐BEV 203
1741 3W‐BEVs 205175 Conclusions 206References 206
18 New Business Models and the Automotive Industry 209181 Introduction 209182 Fundamentals of the Existing Automotive Industry Business Model 210183 Pressures for Change on the Existing Business Model 212184 Incremental Business Model Evolution in the Automotive Industry 213185 Radical Business Model Innovation in the Automotive Industry 214186 Conclusions and Future Prospects for Business Model Innovation 216References 216
19 Future Challenges for Product and Industry 219191 Introduction 219192 New Engine Technologies 220193 Owning or Sharing 223194 The Future Car 223195 The Future Industry 224References 226
Index 229
Notes on Contributors
Editorsrsquo Profiles
Paul NieuwenhuisCentre for Automotive Industry Research and Electric Vehicle Centre of ExcellenceCardiff Business School Cardiff UniversityCardiff Wales UK
Dr Paul Nieuwenhuis is a senior lecturer at Cardiff University He joined the Centre for Automotive Industry Research (CAIR) at Cardiff University in 1991 and he became one of its two directors in 2006 He was a founder member of the ESRC Centre for Business Relationships Accountability Sustainability and Society (BRASS) and is an associate of the Sustainable Places Research Institute His main interests are historic and environmental and his publica-tions have been in these areas for example The Green Car Guide (1992) and Sustainable Automobility (2014) He also contributed to the Beaulieu Encyclopaedia of the Automobile (2000) which won a Cugnot Award from the Society of Automotive Historians Dr Nieuwenhuis has produced around 300 publications ranging from books and academic papers to conference papers for both academic and business audiences and journalistic pieces Dr Nieuwenhuis is a member of the Guild of Motoring Writers
Peter WellsCentre for Automotive Industry ResearchCardiff Business School Cardiff UniversityCardiff Wales UK
Peter Wells is a professor of sustainable business models at Cardiff Business School where his work has ranged across spatial industrial development economics organizational theory industrial ecology technological change transition theory business models and sustainability ndash all through an applied focus on the global automotive industry Professor Wells has over 550 publications reaching academia industry policy and stakeholder audiences through tradi-tional papers and books Internet publications and more recently webinars
xii Notes on Contributors
Contributorsrsquo Profiles
Katsuki AokiSchool of Business AdministrationMeiji UniversityTokyo Japan
Dr Katsuki Aoki is an associate professor in the School of Business at Meiji University in Japan He received his PhD in business administration from Meiji University in 1999 His main research interests include (i) international comparative studies on the implementation of kaizen activities (ii) the benefits and limitations of the keiretsu system (OEMndashsupplier rela-tionships) in the automotive industry and (iii) mass customization and order fulfilment systems in the automotive industry His paper entitled lsquoTransferring Japanese kaizen activities to over-seas plants in Chinarsquo was selected as one of the most prominent papers at the Emerald Literati Network Awards for Excellence 2009
Liana M CipciganElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Dr Liana M Cipcigan is a senior lecturer in the School of Engineering at Cardiff University leading the research of integration and control of EVs in electricity and transportation net-works She is a member of the Electric Vehicle Centre of Excellence (EVCE) Her current research activities are focused on smart grids distributed generation and EV integration and control She has significant research experience in EU projects FP6 More Microgrids FP7 Mobile Energy Resources in Grids of Electricity (MERGE) and ERDF ENEVATE She is the principal investigator (PI) of the EPSRC projects lsquoSmart Management of Electric Vehiclesrsquo and lsquoElectric Vehicle Value Chain ndash Bridging the Gapsrsquo She is participating in the UKERC project lsquoSmart Grids Scenarios for UKrsquo and TSB project lsquoAgent‐Based Controllers for Electric Vehicles and Micro‐generatorsrsquo She is a member of CEN‐CLC eMobility working group on Smart Charging and IEEE P20301 working group on standards for EVs and related infrastructure
Huw DaviesElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Dr Huw Davies is a lecturer in mechanical engineering at Cardiff University School of Engineering His background is in vehicle engineering and the development of vehicle safety standards He has advised the UK Department for Transport the European Commission and the Automotive Industry At Cardiff University he has developed the transport research theme Safety mobility and emissions are at its core The universal goals are zero collisions zero congestion and zero emissions Dr Davies leads Cardiff Universityrsquos Electric Vehicle Centre of Excellence
Notes on Contributors xiii
Ceri DonovanElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Ceri Donovan is a research assistant at Cardiff University School of Engineering and a member of Cardiff Universityrsquos Electric Vehicle Centre of Excellence She spent most of her time in recent years working on ENEVATE which aimed to accelerate the uptake of e‐mobility in northwest Europe This includes conducting research on all aspects of electric vehicles including market drivers and mobility concepts vehicle safety and regulations She previously worked in defence research primarily focusing on how to integrate new technology onto existing platforms from the procurement as well as the practical perspectives She has an MSc in biometry from the University of Reading
Patrick GalvinInnovation Policy LabMunk School of Global AffairsUniversity of TorontoToronto Ontario Canada
Patrick Galvin is a postdoctoral research fellow with the Innovation Policy Lab at the Munk School of Global Affairs where he is part of a research team investigating the dynamics of devel-oping a new automotive policy for the Canadian automotive industry for the twenty‐first century He is also working on the SSHRC‐funded Creating Digital Opportunity project Prior to his current appointment and after having obtained both his BA (honours) and MA degrees in political science Patrick spent several years working in the housing policy field with a number of consulting firms Patrick enrolled in the PhD programme in politics at the University of Exeter in England He completed his dissertation in November 2012 and he was formally awarded his PhD degree in July 2012 Patrickrsquos PhD dissertation built on his training in public policy and political economy by examining how local government in the city of Toronto develops its cluster‐related innovation policy It focuses on two empirical case studies to see how the city develops its cluster policy for two industrial sectors the aerospace sector and the fashion sector
Elena GoracinovaInnovation Policy LabMunk School of Global AffairsUniversity of TorontoToronto Ontario Canada
Elena Goracinova is a PhD candidate in political science working at the University of Torontorsquos Munk School of Global Affairs Innovation Policy Lab with Professor David Wolfe She received her masterrsquos degree in geography from the University of Toronto with a thesis on manufacturing in developed economies She is interested in studying the role of the state in economic policymaking Her current work focuses on the scope and effectiveness of advanced manufacturing policies in Canada
xiv Notes on Contributors
John HolmesProfessor EmeritusDepartment of GeographyQueenrsquos UniversityKingston Ontario Canada
John Holmes is a professor of geography at Queenrsquos University in Kingston Ontario Canada He received his BSc (honours) and MA (social science) degrees from the University of Sheffield and his PhD from Ohio State University He is also affiliated with the graduate industrial relations programme in the Queenrsquos School of Policy Studies His research focuses on geographical aspects of the political economy of contemporary economic and social change and in particular on the contemporary restructuring and reorganization of production and work in North America Empirical research and writing have focused primarily on the automobile industry For a list of selected publications see httpgeogqueensucafacultyholmesasp
Seunghwan KuFaculty of Business AdministrationKyoto Sangyo UniversityKyoto Japan
Seunghwan Ku is a professor of technology of management of the Faculty of Business Administration Kyoto Sangyo University He received his PhD (management of technology) from the University of Tokyo Japan His dissertation entitled lsquoThe Dynamism of Product Architecture Modularization Knowledge Integration Interfirm Linkagersquo was published by Mineruba Shobo a major publisher in Japan His recent publications include lsquoEconomic Analysis of ICT Innovationrsquo (2011) with M Fujiwara and lsquoShip Development and Shipbuilding Industry The Constraint of Large Artifact Development and the Uncertainty of Business Modelrsquo with H Kato in T Fujimoto ed lsquoCoping with Complex Artifactsrsquo (2013) His current research interests are (i) product development (ii) logistics and inter‐firm linkages (iii) prod-uct strategy and innovation and (iv) supplier system in Korean and Japanese industries the auto sector in particular
Maneesh KumarCentre for Automotive Industry ResearchCardiff Business School Cardiff UniversityCardiff Wales UK
Dr Maneesh Kumar is a senior lecturer at Cardiff Business School Cardiff University UK His research interests are primarily in the area of quality management Lean Six Sigma (LSS) and service recovery within manufacturing service and public sector organizations His recent research within Indian automotive industry focuses on understanding the best‐in‐class practices in diffusing LeanKaizen practice at supply network level and how automotive giants (OEMs) support and develop their suppliers (at Tier 1 and Tier 2 level) His research outputs include an edited book five edited conference proceedings three book chapters and over 80 peer‐reviewed
Notes on Contributors xv
journal publications and conference papers He has been involved in delivering LSS training up to black‐belt level and delivered several workshops on LSS application in several blue chip companies He is also a regular speaker at international conferences and seminars on LSS and process excellence
Xiao LinCentre for Automotive Industry ResearchLogistics and Operations Management SectionCardiff Business School Cardiff UniversityCardiff Wales UK
Xiao Lin is a PhD student in the logistics and operations management section at Cardiff Business School Cardiff University Her research interests include sustainability transition theory business models etc Her PhD research project is specifically focusing on the study of the future prospect for e‐bikes in sustainable mobility in China through various quantitative and qualitative analysis methods Xiao Lin is enthusiastic in contributing to the collaboration of the sustainable community She is a member of the organizing committee of the lsquoThe 2014 Global Research Forum Sustainable Production and Consumption Conferencersquo
Daniel NewmanElectric Vehicle Centre of Excellence and Sustainable Places Research InstituteCardiff UniversityCardiff Wales UK
Dr Daniel Newman is a research assistant at Cardiff Business School working within the Cardiff University Electric Vehicle Centre of Excellence His activities are primarily focused on the ENEVATE project conducting social research investigating the potential for increasing electric vehicle uptake in northwest Europe He was previously a research assistant at the University of Bristol Law School looking at environmental law and health and safety regulations Prior to this he completed an ESRC‐funded PhD in the University of Bristol Law School investigating the state of access to justice which was published as a book by Hart in 2012
Ben WallerSenior Researcher ICDPInternational Car Distribution Programme (ICDP)Cardiff Wales UK
Ben is a senior researcher at the International Car Distribution Programme (ICDP) and based in the United Kingdom ICDP is an international research‐based organization focused on auto-motive distribution including the supply and retailing of new and used vehicles aftersales network structures and operations Through research activities data services education events and consulting ICDP works with vehicle makers dealers suppliers and related orga-nizations to improve the quality and effectiveness of the distribution model Ben has presented to a range of international audiences from academic conferences to senior executives and also authors articles for business press and delivers executive teaching
xvi Notes on Contributors
Lorraine WhitmarshSchool of PsychologyCardiff UniversityCardiff Wales UK
Dr Lorraine Whitmarsh is an environmental psychologist specializing in perceptions and behaviour in relation to climate change energy and transport She is a senior lecturer in the School of Psychology at Cardiff University UK Lorraine is also a partner coordinator for the Tyndall Centre for Climate Change Research and a research associate of Cardiff Universityrsquos Centre for Business Relationships Accountability Sustainability and Society (BRASS) and the Sustainable Places Research Institute She sits on the Climate Change Commission for Wales advising Welsh government on transport and behaviour change
David A WolfeProfessor of Political Science andCo‐director Innovation Policy LabMunk School of Global Affairs University of TorontoToronto Ontario Canada
David A Wolfe is a professor of political science at UTM and a co‐director of the Innovation Policy Lab at the Munk School of Global Affairs in Toronto From 2009 to 2014 he was the Royal Bank Chair in Public and Economic Policy at the University of Toronto He is currently leading a major partnership grant on Creating Digital Opportunity Canadarsquos ICT Industry in Global Perspective funded by the Social Sciences and Humanities Research Council of Canada He is also participating in the project on manufacturing policy and the Canadian auto-motive sector based in the Automotive Policy Research Centre at McMaster University
Dimitrios XeniasSchool of PsychologyCardiff UniversityCardiff Wales UK
Dr Dimitrios Xenias is a social and environmental psychologist focusing on sustainable travel and associated behaviours such as mode choice on domestic energy‐related behaviours and on perceptions of climate change and its communication He is a research associate in the School of Psychology at Cardiff University UK Dimitrios is also an associate of the Tyndall Centre for Climate Change Research and a research associate of Cardiff Universityrsquos Centre for Business Relationships Accountability Sustainability and Society (BRASS) and the Sustainable Places Research Institute
Series Preface
The automotive industry is one of the largest manufacturing sectors in the global community Not only does it generate significant economic benefits to the worldrsquos economy but the auto-mobile is highly linked to a wide variety of international concerns such as energy consump-tion emissions trade and safety The primary objective of the Automotive Series is to publish practical and topical books for researchers and practitioners in the industry and postgraduatesadvanced undergraduates in automotive engineering
The series addresses new and emerging technologies in automotive engineering supporting the development of more fuel‐efficient safer and more environmentally friendly vehicles It covers a wide range of topics including design manufacture and operation and the intention is to provide a source of relevant information that will be of interest and benefit to people working in the field of automotive engineering
This book The Global Automotive Industry presents a broad spectrum view of the automo-tive sector from the technology industry and policy perspectives In the early chapters of the book an understanding of the industry from a social technical and economic perspective is presented This is followed by a discussion of the fabric of next‐generation vehicle systems as it is woven into a global society This discussion is expanded to include the economic impact of the automotive industrial sector on nationsrsquo economies from production operationsrevenue to job growth This text goes beyond regional thinking with respect to automotive production and discusses the historic expansion of automotive manufacturing giants in Korea and the new emerging markets in China and potentially India
The text finishes with an excellent overview of emerging technologies and economies that will be pivotal to the automotive sector These discussions are then presented in the light of new business models in a global marketplace and the impact of regulation on the automobile as well as its manufacture These topics are well integrated into the earlier topics presented in the book and make it a unique and valuable crosscutting source of information for the reader
The Global Automotive Industry integrates these topics in a unique and thought‐provoking manner that provides significant insight into global automotive production regulation and
xviii Series Preface
economic impact on society It is a forward‐thinking text that considers a wide variety of topics that will drive this major industry and the global economy for the foreseeable future It is written by highly recognized experts in the field and is a welcome addition to the Automotive Series
Thomas KurfessJuly 2015
Foreword
The global automotive industry is a complex and demanding topic for any book It is clear following my 30‐year career within the automotive industry that only a comparatively small number of individuals have a comprehensive understanding of a vehiclersquos full construction Even after decades of professional involvement it can be difficult for an individual to have a full appreciation of the subject and its international infrastructure and landscape
From pre‐production to the factory floor and the boardroom knowledge sharing is incred-ibly important to the future of the automotive engineering profession With future mobility solutions being vital to modern society and with the needs of each region differing depending on capabilities and production facilities communication amongst the worldrsquos engineers pro-vides a route to approaching and accommodating the global social political and economic considerations that the future will demand
FISITA has successfully coordinated global communications amongst its network of over 200 000 professional engineers from member societies in 37 countries for over 60 years This demonstrates the point through many generations that sharing of knowledge and ideas amongst an industry as large as automotive including engineers academics and executives is vital as it provides us all with the tools to contribute to a better future
As part of this journey global collaboration within the industry is also necessary in order to deliver a clear message to wider society that the automotive engineering profession is well placed to face the challenges of today and tomorrow
Paul Nieuwenhuis and Peter Wells have provided us with a very good starting point The authors are able to present the wide scope of the industry in a clear way whilst contributing a wealth of knowledge about the global automotive industry
Chris MasonCEO FISITA
The Global Automotive Industry First Edition Edited by Paul Nieuwenhuis and Peter Wells copy 2015 John Wiley amp Sons Ltd Published 2015 by John Wiley amp Sons Ltd
Introduction and OverviewPaul Nieuwenhuis1 and Peter Wells2
1 Centre for Automotive Industry Research and Electric Vehicle Centre of Excellence Cardiff Business School Cardiff University Cardiff Wales UK2 Centre for Automotive Industry Research Cardiff Business School Cardiff University Cardiff Wales UK
11 Introduction
It is an impossible task to do full justice in one book to the global automotive industry with the pervasive impact economic significance and cultural status that it brings As editors our task is as much one of selective omission as one of collation to create an account of the business of mak-ing selling and using cars that is both representative and yet respectful of the diversity we know to be a feature of the industry Moreover this is an industry in the midst of reinventing itself It had seemed to some both inside and outside the industry around the turn of the millennium that this was a lsquosunsetrsquo industry characterized by over‐capacity plant closures job losses declining profitability and a product that seemed unsuited to meeting the environmental and social chal-lenges arising from mass car ownership and use The combination of profound environmental pressures and endemic economic distress appeared to call into question the pre‐eminent position enjoyed by the car in providing for personal mobility and the viability of the industry behind this most contradictory of products These concerns came to a peak with the arrival of the global economic crisis around 2007ndash2008 which resulted in new car sales falling steeply in the established markets and investment freezing while the entire financial community held its collective breath to see whether the world would plunge into an economic abyss Those looking closely at urban developments and the changing cultural priorities of young people started to whisper about the concept of lsquopeak carrsquo in which the high tide of automobility had been reached in the saturated markets of the European Union North America Japan and Korea
Yet only a few years later the industry has reemerged burnished by the embrace of new technologies and with resurgent sales in the previously moribund West being more than matched by the frenetic growth of sales in China and elsewhere Regulatory interventions
1
2 The Global Automotive Industry
such as the European Union fleet average carbon emissions targets that were once seen as burdensome and punitive have arguably helped stimulate the technological renaissance of the industry alongside the realization that there might be other routes to profitability Later chap-ters in the book are more concerned with this recent period of transformation and the possible futures it portends Chapter 16 for example is about the impact of the electric vehicle while Chapter 18 links technology change with possible innovations in business models forced on the industry by such technological changes Chapter 19 is more speculative but offers up some signposts for the future of automobility and the automotive industry
This is not to say that the process of change has been without stress or consequence Restructuring of the industry has continued apace the merger of Chrysler and Fiat came as a consequence of several years of corporate turmoil while the rescue of PSA by the French government and by the Chinese company Dongfeng costs the Peugeot family their control over this long established business ndash the oldest in the industry The great expectations held for battery electric vehicles remain as yet largely unrealized despite the highly visible and expen-sive efforts of companies like Nissan Renault and BMW alongside the publicity‐garnering machine that is Tesla In the meantime high‐profile failures such as the battery swap business Better Place serve as stark reminders that attempts to reinvent this industry especially by new entrants are fraught with hazard At the same time markets in the European Union have not really recovered to pre‐crisis levels and perhaps never will
So despite an apparent lsquobusiness‐as‐usualrsquo attitude permeating the automotive industry at the moment in reality it is subject to potentially radical change Only a few years ago we saw two of the worldrsquos largest car manufacturers General Motors and Chrysler on the brink of collapse Having decided both were lsquotoo big to failrsquo they had to be bailed out by the American tax‐payer Ford managed without direct government support but it is nevertheless quite clear that the collapse of the supply base that would have resulted from a collapse of both their key domestic competitors GM and Chrysler would also have dragged down Ford in due course Within a matter of months the worldrsquos most prominent car industry and the oldest mass production car industry could have disappeared only intervention from the public sector saved this key compo-nent of the private sector underlining that apart from anything else the close synergies and intertwined relationships continue to exist between the private and public sectors in developed countries (Mazzucato 2013) This highlights not only the weaknesses inherent in the close links between the financial and car systems but also indicates that the current mass production system whether seen as Fordist or Buddist (see below) may well be due for a rethink in several respects
In Europe the apparent success of Germany more recently the UK automotive industry is easily misunderstood leading perhaps to overconfidence but do note that the secret of success in Europe is largely confined to the more upmarket segments with the Germans the primary beneficiaries and that this success is very reliant on demand from Asia particularly China it has therefore made Europe ndash and also the United States particularly GM ndash very dependent on that far from stable market as also outlined in more detail in Chapter 10 At the same time pressures to make the car more environmentally compatible as we see it have not only led to cars with much less harmful tailpipe emissions but the more recent pressure to reduce the carbon footprint of cars particularly focused on their emissions of the greenhouse gas carbon dioxide has the potential to radically reshape the industry and its products These regulatory pressures are reviewed in Chapter 14 although the potential impact of this agenda is not yet fully understood but it has already led to a new wave of alternative powertrain vehicles in the market ranging from early petrol‐electric hybrids ndash including the now iconic Toyota Prius ndash via
Introduction and Overview 3
so‐called range‐extended and plug‐in hybrids such as the GM Volt and Ampera to full battery‐electric vehicles such as the Nissan Leaf Renault Zoe and Tesla Model S Such developments as well as the introduction of the even more radical BMW i3 which not only introduces a full battery‐electric powertrain but also houses this within a radical departure from the tried and tested lsquoBuddistrsquo (see Chapter 5) all‐steel body in using a carbon fibre body on an aluminium chassis are clear signs that business‐as‐usual is steadily being undermined even from within the established industry
Despite the size of the industry car making is in reality a very precarious business In its present form it lacks resilience it is not sustainable This is true not just in terms of environmental sustainability where it clearly is not measuring up but even in terms of basic economic sustainability Yet this industry is still crucially important representing a significant part of the economy in many industrialized countries as well as many newly industrializing economies notably China In addition the car‐based transport system or lsquoregimersquo (Geels et al 2012) which extends well beyond the industry that makes cars to the way in which auto-mobility has become integrated in our societies and cultures has become so embedded that its removal would lead to widespread social and economic crisis
In some regards therefore this book may be a testimony to a dying era as much as a hymnal to a new one Thus far the automotive industry has managed to contain the pressures for change both economic and environmental within the broad ambit of the long‐standing business model of the mainstream vehicle manufacturers In parallel those purchasing and using cars in the traditional manner have remained by far the majority compared with more innovative solutions such as car clubs city car sharing schemes and other alternatives that might presage the end of established automobility cultures The question is whether the collective and cumulative impact of all the new developments sweeping through the industry will be sufficient to herald the arrival of a new lsquoautomotive ecosystemrsquo as some have termed it or lsquoregimersquo according to others and one in which the dominance of the established vehicle manufacturers and their entrenched supply chains is challenged by a new order of communi-cations and mobility providers Some caution on these issues is urged here The automotive industry is not immune to hype cycles or the fevered imaginations of those professional change‐mongers with a vested interest in fermenting and emphasizing the new over the continuous
12 Continuity and Change
The book as a whole therefore represents an attempt to capture continuity and change in the global automotive industry this theme is brought to the fore in the first main chapter of the book Chapter 2 as change is very much a feature of the current phase of the automotive system Change of course needs to be seen in historical perspective and as such many of the chapters offer up a historical narrative that builds a temporal dynamic into the account of the subject under consideration There is some need in seeking to understand the structures and practices of the present to delve into the past If nothing else path dependency theory tells us that many decisions are nonlinear irreversible steps that result in distinct historical outcomes bounded by time and place As we have sought to delineate elsewhere the cluster of innovations that created the template for the mass production automotive industry occurred largely in the United States in the early years of the twentieth century the Ford moving assembly line with standardized and inter‐changeable parts the Budd all‐steel body that could be stamped
4 The Global Automotive Industry
welded and painted and the Sloan multi‐brand company with marketing innovations such as consumer credit and annual model changes these developments are outlined in Chapter 5 Despite many years of incremental change the basic architecture of the industry remains in place That such durability is evident speaks volumes for the scope for productivity improve-ment within this basic architecture over many decades and the efficacy of the system as a whole in terms of matching the imperatives of production economics to the demands of the market For this reason key early chapters in the book for example Chapters 3 4 5 and 6 are about the production system and the market for cars There is no subscription here to the simple neoclassical economics assumption that lsquoconsumersrsquo demand and lsquoproducersrsquo provide Rather there is a continuing dynamic tension between supply and demand sides that is never entirely resolved
13 Overview
The chapters in this book are thus essentially an attempt to take stock of the industry in its present state of a well‐established industry on the verge of potentially radical change tracking some of its history ndash trying to answer the question of how did we get here ndash assessing key aspects of its current state while also plotting some possible futures for the industry and its products This book does not seek to present chapters that are held together by a common the-oretical thread Such works can be tremendously informative and insightful (see Geels et al 2012) but of course tend to place primary emphasis on the question of theoretical coherence Rather the approach here has been more agnostic in theoretical terms and has been to seek insights and individual views by those who are established experts in their fields and who are known for their knowledge of the automotive industry (or a specific aspect of it) alongside their particular theoretical or methodological frameworks Each chapter is thus a cameo able to stand alone as a concise insight into one dimension of this multi‐faceted industry but also serves as a piece in the jigsaw that describes and explains how this industry really works
There are some gaps of course It is not possible to give consideration to all the countries producing cars and the unique contexts within which they operate The salience of the lsquovari-eties of capitalismrsquo school of thought (see Section 23) is acknowledged here and some com-parative chapters are pertinent to this school notably those on labourndashmanagement relations in North America and Japan (Chapters 7 and 8 respectively) While the question of labour relations in Japan has remained largely immune to external influence (notwithstanding the substantial impact of Renault on operations at Nissan and the rather lesser impact of Ford on Mazda) the story in North America has a strong thread in which lsquoJapanizationrsquo has been highly significant Chapters 9 10 and 11 cover the broad sweep of the automotive industry in Asia highlighting South Korea China and India respectively ndash both Korea and India have become comparatively neglected in view of the immense attention directed at China Interestingly both these countries are more than passive recipients of automobility and can claim to be home to significant companies within the industry of the modern era while also representing unique markets
An apparent gap in the account includes a chapter that explicitly deals with the global supply chain of components and raw materials to the vehicle manufacturers ndash where typically up to 85 of the ex‐works value of a new car is accounted for by bought in components and materials The theme of supply chain management is an important facet of the industry but
The Global auTomoTive indusTry
automotive series
series editor Thomas Kurfess
The Global Automotive Industry Nieuwenhuis and Wells September 2015
Vehicle Dynamics Meywerk May 2015
Vehicle Gearbox Noise and Vibration Measurement Signal Analysis Signal Processing and Noise Reduction Measures
Tůma April 2014
Modeling and Control of Engines and Drivelines
Eriksson and Nielsen April 2014
Modelling Simulation and Control of Two‐Wheeled Vehicles
Tanelli Corno and Savaresi
March 2014
Advanced Composite Materials for Automotive Applications Structural Integrity and Crashworthiness
Elmarakbi December 2013
Guide to Load Analysis for Durability in Vehicle Engineering
Johannesson and Speckert
November 2013
The Global auTomoTive indusTryedited by
Paul nieuwenhuisCardiff University UK
Peter WellsCardiff University UK
This edition first published 2015copy 2015 John Wiley amp Sons Ltd
Registered OfficeJohn Wiley amp Sons Ltd The Atrium Southern Gate Chichester West Sussex PO19 8SQ United Kingdom
For details of our global editorial offices for customer services and for information about how to apply for permission to reuse the copyright material in this book please see our website at wwwwileycom
The right of the author to be identified as the author of this work has been asserted in accordance with the Copyright Designs and Patents Act 1988
All rights reserved No part of this publication may be reproduced stored in a retrieval system or transmitted in any form or by any means electronic mechanical photocopying recording or otherwise except as permitted by the UK Copyright Designs and Patents Act 1988 without the prior permission of the publisher
Wiley also publishes its books in a variety of electronic formats Some content that appears in print may not be available in electronic books
Designations used by companies to distinguish their products are often claimed as trademarks All brand names and product names used in this book are trade names service marks trademarks or registered trademarks of their respective owners The publisher is not associated with any product or vendor mentioned in this book
Limit of LiabilityDisclaimer of Warranty While the publisher and author have used their best efforts in preparing this book they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose It is sold on the understanding that the publisher is not engaged in rendering professional services and neither the publisher nor the author shall be liable for damages arising herefrom If professional advice or other expert assistance is required the services of a competent professional should be sought
Library of Congress Cataloging‐in‐Publication Data applied for
ISBN 9781118802397
A catalogue record for this book is available from the British Library
Set in 1012pt Times by SPi Global Pondicherry India
1 2015
Contents
Notes on Contributors xiSeries Preface xviiForeword xix
1 Introduction and Overview 111 Introduction 112 Continuity and Change 313 Overview 4References 6
2 Understanding Change and Difference in the Global Automotive Industry 721 Introduction 722 Socio‐Technical Transitions 923 Varieties of Capitalism 1224 Global Value Chains 1425 Change in the Automotive Industry A Synthesis 1526 Conclusions 16References 17
3 The Market for New Cars 1931 Introduction 1932 Market Fragmentation and Lack of Industry Consolidation 2033 Geography of Markets 2234 Mobility Services and the Emergent Automotive Ecosystem 2635 Conclusions 27References 27
4 Understanding People and Cars 2941 Influences on Travel Choices 2942 Influences on Vehicle Choice 33
vi Contents
43 Acceptability of Transport Policies and New Technologies 3444 Conclusions 36References 37
5 Car Manufacturing 4151 Background and Prehistory 4152 Ford Budd and Sloan The History of Mass Car Production 4253 Monocoque Construction Buddrsquos Impact on Car Design 4454 Toyotism 4555 Buddism in Crisis 4656 Lean v Agile 4757 Conclusions 49References 50
6 Recent Trends in Manufacturing Innovation Policy for the Automotive Sector A Survey of the United States Mexico European Union Germany and Spain 5361 Introduction 5362 A Changing Manufacturing Landscape 5563 Restructuring in the Automotive Industry 5664 Automotive Policies in the United States Mexico EU Germany and Spain 57
641 United States 57642 Mexico 59643 European Union 60644 Germany 61645 Spain 62
65 Conclusion 63References 64
7 Labour Relations and Human Resource Management in the Automotive Industry North American Perspectives 6771 Introduction 6772 From Fordist Production to Lean Production The Evolution of
Labour RelationsHuman Resource Management Systems in the North American Auto Industry Prior to 2000 70721 The Classic Fordist Industrial Relations System in the
US and Canadian Automotive Industries 70722 The Impact of Japanese Transplants and Lean Production
Methods on the North American Automotive Labour Relations System 72
73 Developments in North American Auto Labour Relations Since 2000 74731 Concession Bargaining 2003ndash2008 74732 The Impact of the Global Financial Crisis 76733 Post‐Crisis Developments 78
74 Conclusion 78References 80
Contents vii
8 Labour Relations and HRM in the Automotive Industry Japanese Impacts 8381 Introduction The Japanese Car Industry and Toyota Production System 8382 TPS and Japanese HRM 8583 lsquoJapanizationrsquo of the Global Automotive Industry 8884 Changes in Japanese Labour Relations and HRM 9085 Concluding Remarks 92References 93
9 The Rise of South Korean (or Korean) Automobile Industry 9591 Introduction 9592 A Brief History of South Korean Automobile Industry
and the Performance of HMC 96921 Brief History of South Korean Automobile Industry 96922 The Change in Performance of HMG 100
93 Considering Five Success Factors of HMC 102931 Vertical Integration 102932 Modularization of Production and Standardization 102933 Expansion of Overseas Production Capabilities
in Emerging Markets 104934 Product Strategy 104935 Quality Focused and Design Focused Management 105
94 Characteristics of HRM in HMC and Effects on the Management System 106941 Militant Trade Union Movement and Confrontational
Labour‐Management Relations 106942 Fragmentation and Automation of Work 106943 Internal Competition Systems 107
95 Conclusion New Challenges for the Korean Auto Makers as Multinational Enterprises 107
References 108
10 Chinarsquos Car Industry 109101 Background 109102 Pre‐History 110103 Chinarsquos Car Industry 111104 The Role of Government 114
1041 Traditional Automobile Industries 114105 New Energy Vehicles 118
1051 RampD Support 1181052 Industrialization 119
106 Bringing NEVs to Market 1211061 Demonstration and Pilot Projects Strategic Niche Management 1211062 Financial Incentives 122
107 Conclusions 124References 124
viii Contents
11 Forging Ahead or Stagnating An Analysis of Indian Automotive Industry 127111 Introduction 127112 History of the Indian Automotive Industry 128113 Statistics on Automobile Industry Performance 132114 Stagnation of Industry in 2013ndash2014 133115 Factors Critical to the Growth of the Indian Automotive Industry 133116 Challenges and Future of Indian Automotive Industry 134References 136
12 From Factory to End‐User An Overview of Automotive Distribution and the Challenges of Disruptive Change 139121 Shipping and Stocking Cars 140122 Retail and Distribution 143123 Changes to the Dealer Model 146124 The Changing Role of Fleets 148125 Delivering Integrated Services Means Rethinking Skills 150References 150
13 Impacts of Automobility 153131 Introduction 153132 Externalities and Automobility A Broad Perspective 153133 Death and Injuries from Road Traffic 154134 Environmental Impacts 156135 Toxic Emissions 157136 Current Concerns 159137 Role of the Consumer 160138 Conclusions 161References 161
14 Regulating the Car 163141 Regulating for Safety 163
1411 Development of Vehicle Standards 1641412 European Directives 1641413 US Federal Motor Vehicle Safety Standards 166
142 New Car Assessment Programmes 167143 Future Developments 168
1431 Impact of New Vehicle Technologies 169144 Legislating for a Cleaner Environment 170
1441 Fuel Economy Incentives and Disincentives 171145 Climate Change 172146 Future Developments 173References 174
15 Global versus Local Regionalism in a Global Industry 177151 The Old World 177152 Asia 179
1521 The Creation of Two Motoring Cultures India v China 179
Contents ix
153 Latin America 180154 Case Study On the Margins of Mass Production Australia 181References 184
16 The Impact of Electric Automobility 185161 Electric Vehicle Design 185
1611 Battery Electric Vehicles 1861612 Hybrid Electric Vehicles 186
162 Charging Infrastructure ndash UK Case Study 187163 Electric Vehicles in Europe 191
1631 Urban Electric Vehicles 1931632 Rural Electric Vehicles ndash The Welsh Case 193
164 Conclusions 197References 197
17 Alternatives to the Car 199171 Introduction 199172 Defining the Car Legislative and Market Boundaries 200173 The Hidden World of Non‐Car Automobility 202174 Transition by Stealth The 2W‐BEV 203
1741 3W‐BEVs 205175 Conclusions 206References 206
18 New Business Models and the Automotive Industry 209181 Introduction 209182 Fundamentals of the Existing Automotive Industry Business Model 210183 Pressures for Change on the Existing Business Model 212184 Incremental Business Model Evolution in the Automotive Industry 213185 Radical Business Model Innovation in the Automotive Industry 214186 Conclusions and Future Prospects for Business Model Innovation 216References 216
19 Future Challenges for Product and Industry 219191 Introduction 219192 New Engine Technologies 220193 Owning or Sharing 223194 The Future Car 223195 The Future Industry 224References 226
Index 229
Notes on Contributors
Editorsrsquo Profiles
Paul NieuwenhuisCentre for Automotive Industry Research and Electric Vehicle Centre of ExcellenceCardiff Business School Cardiff UniversityCardiff Wales UK
Dr Paul Nieuwenhuis is a senior lecturer at Cardiff University He joined the Centre for Automotive Industry Research (CAIR) at Cardiff University in 1991 and he became one of its two directors in 2006 He was a founder member of the ESRC Centre for Business Relationships Accountability Sustainability and Society (BRASS) and is an associate of the Sustainable Places Research Institute His main interests are historic and environmental and his publica-tions have been in these areas for example The Green Car Guide (1992) and Sustainable Automobility (2014) He also contributed to the Beaulieu Encyclopaedia of the Automobile (2000) which won a Cugnot Award from the Society of Automotive Historians Dr Nieuwenhuis has produced around 300 publications ranging from books and academic papers to conference papers for both academic and business audiences and journalistic pieces Dr Nieuwenhuis is a member of the Guild of Motoring Writers
Peter WellsCentre for Automotive Industry ResearchCardiff Business School Cardiff UniversityCardiff Wales UK
Peter Wells is a professor of sustainable business models at Cardiff Business School where his work has ranged across spatial industrial development economics organizational theory industrial ecology technological change transition theory business models and sustainability ndash all through an applied focus on the global automotive industry Professor Wells has over 550 publications reaching academia industry policy and stakeholder audiences through tradi-tional papers and books Internet publications and more recently webinars
xii Notes on Contributors
Contributorsrsquo Profiles
Katsuki AokiSchool of Business AdministrationMeiji UniversityTokyo Japan
Dr Katsuki Aoki is an associate professor in the School of Business at Meiji University in Japan He received his PhD in business administration from Meiji University in 1999 His main research interests include (i) international comparative studies on the implementation of kaizen activities (ii) the benefits and limitations of the keiretsu system (OEMndashsupplier rela-tionships) in the automotive industry and (iii) mass customization and order fulfilment systems in the automotive industry His paper entitled lsquoTransferring Japanese kaizen activities to over-seas plants in Chinarsquo was selected as one of the most prominent papers at the Emerald Literati Network Awards for Excellence 2009
Liana M CipciganElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Dr Liana M Cipcigan is a senior lecturer in the School of Engineering at Cardiff University leading the research of integration and control of EVs in electricity and transportation net-works She is a member of the Electric Vehicle Centre of Excellence (EVCE) Her current research activities are focused on smart grids distributed generation and EV integration and control She has significant research experience in EU projects FP6 More Microgrids FP7 Mobile Energy Resources in Grids of Electricity (MERGE) and ERDF ENEVATE She is the principal investigator (PI) of the EPSRC projects lsquoSmart Management of Electric Vehiclesrsquo and lsquoElectric Vehicle Value Chain ndash Bridging the Gapsrsquo She is participating in the UKERC project lsquoSmart Grids Scenarios for UKrsquo and TSB project lsquoAgent‐Based Controllers for Electric Vehicles and Micro‐generatorsrsquo She is a member of CEN‐CLC eMobility working group on Smart Charging and IEEE P20301 working group on standards for EVs and related infrastructure
Huw DaviesElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Dr Huw Davies is a lecturer in mechanical engineering at Cardiff University School of Engineering His background is in vehicle engineering and the development of vehicle safety standards He has advised the UK Department for Transport the European Commission and the Automotive Industry At Cardiff University he has developed the transport research theme Safety mobility and emissions are at its core The universal goals are zero collisions zero congestion and zero emissions Dr Davies leads Cardiff Universityrsquos Electric Vehicle Centre of Excellence
Notes on Contributors xiii
Ceri DonovanElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Ceri Donovan is a research assistant at Cardiff University School of Engineering and a member of Cardiff Universityrsquos Electric Vehicle Centre of Excellence She spent most of her time in recent years working on ENEVATE which aimed to accelerate the uptake of e‐mobility in northwest Europe This includes conducting research on all aspects of electric vehicles including market drivers and mobility concepts vehicle safety and regulations She previously worked in defence research primarily focusing on how to integrate new technology onto existing platforms from the procurement as well as the practical perspectives She has an MSc in biometry from the University of Reading
Patrick GalvinInnovation Policy LabMunk School of Global AffairsUniversity of TorontoToronto Ontario Canada
Patrick Galvin is a postdoctoral research fellow with the Innovation Policy Lab at the Munk School of Global Affairs where he is part of a research team investigating the dynamics of devel-oping a new automotive policy for the Canadian automotive industry for the twenty‐first century He is also working on the SSHRC‐funded Creating Digital Opportunity project Prior to his current appointment and after having obtained both his BA (honours) and MA degrees in political science Patrick spent several years working in the housing policy field with a number of consulting firms Patrick enrolled in the PhD programme in politics at the University of Exeter in England He completed his dissertation in November 2012 and he was formally awarded his PhD degree in July 2012 Patrickrsquos PhD dissertation built on his training in public policy and political economy by examining how local government in the city of Toronto develops its cluster‐related innovation policy It focuses on two empirical case studies to see how the city develops its cluster policy for two industrial sectors the aerospace sector and the fashion sector
Elena GoracinovaInnovation Policy LabMunk School of Global AffairsUniversity of TorontoToronto Ontario Canada
Elena Goracinova is a PhD candidate in political science working at the University of Torontorsquos Munk School of Global Affairs Innovation Policy Lab with Professor David Wolfe She received her masterrsquos degree in geography from the University of Toronto with a thesis on manufacturing in developed economies She is interested in studying the role of the state in economic policymaking Her current work focuses on the scope and effectiveness of advanced manufacturing policies in Canada
xiv Notes on Contributors
John HolmesProfessor EmeritusDepartment of GeographyQueenrsquos UniversityKingston Ontario Canada
John Holmes is a professor of geography at Queenrsquos University in Kingston Ontario Canada He received his BSc (honours) and MA (social science) degrees from the University of Sheffield and his PhD from Ohio State University He is also affiliated with the graduate industrial relations programme in the Queenrsquos School of Policy Studies His research focuses on geographical aspects of the political economy of contemporary economic and social change and in particular on the contemporary restructuring and reorganization of production and work in North America Empirical research and writing have focused primarily on the automobile industry For a list of selected publications see httpgeogqueensucafacultyholmesasp
Seunghwan KuFaculty of Business AdministrationKyoto Sangyo UniversityKyoto Japan
Seunghwan Ku is a professor of technology of management of the Faculty of Business Administration Kyoto Sangyo University He received his PhD (management of technology) from the University of Tokyo Japan His dissertation entitled lsquoThe Dynamism of Product Architecture Modularization Knowledge Integration Interfirm Linkagersquo was published by Mineruba Shobo a major publisher in Japan His recent publications include lsquoEconomic Analysis of ICT Innovationrsquo (2011) with M Fujiwara and lsquoShip Development and Shipbuilding Industry The Constraint of Large Artifact Development and the Uncertainty of Business Modelrsquo with H Kato in T Fujimoto ed lsquoCoping with Complex Artifactsrsquo (2013) His current research interests are (i) product development (ii) logistics and inter‐firm linkages (iii) prod-uct strategy and innovation and (iv) supplier system in Korean and Japanese industries the auto sector in particular
Maneesh KumarCentre for Automotive Industry ResearchCardiff Business School Cardiff UniversityCardiff Wales UK
Dr Maneesh Kumar is a senior lecturer at Cardiff Business School Cardiff University UK His research interests are primarily in the area of quality management Lean Six Sigma (LSS) and service recovery within manufacturing service and public sector organizations His recent research within Indian automotive industry focuses on understanding the best‐in‐class practices in diffusing LeanKaizen practice at supply network level and how automotive giants (OEMs) support and develop their suppliers (at Tier 1 and Tier 2 level) His research outputs include an edited book five edited conference proceedings three book chapters and over 80 peer‐reviewed
Notes on Contributors xv
journal publications and conference papers He has been involved in delivering LSS training up to black‐belt level and delivered several workshops on LSS application in several blue chip companies He is also a regular speaker at international conferences and seminars on LSS and process excellence
Xiao LinCentre for Automotive Industry ResearchLogistics and Operations Management SectionCardiff Business School Cardiff UniversityCardiff Wales UK
Xiao Lin is a PhD student in the logistics and operations management section at Cardiff Business School Cardiff University Her research interests include sustainability transition theory business models etc Her PhD research project is specifically focusing on the study of the future prospect for e‐bikes in sustainable mobility in China through various quantitative and qualitative analysis methods Xiao Lin is enthusiastic in contributing to the collaboration of the sustainable community She is a member of the organizing committee of the lsquoThe 2014 Global Research Forum Sustainable Production and Consumption Conferencersquo
Daniel NewmanElectric Vehicle Centre of Excellence and Sustainable Places Research InstituteCardiff UniversityCardiff Wales UK
Dr Daniel Newman is a research assistant at Cardiff Business School working within the Cardiff University Electric Vehicle Centre of Excellence His activities are primarily focused on the ENEVATE project conducting social research investigating the potential for increasing electric vehicle uptake in northwest Europe He was previously a research assistant at the University of Bristol Law School looking at environmental law and health and safety regulations Prior to this he completed an ESRC‐funded PhD in the University of Bristol Law School investigating the state of access to justice which was published as a book by Hart in 2012
Ben WallerSenior Researcher ICDPInternational Car Distribution Programme (ICDP)Cardiff Wales UK
Ben is a senior researcher at the International Car Distribution Programme (ICDP) and based in the United Kingdom ICDP is an international research‐based organization focused on auto-motive distribution including the supply and retailing of new and used vehicles aftersales network structures and operations Through research activities data services education events and consulting ICDP works with vehicle makers dealers suppliers and related orga-nizations to improve the quality and effectiveness of the distribution model Ben has presented to a range of international audiences from academic conferences to senior executives and also authors articles for business press and delivers executive teaching
xvi Notes on Contributors
Lorraine WhitmarshSchool of PsychologyCardiff UniversityCardiff Wales UK
Dr Lorraine Whitmarsh is an environmental psychologist specializing in perceptions and behaviour in relation to climate change energy and transport She is a senior lecturer in the School of Psychology at Cardiff University UK Lorraine is also a partner coordinator for the Tyndall Centre for Climate Change Research and a research associate of Cardiff Universityrsquos Centre for Business Relationships Accountability Sustainability and Society (BRASS) and the Sustainable Places Research Institute She sits on the Climate Change Commission for Wales advising Welsh government on transport and behaviour change
David A WolfeProfessor of Political Science andCo‐director Innovation Policy LabMunk School of Global Affairs University of TorontoToronto Ontario Canada
David A Wolfe is a professor of political science at UTM and a co‐director of the Innovation Policy Lab at the Munk School of Global Affairs in Toronto From 2009 to 2014 he was the Royal Bank Chair in Public and Economic Policy at the University of Toronto He is currently leading a major partnership grant on Creating Digital Opportunity Canadarsquos ICT Industry in Global Perspective funded by the Social Sciences and Humanities Research Council of Canada He is also participating in the project on manufacturing policy and the Canadian auto-motive sector based in the Automotive Policy Research Centre at McMaster University
Dimitrios XeniasSchool of PsychologyCardiff UniversityCardiff Wales UK
Dr Dimitrios Xenias is a social and environmental psychologist focusing on sustainable travel and associated behaviours such as mode choice on domestic energy‐related behaviours and on perceptions of climate change and its communication He is a research associate in the School of Psychology at Cardiff University UK Dimitrios is also an associate of the Tyndall Centre for Climate Change Research and a research associate of Cardiff Universityrsquos Centre for Business Relationships Accountability Sustainability and Society (BRASS) and the Sustainable Places Research Institute
Series Preface
The automotive industry is one of the largest manufacturing sectors in the global community Not only does it generate significant economic benefits to the worldrsquos economy but the auto-mobile is highly linked to a wide variety of international concerns such as energy consump-tion emissions trade and safety The primary objective of the Automotive Series is to publish practical and topical books for researchers and practitioners in the industry and postgraduatesadvanced undergraduates in automotive engineering
The series addresses new and emerging technologies in automotive engineering supporting the development of more fuel‐efficient safer and more environmentally friendly vehicles It covers a wide range of topics including design manufacture and operation and the intention is to provide a source of relevant information that will be of interest and benefit to people working in the field of automotive engineering
This book The Global Automotive Industry presents a broad spectrum view of the automo-tive sector from the technology industry and policy perspectives In the early chapters of the book an understanding of the industry from a social technical and economic perspective is presented This is followed by a discussion of the fabric of next‐generation vehicle systems as it is woven into a global society This discussion is expanded to include the economic impact of the automotive industrial sector on nationsrsquo economies from production operationsrevenue to job growth This text goes beyond regional thinking with respect to automotive production and discusses the historic expansion of automotive manufacturing giants in Korea and the new emerging markets in China and potentially India
The text finishes with an excellent overview of emerging technologies and economies that will be pivotal to the automotive sector These discussions are then presented in the light of new business models in a global marketplace and the impact of regulation on the automobile as well as its manufacture These topics are well integrated into the earlier topics presented in the book and make it a unique and valuable crosscutting source of information for the reader
The Global Automotive Industry integrates these topics in a unique and thought‐provoking manner that provides significant insight into global automotive production regulation and
xviii Series Preface
economic impact on society It is a forward‐thinking text that considers a wide variety of topics that will drive this major industry and the global economy for the foreseeable future It is written by highly recognized experts in the field and is a welcome addition to the Automotive Series
Thomas KurfessJuly 2015
Foreword
The global automotive industry is a complex and demanding topic for any book It is clear following my 30‐year career within the automotive industry that only a comparatively small number of individuals have a comprehensive understanding of a vehiclersquos full construction Even after decades of professional involvement it can be difficult for an individual to have a full appreciation of the subject and its international infrastructure and landscape
From pre‐production to the factory floor and the boardroom knowledge sharing is incred-ibly important to the future of the automotive engineering profession With future mobility solutions being vital to modern society and with the needs of each region differing depending on capabilities and production facilities communication amongst the worldrsquos engineers pro-vides a route to approaching and accommodating the global social political and economic considerations that the future will demand
FISITA has successfully coordinated global communications amongst its network of over 200 000 professional engineers from member societies in 37 countries for over 60 years This demonstrates the point through many generations that sharing of knowledge and ideas amongst an industry as large as automotive including engineers academics and executives is vital as it provides us all with the tools to contribute to a better future
As part of this journey global collaboration within the industry is also necessary in order to deliver a clear message to wider society that the automotive engineering profession is well placed to face the challenges of today and tomorrow
Paul Nieuwenhuis and Peter Wells have provided us with a very good starting point The authors are able to present the wide scope of the industry in a clear way whilst contributing a wealth of knowledge about the global automotive industry
Chris MasonCEO FISITA
The Global Automotive Industry First Edition Edited by Paul Nieuwenhuis and Peter Wells copy 2015 John Wiley amp Sons Ltd Published 2015 by John Wiley amp Sons Ltd
Introduction and OverviewPaul Nieuwenhuis1 and Peter Wells2
1 Centre for Automotive Industry Research and Electric Vehicle Centre of Excellence Cardiff Business School Cardiff University Cardiff Wales UK2 Centre for Automotive Industry Research Cardiff Business School Cardiff University Cardiff Wales UK
11 Introduction
It is an impossible task to do full justice in one book to the global automotive industry with the pervasive impact economic significance and cultural status that it brings As editors our task is as much one of selective omission as one of collation to create an account of the business of mak-ing selling and using cars that is both representative and yet respectful of the diversity we know to be a feature of the industry Moreover this is an industry in the midst of reinventing itself It had seemed to some both inside and outside the industry around the turn of the millennium that this was a lsquosunsetrsquo industry characterized by over‐capacity plant closures job losses declining profitability and a product that seemed unsuited to meeting the environmental and social chal-lenges arising from mass car ownership and use The combination of profound environmental pressures and endemic economic distress appeared to call into question the pre‐eminent position enjoyed by the car in providing for personal mobility and the viability of the industry behind this most contradictory of products These concerns came to a peak with the arrival of the global economic crisis around 2007ndash2008 which resulted in new car sales falling steeply in the established markets and investment freezing while the entire financial community held its collective breath to see whether the world would plunge into an economic abyss Those looking closely at urban developments and the changing cultural priorities of young people started to whisper about the concept of lsquopeak carrsquo in which the high tide of automobility had been reached in the saturated markets of the European Union North America Japan and Korea
Yet only a few years later the industry has reemerged burnished by the embrace of new technologies and with resurgent sales in the previously moribund West being more than matched by the frenetic growth of sales in China and elsewhere Regulatory interventions
1
2 The Global Automotive Industry
such as the European Union fleet average carbon emissions targets that were once seen as burdensome and punitive have arguably helped stimulate the technological renaissance of the industry alongside the realization that there might be other routes to profitability Later chap-ters in the book are more concerned with this recent period of transformation and the possible futures it portends Chapter 16 for example is about the impact of the electric vehicle while Chapter 18 links technology change with possible innovations in business models forced on the industry by such technological changes Chapter 19 is more speculative but offers up some signposts for the future of automobility and the automotive industry
This is not to say that the process of change has been without stress or consequence Restructuring of the industry has continued apace the merger of Chrysler and Fiat came as a consequence of several years of corporate turmoil while the rescue of PSA by the French government and by the Chinese company Dongfeng costs the Peugeot family their control over this long established business ndash the oldest in the industry The great expectations held for battery electric vehicles remain as yet largely unrealized despite the highly visible and expen-sive efforts of companies like Nissan Renault and BMW alongside the publicity‐garnering machine that is Tesla In the meantime high‐profile failures such as the battery swap business Better Place serve as stark reminders that attempts to reinvent this industry especially by new entrants are fraught with hazard At the same time markets in the European Union have not really recovered to pre‐crisis levels and perhaps never will
So despite an apparent lsquobusiness‐as‐usualrsquo attitude permeating the automotive industry at the moment in reality it is subject to potentially radical change Only a few years ago we saw two of the worldrsquos largest car manufacturers General Motors and Chrysler on the brink of collapse Having decided both were lsquotoo big to failrsquo they had to be bailed out by the American tax‐payer Ford managed without direct government support but it is nevertheless quite clear that the collapse of the supply base that would have resulted from a collapse of both their key domestic competitors GM and Chrysler would also have dragged down Ford in due course Within a matter of months the worldrsquos most prominent car industry and the oldest mass production car industry could have disappeared only intervention from the public sector saved this key compo-nent of the private sector underlining that apart from anything else the close synergies and intertwined relationships continue to exist between the private and public sectors in developed countries (Mazzucato 2013) This highlights not only the weaknesses inherent in the close links between the financial and car systems but also indicates that the current mass production system whether seen as Fordist or Buddist (see below) may well be due for a rethink in several respects
In Europe the apparent success of Germany more recently the UK automotive industry is easily misunderstood leading perhaps to overconfidence but do note that the secret of success in Europe is largely confined to the more upmarket segments with the Germans the primary beneficiaries and that this success is very reliant on demand from Asia particularly China it has therefore made Europe ndash and also the United States particularly GM ndash very dependent on that far from stable market as also outlined in more detail in Chapter 10 At the same time pressures to make the car more environmentally compatible as we see it have not only led to cars with much less harmful tailpipe emissions but the more recent pressure to reduce the carbon footprint of cars particularly focused on their emissions of the greenhouse gas carbon dioxide has the potential to radically reshape the industry and its products These regulatory pressures are reviewed in Chapter 14 although the potential impact of this agenda is not yet fully understood but it has already led to a new wave of alternative powertrain vehicles in the market ranging from early petrol‐electric hybrids ndash including the now iconic Toyota Prius ndash via
Introduction and Overview 3
so‐called range‐extended and plug‐in hybrids such as the GM Volt and Ampera to full battery‐electric vehicles such as the Nissan Leaf Renault Zoe and Tesla Model S Such developments as well as the introduction of the even more radical BMW i3 which not only introduces a full battery‐electric powertrain but also houses this within a radical departure from the tried and tested lsquoBuddistrsquo (see Chapter 5) all‐steel body in using a carbon fibre body on an aluminium chassis are clear signs that business‐as‐usual is steadily being undermined even from within the established industry
Despite the size of the industry car making is in reality a very precarious business In its present form it lacks resilience it is not sustainable This is true not just in terms of environmental sustainability where it clearly is not measuring up but even in terms of basic economic sustainability Yet this industry is still crucially important representing a significant part of the economy in many industrialized countries as well as many newly industrializing economies notably China In addition the car‐based transport system or lsquoregimersquo (Geels et al 2012) which extends well beyond the industry that makes cars to the way in which auto-mobility has become integrated in our societies and cultures has become so embedded that its removal would lead to widespread social and economic crisis
In some regards therefore this book may be a testimony to a dying era as much as a hymnal to a new one Thus far the automotive industry has managed to contain the pressures for change both economic and environmental within the broad ambit of the long‐standing business model of the mainstream vehicle manufacturers In parallel those purchasing and using cars in the traditional manner have remained by far the majority compared with more innovative solutions such as car clubs city car sharing schemes and other alternatives that might presage the end of established automobility cultures The question is whether the collective and cumulative impact of all the new developments sweeping through the industry will be sufficient to herald the arrival of a new lsquoautomotive ecosystemrsquo as some have termed it or lsquoregimersquo according to others and one in which the dominance of the established vehicle manufacturers and their entrenched supply chains is challenged by a new order of communi-cations and mobility providers Some caution on these issues is urged here The automotive industry is not immune to hype cycles or the fevered imaginations of those professional change‐mongers with a vested interest in fermenting and emphasizing the new over the continuous
12 Continuity and Change
The book as a whole therefore represents an attempt to capture continuity and change in the global automotive industry this theme is brought to the fore in the first main chapter of the book Chapter 2 as change is very much a feature of the current phase of the automotive system Change of course needs to be seen in historical perspective and as such many of the chapters offer up a historical narrative that builds a temporal dynamic into the account of the subject under consideration There is some need in seeking to understand the structures and practices of the present to delve into the past If nothing else path dependency theory tells us that many decisions are nonlinear irreversible steps that result in distinct historical outcomes bounded by time and place As we have sought to delineate elsewhere the cluster of innovations that created the template for the mass production automotive industry occurred largely in the United States in the early years of the twentieth century the Ford moving assembly line with standardized and inter‐changeable parts the Budd all‐steel body that could be stamped
4 The Global Automotive Industry
welded and painted and the Sloan multi‐brand company with marketing innovations such as consumer credit and annual model changes these developments are outlined in Chapter 5 Despite many years of incremental change the basic architecture of the industry remains in place That such durability is evident speaks volumes for the scope for productivity improve-ment within this basic architecture over many decades and the efficacy of the system as a whole in terms of matching the imperatives of production economics to the demands of the market For this reason key early chapters in the book for example Chapters 3 4 5 and 6 are about the production system and the market for cars There is no subscription here to the simple neoclassical economics assumption that lsquoconsumersrsquo demand and lsquoproducersrsquo provide Rather there is a continuing dynamic tension between supply and demand sides that is never entirely resolved
13 Overview
The chapters in this book are thus essentially an attempt to take stock of the industry in its present state of a well‐established industry on the verge of potentially radical change tracking some of its history ndash trying to answer the question of how did we get here ndash assessing key aspects of its current state while also plotting some possible futures for the industry and its products This book does not seek to present chapters that are held together by a common the-oretical thread Such works can be tremendously informative and insightful (see Geels et al 2012) but of course tend to place primary emphasis on the question of theoretical coherence Rather the approach here has been more agnostic in theoretical terms and has been to seek insights and individual views by those who are established experts in their fields and who are known for their knowledge of the automotive industry (or a specific aspect of it) alongside their particular theoretical or methodological frameworks Each chapter is thus a cameo able to stand alone as a concise insight into one dimension of this multi‐faceted industry but also serves as a piece in the jigsaw that describes and explains how this industry really works
There are some gaps of course It is not possible to give consideration to all the countries producing cars and the unique contexts within which they operate The salience of the lsquovari-eties of capitalismrsquo school of thought (see Section 23) is acknowledged here and some com-parative chapters are pertinent to this school notably those on labourndashmanagement relations in North America and Japan (Chapters 7 and 8 respectively) While the question of labour relations in Japan has remained largely immune to external influence (notwithstanding the substantial impact of Renault on operations at Nissan and the rather lesser impact of Ford on Mazda) the story in North America has a strong thread in which lsquoJapanizationrsquo has been highly significant Chapters 9 10 and 11 cover the broad sweep of the automotive industry in Asia highlighting South Korea China and India respectively ndash both Korea and India have become comparatively neglected in view of the immense attention directed at China Interestingly both these countries are more than passive recipients of automobility and can claim to be home to significant companies within the industry of the modern era while also representing unique markets
An apparent gap in the account includes a chapter that explicitly deals with the global supply chain of components and raw materials to the vehicle manufacturers ndash where typically up to 85 of the ex‐works value of a new car is accounted for by bought in components and materials The theme of supply chain management is an important facet of the industry but
automotive series
series editor Thomas Kurfess
The Global Automotive Industry Nieuwenhuis and Wells September 2015
Vehicle Dynamics Meywerk May 2015
Vehicle Gearbox Noise and Vibration Measurement Signal Analysis Signal Processing and Noise Reduction Measures
Tůma April 2014
Modeling and Control of Engines and Drivelines
Eriksson and Nielsen April 2014
Modelling Simulation and Control of Two‐Wheeled Vehicles
Tanelli Corno and Savaresi
March 2014
Advanced Composite Materials for Automotive Applications Structural Integrity and Crashworthiness
Elmarakbi December 2013
Guide to Load Analysis for Durability in Vehicle Engineering
Johannesson and Speckert
November 2013
The Global auTomoTive indusTryedited by
Paul nieuwenhuisCardiff University UK
Peter WellsCardiff University UK
This edition first published 2015copy 2015 John Wiley amp Sons Ltd
Registered OfficeJohn Wiley amp Sons Ltd The Atrium Southern Gate Chichester West Sussex PO19 8SQ United Kingdom
For details of our global editorial offices for customer services and for information about how to apply for permission to reuse the copyright material in this book please see our website at wwwwileycom
The right of the author to be identified as the author of this work has been asserted in accordance with the Copyright Designs and Patents Act 1988
All rights reserved No part of this publication may be reproduced stored in a retrieval system or transmitted in any form or by any means electronic mechanical photocopying recording or otherwise except as permitted by the UK Copyright Designs and Patents Act 1988 without the prior permission of the publisher
Wiley also publishes its books in a variety of electronic formats Some content that appears in print may not be available in electronic books
Designations used by companies to distinguish their products are often claimed as trademarks All brand names and product names used in this book are trade names service marks trademarks or registered trademarks of their respective owners The publisher is not associated with any product or vendor mentioned in this book
Limit of LiabilityDisclaimer of Warranty While the publisher and author have used their best efforts in preparing this book they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose It is sold on the understanding that the publisher is not engaged in rendering professional services and neither the publisher nor the author shall be liable for damages arising herefrom If professional advice or other expert assistance is required the services of a competent professional should be sought
Library of Congress Cataloging‐in‐Publication Data applied for
ISBN 9781118802397
A catalogue record for this book is available from the British Library
Set in 1012pt Times by SPi Global Pondicherry India
1 2015
Contents
Notes on Contributors xiSeries Preface xviiForeword xix
1 Introduction and Overview 111 Introduction 112 Continuity and Change 313 Overview 4References 6
2 Understanding Change and Difference in the Global Automotive Industry 721 Introduction 722 Socio‐Technical Transitions 923 Varieties of Capitalism 1224 Global Value Chains 1425 Change in the Automotive Industry A Synthesis 1526 Conclusions 16References 17
3 The Market for New Cars 1931 Introduction 1932 Market Fragmentation and Lack of Industry Consolidation 2033 Geography of Markets 2234 Mobility Services and the Emergent Automotive Ecosystem 2635 Conclusions 27References 27
4 Understanding People and Cars 2941 Influences on Travel Choices 2942 Influences on Vehicle Choice 33
vi Contents
43 Acceptability of Transport Policies and New Technologies 3444 Conclusions 36References 37
5 Car Manufacturing 4151 Background and Prehistory 4152 Ford Budd and Sloan The History of Mass Car Production 4253 Monocoque Construction Buddrsquos Impact on Car Design 4454 Toyotism 4555 Buddism in Crisis 4656 Lean v Agile 4757 Conclusions 49References 50
6 Recent Trends in Manufacturing Innovation Policy for the Automotive Sector A Survey of the United States Mexico European Union Germany and Spain 5361 Introduction 5362 A Changing Manufacturing Landscape 5563 Restructuring in the Automotive Industry 5664 Automotive Policies in the United States Mexico EU Germany and Spain 57
641 United States 57642 Mexico 59643 European Union 60644 Germany 61645 Spain 62
65 Conclusion 63References 64
7 Labour Relations and Human Resource Management in the Automotive Industry North American Perspectives 6771 Introduction 6772 From Fordist Production to Lean Production The Evolution of
Labour RelationsHuman Resource Management Systems in the North American Auto Industry Prior to 2000 70721 The Classic Fordist Industrial Relations System in the
US and Canadian Automotive Industries 70722 The Impact of Japanese Transplants and Lean Production
Methods on the North American Automotive Labour Relations System 72
73 Developments in North American Auto Labour Relations Since 2000 74731 Concession Bargaining 2003ndash2008 74732 The Impact of the Global Financial Crisis 76733 Post‐Crisis Developments 78
74 Conclusion 78References 80
Contents vii
8 Labour Relations and HRM in the Automotive Industry Japanese Impacts 8381 Introduction The Japanese Car Industry and Toyota Production System 8382 TPS and Japanese HRM 8583 lsquoJapanizationrsquo of the Global Automotive Industry 8884 Changes in Japanese Labour Relations and HRM 9085 Concluding Remarks 92References 93
9 The Rise of South Korean (or Korean) Automobile Industry 9591 Introduction 9592 A Brief History of South Korean Automobile Industry
and the Performance of HMC 96921 Brief History of South Korean Automobile Industry 96922 The Change in Performance of HMG 100
93 Considering Five Success Factors of HMC 102931 Vertical Integration 102932 Modularization of Production and Standardization 102933 Expansion of Overseas Production Capabilities
in Emerging Markets 104934 Product Strategy 104935 Quality Focused and Design Focused Management 105
94 Characteristics of HRM in HMC and Effects on the Management System 106941 Militant Trade Union Movement and Confrontational
Labour‐Management Relations 106942 Fragmentation and Automation of Work 106943 Internal Competition Systems 107
95 Conclusion New Challenges for the Korean Auto Makers as Multinational Enterprises 107
References 108
10 Chinarsquos Car Industry 109101 Background 109102 Pre‐History 110103 Chinarsquos Car Industry 111104 The Role of Government 114
1041 Traditional Automobile Industries 114105 New Energy Vehicles 118
1051 RampD Support 1181052 Industrialization 119
106 Bringing NEVs to Market 1211061 Demonstration and Pilot Projects Strategic Niche Management 1211062 Financial Incentives 122
107 Conclusions 124References 124
viii Contents
11 Forging Ahead or Stagnating An Analysis of Indian Automotive Industry 127111 Introduction 127112 History of the Indian Automotive Industry 128113 Statistics on Automobile Industry Performance 132114 Stagnation of Industry in 2013ndash2014 133115 Factors Critical to the Growth of the Indian Automotive Industry 133116 Challenges and Future of Indian Automotive Industry 134References 136
12 From Factory to End‐User An Overview of Automotive Distribution and the Challenges of Disruptive Change 139121 Shipping and Stocking Cars 140122 Retail and Distribution 143123 Changes to the Dealer Model 146124 The Changing Role of Fleets 148125 Delivering Integrated Services Means Rethinking Skills 150References 150
13 Impacts of Automobility 153131 Introduction 153132 Externalities and Automobility A Broad Perspective 153133 Death and Injuries from Road Traffic 154134 Environmental Impacts 156135 Toxic Emissions 157136 Current Concerns 159137 Role of the Consumer 160138 Conclusions 161References 161
14 Regulating the Car 163141 Regulating for Safety 163
1411 Development of Vehicle Standards 1641412 European Directives 1641413 US Federal Motor Vehicle Safety Standards 166
142 New Car Assessment Programmes 167143 Future Developments 168
1431 Impact of New Vehicle Technologies 169144 Legislating for a Cleaner Environment 170
1441 Fuel Economy Incentives and Disincentives 171145 Climate Change 172146 Future Developments 173References 174
15 Global versus Local Regionalism in a Global Industry 177151 The Old World 177152 Asia 179
1521 The Creation of Two Motoring Cultures India v China 179
Contents ix
153 Latin America 180154 Case Study On the Margins of Mass Production Australia 181References 184
16 The Impact of Electric Automobility 185161 Electric Vehicle Design 185
1611 Battery Electric Vehicles 1861612 Hybrid Electric Vehicles 186
162 Charging Infrastructure ndash UK Case Study 187163 Electric Vehicles in Europe 191
1631 Urban Electric Vehicles 1931632 Rural Electric Vehicles ndash The Welsh Case 193
164 Conclusions 197References 197
17 Alternatives to the Car 199171 Introduction 199172 Defining the Car Legislative and Market Boundaries 200173 The Hidden World of Non‐Car Automobility 202174 Transition by Stealth The 2W‐BEV 203
1741 3W‐BEVs 205175 Conclusions 206References 206
18 New Business Models and the Automotive Industry 209181 Introduction 209182 Fundamentals of the Existing Automotive Industry Business Model 210183 Pressures for Change on the Existing Business Model 212184 Incremental Business Model Evolution in the Automotive Industry 213185 Radical Business Model Innovation in the Automotive Industry 214186 Conclusions and Future Prospects for Business Model Innovation 216References 216
19 Future Challenges for Product and Industry 219191 Introduction 219192 New Engine Technologies 220193 Owning or Sharing 223194 The Future Car 223195 The Future Industry 224References 226
Index 229
Notes on Contributors
Editorsrsquo Profiles
Paul NieuwenhuisCentre for Automotive Industry Research and Electric Vehicle Centre of ExcellenceCardiff Business School Cardiff UniversityCardiff Wales UK
Dr Paul Nieuwenhuis is a senior lecturer at Cardiff University He joined the Centre for Automotive Industry Research (CAIR) at Cardiff University in 1991 and he became one of its two directors in 2006 He was a founder member of the ESRC Centre for Business Relationships Accountability Sustainability and Society (BRASS) and is an associate of the Sustainable Places Research Institute His main interests are historic and environmental and his publica-tions have been in these areas for example The Green Car Guide (1992) and Sustainable Automobility (2014) He also contributed to the Beaulieu Encyclopaedia of the Automobile (2000) which won a Cugnot Award from the Society of Automotive Historians Dr Nieuwenhuis has produced around 300 publications ranging from books and academic papers to conference papers for both academic and business audiences and journalistic pieces Dr Nieuwenhuis is a member of the Guild of Motoring Writers
Peter WellsCentre for Automotive Industry ResearchCardiff Business School Cardiff UniversityCardiff Wales UK
Peter Wells is a professor of sustainable business models at Cardiff Business School where his work has ranged across spatial industrial development economics organizational theory industrial ecology technological change transition theory business models and sustainability ndash all through an applied focus on the global automotive industry Professor Wells has over 550 publications reaching academia industry policy and stakeholder audiences through tradi-tional papers and books Internet publications and more recently webinars
xii Notes on Contributors
Contributorsrsquo Profiles
Katsuki AokiSchool of Business AdministrationMeiji UniversityTokyo Japan
Dr Katsuki Aoki is an associate professor in the School of Business at Meiji University in Japan He received his PhD in business administration from Meiji University in 1999 His main research interests include (i) international comparative studies on the implementation of kaizen activities (ii) the benefits and limitations of the keiretsu system (OEMndashsupplier rela-tionships) in the automotive industry and (iii) mass customization and order fulfilment systems in the automotive industry His paper entitled lsquoTransferring Japanese kaizen activities to over-seas plants in Chinarsquo was selected as one of the most prominent papers at the Emerald Literati Network Awards for Excellence 2009
Liana M CipciganElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Dr Liana M Cipcigan is a senior lecturer in the School of Engineering at Cardiff University leading the research of integration and control of EVs in electricity and transportation net-works She is a member of the Electric Vehicle Centre of Excellence (EVCE) Her current research activities are focused on smart grids distributed generation and EV integration and control She has significant research experience in EU projects FP6 More Microgrids FP7 Mobile Energy Resources in Grids of Electricity (MERGE) and ERDF ENEVATE She is the principal investigator (PI) of the EPSRC projects lsquoSmart Management of Electric Vehiclesrsquo and lsquoElectric Vehicle Value Chain ndash Bridging the Gapsrsquo She is participating in the UKERC project lsquoSmart Grids Scenarios for UKrsquo and TSB project lsquoAgent‐Based Controllers for Electric Vehicles and Micro‐generatorsrsquo She is a member of CEN‐CLC eMobility working group on Smart Charging and IEEE P20301 working group on standards for EVs and related infrastructure
Huw DaviesElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Dr Huw Davies is a lecturer in mechanical engineering at Cardiff University School of Engineering His background is in vehicle engineering and the development of vehicle safety standards He has advised the UK Department for Transport the European Commission and the Automotive Industry At Cardiff University he has developed the transport research theme Safety mobility and emissions are at its core The universal goals are zero collisions zero congestion and zero emissions Dr Davies leads Cardiff Universityrsquos Electric Vehicle Centre of Excellence
Notes on Contributors xiii
Ceri DonovanElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Ceri Donovan is a research assistant at Cardiff University School of Engineering and a member of Cardiff Universityrsquos Electric Vehicle Centre of Excellence She spent most of her time in recent years working on ENEVATE which aimed to accelerate the uptake of e‐mobility in northwest Europe This includes conducting research on all aspects of electric vehicles including market drivers and mobility concepts vehicle safety and regulations She previously worked in defence research primarily focusing on how to integrate new technology onto existing platforms from the procurement as well as the practical perspectives She has an MSc in biometry from the University of Reading
Patrick GalvinInnovation Policy LabMunk School of Global AffairsUniversity of TorontoToronto Ontario Canada
Patrick Galvin is a postdoctoral research fellow with the Innovation Policy Lab at the Munk School of Global Affairs where he is part of a research team investigating the dynamics of devel-oping a new automotive policy for the Canadian automotive industry for the twenty‐first century He is also working on the SSHRC‐funded Creating Digital Opportunity project Prior to his current appointment and after having obtained both his BA (honours) and MA degrees in political science Patrick spent several years working in the housing policy field with a number of consulting firms Patrick enrolled in the PhD programme in politics at the University of Exeter in England He completed his dissertation in November 2012 and he was formally awarded his PhD degree in July 2012 Patrickrsquos PhD dissertation built on his training in public policy and political economy by examining how local government in the city of Toronto develops its cluster‐related innovation policy It focuses on two empirical case studies to see how the city develops its cluster policy for two industrial sectors the aerospace sector and the fashion sector
Elena GoracinovaInnovation Policy LabMunk School of Global AffairsUniversity of TorontoToronto Ontario Canada
Elena Goracinova is a PhD candidate in political science working at the University of Torontorsquos Munk School of Global Affairs Innovation Policy Lab with Professor David Wolfe She received her masterrsquos degree in geography from the University of Toronto with a thesis on manufacturing in developed economies She is interested in studying the role of the state in economic policymaking Her current work focuses on the scope and effectiveness of advanced manufacturing policies in Canada
xiv Notes on Contributors
John HolmesProfessor EmeritusDepartment of GeographyQueenrsquos UniversityKingston Ontario Canada
John Holmes is a professor of geography at Queenrsquos University in Kingston Ontario Canada He received his BSc (honours) and MA (social science) degrees from the University of Sheffield and his PhD from Ohio State University He is also affiliated with the graduate industrial relations programme in the Queenrsquos School of Policy Studies His research focuses on geographical aspects of the political economy of contemporary economic and social change and in particular on the contemporary restructuring and reorganization of production and work in North America Empirical research and writing have focused primarily on the automobile industry For a list of selected publications see httpgeogqueensucafacultyholmesasp
Seunghwan KuFaculty of Business AdministrationKyoto Sangyo UniversityKyoto Japan
Seunghwan Ku is a professor of technology of management of the Faculty of Business Administration Kyoto Sangyo University He received his PhD (management of technology) from the University of Tokyo Japan His dissertation entitled lsquoThe Dynamism of Product Architecture Modularization Knowledge Integration Interfirm Linkagersquo was published by Mineruba Shobo a major publisher in Japan His recent publications include lsquoEconomic Analysis of ICT Innovationrsquo (2011) with M Fujiwara and lsquoShip Development and Shipbuilding Industry The Constraint of Large Artifact Development and the Uncertainty of Business Modelrsquo with H Kato in T Fujimoto ed lsquoCoping with Complex Artifactsrsquo (2013) His current research interests are (i) product development (ii) logistics and inter‐firm linkages (iii) prod-uct strategy and innovation and (iv) supplier system in Korean and Japanese industries the auto sector in particular
Maneesh KumarCentre for Automotive Industry ResearchCardiff Business School Cardiff UniversityCardiff Wales UK
Dr Maneesh Kumar is a senior lecturer at Cardiff Business School Cardiff University UK His research interests are primarily in the area of quality management Lean Six Sigma (LSS) and service recovery within manufacturing service and public sector organizations His recent research within Indian automotive industry focuses on understanding the best‐in‐class practices in diffusing LeanKaizen practice at supply network level and how automotive giants (OEMs) support and develop their suppliers (at Tier 1 and Tier 2 level) His research outputs include an edited book five edited conference proceedings three book chapters and over 80 peer‐reviewed
Notes on Contributors xv
journal publications and conference papers He has been involved in delivering LSS training up to black‐belt level and delivered several workshops on LSS application in several blue chip companies He is also a regular speaker at international conferences and seminars on LSS and process excellence
Xiao LinCentre for Automotive Industry ResearchLogistics and Operations Management SectionCardiff Business School Cardiff UniversityCardiff Wales UK
Xiao Lin is a PhD student in the logistics and operations management section at Cardiff Business School Cardiff University Her research interests include sustainability transition theory business models etc Her PhD research project is specifically focusing on the study of the future prospect for e‐bikes in sustainable mobility in China through various quantitative and qualitative analysis methods Xiao Lin is enthusiastic in contributing to the collaboration of the sustainable community She is a member of the organizing committee of the lsquoThe 2014 Global Research Forum Sustainable Production and Consumption Conferencersquo
Daniel NewmanElectric Vehicle Centre of Excellence and Sustainable Places Research InstituteCardiff UniversityCardiff Wales UK
Dr Daniel Newman is a research assistant at Cardiff Business School working within the Cardiff University Electric Vehicle Centre of Excellence His activities are primarily focused on the ENEVATE project conducting social research investigating the potential for increasing electric vehicle uptake in northwest Europe He was previously a research assistant at the University of Bristol Law School looking at environmental law and health and safety regulations Prior to this he completed an ESRC‐funded PhD in the University of Bristol Law School investigating the state of access to justice which was published as a book by Hart in 2012
Ben WallerSenior Researcher ICDPInternational Car Distribution Programme (ICDP)Cardiff Wales UK
Ben is a senior researcher at the International Car Distribution Programme (ICDP) and based in the United Kingdom ICDP is an international research‐based organization focused on auto-motive distribution including the supply and retailing of new and used vehicles aftersales network structures and operations Through research activities data services education events and consulting ICDP works with vehicle makers dealers suppliers and related orga-nizations to improve the quality and effectiveness of the distribution model Ben has presented to a range of international audiences from academic conferences to senior executives and also authors articles for business press and delivers executive teaching
xvi Notes on Contributors
Lorraine WhitmarshSchool of PsychologyCardiff UniversityCardiff Wales UK
Dr Lorraine Whitmarsh is an environmental psychologist specializing in perceptions and behaviour in relation to climate change energy and transport She is a senior lecturer in the School of Psychology at Cardiff University UK Lorraine is also a partner coordinator for the Tyndall Centre for Climate Change Research and a research associate of Cardiff Universityrsquos Centre for Business Relationships Accountability Sustainability and Society (BRASS) and the Sustainable Places Research Institute She sits on the Climate Change Commission for Wales advising Welsh government on transport and behaviour change
David A WolfeProfessor of Political Science andCo‐director Innovation Policy LabMunk School of Global Affairs University of TorontoToronto Ontario Canada
David A Wolfe is a professor of political science at UTM and a co‐director of the Innovation Policy Lab at the Munk School of Global Affairs in Toronto From 2009 to 2014 he was the Royal Bank Chair in Public and Economic Policy at the University of Toronto He is currently leading a major partnership grant on Creating Digital Opportunity Canadarsquos ICT Industry in Global Perspective funded by the Social Sciences and Humanities Research Council of Canada He is also participating in the project on manufacturing policy and the Canadian auto-motive sector based in the Automotive Policy Research Centre at McMaster University
Dimitrios XeniasSchool of PsychologyCardiff UniversityCardiff Wales UK
Dr Dimitrios Xenias is a social and environmental psychologist focusing on sustainable travel and associated behaviours such as mode choice on domestic energy‐related behaviours and on perceptions of climate change and its communication He is a research associate in the School of Psychology at Cardiff University UK Dimitrios is also an associate of the Tyndall Centre for Climate Change Research and a research associate of Cardiff Universityrsquos Centre for Business Relationships Accountability Sustainability and Society (BRASS) and the Sustainable Places Research Institute
Series Preface
The automotive industry is one of the largest manufacturing sectors in the global community Not only does it generate significant economic benefits to the worldrsquos economy but the auto-mobile is highly linked to a wide variety of international concerns such as energy consump-tion emissions trade and safety The primary objective of the Automotive Series is to publish practical and topical books for researchers and practitioners in the industry and postgraduatesadvanced undergraduates in automotive engineering
The series addresses new and emerging technologies in automotive engineering supporting the development of more fuel‐efficient safer and more environmentally friendly vehicles It covers a wide range of topics including design manufacture and operation and the intention is to provide a source of relevant information that will be of interest and benefit to people working in the field of automotive engineering
This book The Global Automotive Industry presents a broad spectrum view of the automo-tive sector from the technology industry and policy perspectives In the early chapters of the book an understanding of the industry from a social technical and economic perspective is presented This is followed by a discussion of the fabric of next‐generation vehicle systems as it is woven into a global society This discussion is expanded to include the economic impact of the automotive industrial sector on nationsrsquo economies from production operationsrevenue to job growth This text goes beyond regional thinking with respect to automotive production and discusses the historic expansion of automotive manufacturing giants in Korea and the new emerging markets in China and potentially India
The text finishes with an excellent overview of emerging technologies and economies that will be pivotal to the automotive sector These discussions are then presented in the light of new business models in a global marketplace and the impact of regulation on the automobile as well as its manufacture These topics are well integrated into the earlier topics presented in the book and make it a unique and valuable crosscutting source of information for the reader
The Global Automotive Industry integrates these topics in a unique and thought‐provoking manner that provides significant insight into global automotive production regulation and
xviii Series Preface
economic impact on society It is a forward‐thinking text that considers a wide variety of topics that will drive this major industry and the global economy for the foreseeable future It is written by highly recognized experts in the field and is a welcome addition to the Automotive Series
Thomas KurfessJuly 2015
Foreword
The global automotive industry is a complex and demanding topic for any book It is clear following my 30‐year career within the automotive industry that only a comparatively small number of individuals have a comprehensive understanding of a vehiclersquos full construction Even after decades of professional involvement it can be difficult for an individual to have a full appreciation of the subject and its international infrastructure and landscape
From pre‐production to the factory floor and the boardroom knowledge sharing is incred-ibly important to the future of the automotive engineering profession With future mobility solutions being vital to modern society and with the needs of each region differing depending on capabilities and production facilities communication amongst the worldrsquos engineers pro-vides a route to approaching and accommodating the global social political and economic considerations that the future will demand
FISITA has successfully coordinated global communications amongst its network of over 200 000 professional engineers from member societies in 37 countries for over 60 years This demonstrates the point through many generations that sharing of knowledge and ideas amongst an industry as large as automotive including engineers academics and executives is vital as it provides us all with the tools to contribute to a better future
As part of this journey global collaboration within the industry is also necessary in order to deliver a clear message to wider society that the automotive engineering profession is well placed to face the challenges of today and tomorrow
Paul Nieuwenhuis and Peter Wells have provided us with a very good starting point The authors are able to present the wide scope of the industry in a clear way whilst contributing a wealth of knowledge about the global automotive industry
Chris MasonCEO FISITA
The Global Automotive Industry First Edition Edited by Paul Nieuwenhuis and Peter Wells copy 2015 John Wiley amp Sons Ltd Published 2015 by John Wiley amp Sons Ltd
Introduction and OverviewPaul Nieuwenhuis1 and Peter Wells2
1 Centre for Automotive Industry Research and Electric Vehicle Centre of Excellence Cardiff Business School Cardiff University Cardiff Wales UK2 Centre for Automotive Industry Research Cardiff Business School Cardiff University Cardiff Wales UK
11 Introduction
It is an impossible task to do full justice in one book to the global automotive industry with the pervasive impact economic significance and cultural status that it brings As editors our task is as much one of selective omission as one of collation to create an account of the business of mak-ing selling and using cars that is both representative and yet respectful of the diversity we know to be a feature of the industry Moreover this is an industry in the midst of reinventing itself It had seemed to some both inside and outside the industry around the turn of the millennium that this was a lsquosunsetrsquo industry characterized by over‐capacity plant closures job losses declining profitability and a product that seemed unsuited to meeting the environmental and social chal-lenges arising from mass car ownership and use The combination of profound environmental pressures and endemic economic distress appeared to call into question the pre‐eminent position enjoyed by the car in providing for personal mobility and the viability of the industry behind this most contradictory of products These concerns came to a peak with the arrival of the global economic crisis around 2007ndash2008 which resulted in new car sales falling steeply in the established markets and investment freezing while the entire financial community held its collective breath to see whether the world would plunge into an economic abyss Those looking closely at urban developments and the changing cultural priorities of young people started to whisper about the concept of lsquopeak carrsquo in which the high tide of automobility had been reached in the saturated markets of the European Union North America Japan and Korea
Yet only a few years later the industry has reemerged burnished by the embrace of new technologies and with resurgent sales in the previously moribund West being more than matched by the frenetic growth of sales in China and elsewhere Regulatory interventions
1
2 The Global Automotive Industry
such as the European Union fleet average carbon emissions targets that were once seen as burdensome and punitive have arguably helped stimulate the technological renaissance of the industry alongside the realization that there might be other routes to profitability Later chap-ters in the book are more concerned with this recent period of transformation and the possible futures it portends Chapter 16 for example is about the impact of the electric vehicle while Chapter 18 links technology change with possible innovations in business models forced on the industry by such technological changes Chapter 19 is more speculative but offers up some signposts for the future of automobility and the automotive industry
This is not to say that the process of change has been without stress or consequence Restructuring of the industry has continued apace the merger of Chrysler and Fiat came as a consequence of several years of corporate turmoil while the rescue of PSA by the French government and by the Chinese company Dongfeng costs the Peugeot family their control over this long established business ndash the oldest in the industry The great expectations held for battery electric vehicles remain as yet largely unrealized despite the highly visible and expen-sive efforts of companies like Nissan Renault and BMW alongside the publicity‐garnering machine that is Tesla In the meantime high‐profile failures such as the battery swap business Better Place serve as stark reminders that attempts to reinvent this industry especially by new entrants are fraught with hazard At the same time markets in the European Union have not really recovered to pre‐crisis levels and perhaps never will
So despite an apparent lsquobusiness‐as‐usualrsquo attitude permeating the automotive industry at the moment in reality it is subject to potentially radical change Only a few years ago we saw two of the worldrsquos largest car manufacturers General Motors and Chrysler on the brink of collapse Having decided both were lsquotoo big to failrsquo they had to be bailed out by the American tax‐payer Ford managed without direct government support but it is nevertheless quite clear that the collapse of the supply base that would have resulted from a collapse of both their key domestic competitors GM and Chrysler would also have dragged down Ford in due course Within a matter of months the worldrsquos most prominent car industry and the oldest mass production car industry could have disappeared only intervention from the public sector saved this key compo-nent of the private sector underlining that apart from anything else the close synergies and intertwined relationships continue to exist between the private and public sectors in developed countries (Mazzucato 2013) This highlights not only the weaknesses inherent in the close links between the financial and car systems but also indicates that the current mass production system whether seen as Fordist or Buddist (see below) may well be due for a rethink in several respects
In Europe the apparent success of Germany more recently the UK automotive industry is easily misunderstood leading perhaps to overconfidence but do note that the secret of success in Europe is largely confined to the more upmarket segments with the Germans the primary beneficiaries and that this success is very reliant on demand from Asia particularly China it has therefore made Europe ndash and also the United States particularly GM ndash very dependent on that far from stable market as also outlined in more detail in Chapter 10 At the same time pressures to make the car more environmentally compatible as we see it have not only led to cars with much less harmful tailpipe emissions but the more recent pressure to reduce the carbon footprint of cars particularly focused on their emissions of the greenhouse gas carbon dioxide has the potential to radically reshape the industry and its products These regulatory pressures are reviewed in Chapter 14 although the potential impact of this agenda is not yet fully understood but it has already led to a new wave of alternative powertrain vehicles in the market ranging from early petrol‐electric hybrids ndash including the now iconic Toyota Prius ndash via
Introduction and Overview 3
so‐called range‐extended and plug‐in hybrids such as the GM Volt and Ampera to full battery‐electric vehicles such as the Nissan Leaf Renault Zoe and Tesla Model S Such developments as well as the introduction of the even more radical BMW i3 which not only introduces a full battery‐electric powertrain but also houses this within a radical departure from the tried and tested lsquoBuddistrsquo (see Chapter 5) all‐steel body in using a carbon fibre body on an aluminium chassis are clear signs that business‐as‐usual is steadily being undermined even from within the established industry
Despite the size of the industry car making is in reality a very precarious business In its present form it lacks resilience it is not sustainable This is true not just in terms of environmental sustainability where it clearly is not measuring up but even in terms of basic economic sustainability Yet this industry is still crucially important representing a significant part of the economy in many industrialized countries as well as many newly industrializing economies notably China In addition the car‐based transport system or lsquoregimersquo (Geels et al 2012) which extends well beyond the industry that makes cars to the way in which auto-mobility has become integrated in our societies and cultures has become so embedded that its removal would lead to widespread social and economic crisis
In some regards therefore this book may be a testimony to a dying era as much as a hymnal to a new one Thus far the automotive industry has managed to contain the pressures for change both economic and environmental within the broad ambit of the long‐standing business model of the mainstream vehicle manufacturers In parallel those purchasing and using cars in the traditional manner have remained by far the majority compared with more innovative solutions such as car clubs city car sharing schemes and other alternatives that might presage the end of established automobility cultures The question is whether the collective and cumulative impact of all the new developments sweeping through the industry will be sufficient to herald the arrival of a new lsquoautomotive ecosystemrsquo as some have termed it or lsquoregimersquo according to others and one in which the dominance of the established vehicle manufacturers and their entrenched supply chains is challenged by a new order of communi-cations and mobility providers Some caution on these issues is urged here The automotive industry is not immune to hype cycles or the fevered imaginations of those professional change‐mongers with a vested interest in fermenting and emphasizing the new over the continuous
12 Continuity and Change
The book as a whole therefore represents an attempt to capture continuity and change in the global automotive industry this theme is brought to the fore in the first main chapter of the book Chapter 2 as change is very much a feature of the current phase of the automotive system Change of course needs to be seen in historical perspective and as such many of the chapters offer up a historical narrative that builds a temporal dynamic into the account of the subject under consideration There is some need in seeking to understand the structures and practices of the present to delve into the past If nothing else path dependency theory tells us that many decisions are nonlinear irreversible steps that result in distinct historical outcomes bounded by time and place As we have sought to delineate elsewhere the cluster of innovations that created the template for the mass production automotive industry occurred largely in the United States in the early years of the twentieth century the Ford moving assembly line with standardized and inter‐changeable parts the Budd all‐steel body that could be stamped
4 The Global Automotive Industry
welded and painted and the Sloan multi‐brand company with marketing innovations such as consumer credit and annual model changes these developments are outlined in Chapter 5 Despite many years of incremental change the basic architecture of the industry remains in place That such durability is evident speaks volumes for the scope for productivity improve-ment within this basic architecture over many decades and the efficacy of the system as a whole in terms of matching the imperatives of production economics to the demands of the market For this reason key early chapters in the book for example Chapters 3 4 5 and 6 are about the production system and the market for cars There is no subscription here to the simple neoclassical economics assumption that lsquoconsumersrsquo demand and lsquoproducersrsquo provide Rather there is a continuing dynamic tension between supply and demand sides that is never entirely resolved
13 Overview
The chapters in this book are thus essentially an attempt to take stock of the industry in its present state of a well‐established industry on the verge of potentially radical change tracking some of its history ndash trying to answer the question of how did we get here ndash assessing key aspects of its current state while also plotting some possible futures for the industry and its products This book does not seek to present chapters that are held together by a common the-oretical thread Such works can be tremendously informative and insightful (see Geels et al 2012) but of course tend to place primary emphasis on the question of theoretical coherence Rather the approach here has been more agnostic in theoretical terms and has been to seek insights and individual views by those who are established experts in their fields and who are known for their knowledge of the automotive industry (or a specific aspect of it) alongside their particular theoretical or methodological frameworks Each chapter is thus a cameo able to stand alone as a concise insight into one dimension of this multi‐faceted industry but also serves as a piece in the jigsaw that describes and explains how this industry really works
There are some gaps of course It is not possible to give consideration to all the countries producing cars and the unique contexts within which they operate The salience of the lsquovari-eties of capitalismrsquo school of thought (see Section 23) is acknowledged here and some com-parative chapters are pertinent to this school notably those on labourndashmanagement relations in North America and Japan (Chapters 7 and 8 respectively) While the question of labour relations in Japan has remained largely immune to external influence (notwithstanding the substantial impact of Renault on operations at Nissan and the rather lesser impact of Ford on Mazda) the story in North America has a strong thread in which lsquoJapanizationrsquo has been highly significant Chapters 9 10 and 11 cover the broad sweep of the automotive industry in Asia highlighting South Korea China and India respectively ndash both Korea and India have become comparatively neglected in view of the immense attention directed at China Interestingly both these countries are more than passive recipients of automobility and can claim to be home to significant companies within the industry of the modern era while also representing unique markets
An apparent gap in the account includes a chapter that explicitly deals with the global supply chain of components and raw materials to the vehicle manufacturers ndash where typically up to 85 of the ex‐works value of a new car is accounted for by bought in components and materials The theme of supply chain management is an important facet of the industry but
The Global auTomoTive indusTryedited by
Paul nieuwenhuisCardiff University UK
Peter WellsCardiff University UK
This edition first published 2015copy 2015 John Wiley amp Sons Ltd
Registered OfficeJohn Wiley amp Sons Ltd The Atrium Southern Gate Chichester West Sussex PO19 8SQ United Kingdom
For details of our global editorial offices for customer services and for information about how to apply for permission to reuse the copyright material in this book please see our website at wwwwileycom
The right of the author to be identified as the author of this work has been asserted in accordance with the Copyright Designs and Patents Act 1988
All rights reserved No part of this publication may be reproduced stored in a retrieval system or transmitted in any form or by any means electronic mechanical photocopying recording or otherwise except as permitted by the UK Copyright Designs and Patents Act 1988 without the prior permission of the publisher
Wiley also publishes its books in a variety of electronic formats Some content that appears in print may not be available in electronic books
Designations used by companies to distinguish their products are often claimed as trademarks All brand names and product names used in this book are trade names service marks trademarks or registered trademarks of their respective owners The publisher is not associated with any product or vendor mentioned in this book
Limit of LiabilityDisclaimer of Warranty While the publisher and author have used their best efforts in preparing this book they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose It is sold on the understanding that the publisher is not engaged in rendering professional services and neither the publisher nor the author shall be liable for damages arising herefrom If professional advice or other expert assistance is required the services of a competent professional should be sought
Library of Congress Cataloging‐in‐Publication Data applied for
ISBN 9781118802397
A catalogue record for this book is available from the British Library
Set in 1012pt Times by SPi Global Pondicherry India
1 2015
Contents
Notes on Contributors xiSeries Preface xviiForeword xix
1 Introduction and Overview 111 Introduction 112 Continuity and Change 313 Overview 4References 6
2 Understanding Change and Difference in the Global Automotive Industry 721 Introduction 722 Socio‐Technical Transitions 923 Varieties of Capitalism 1224 Global Value Chains 1425 Change in the Automotive Industry A Synthesis 1526 Conclusions 16References 17
3 The Market for New Cars 1931 Introduction 1932 Market Fragmentation and Lack of Industry Consolidation 2033 Geography of Markets 2234 Mobility Services and the Emergent Automotive Ecosystem 2635 Conclusions 27References 27
4 Understanding People and Cars 2941 Influences on Travel Choices 2942 Influences on Vehicle Choice 33
vi Contents
43 Acceptability of Transport Policies and New Technologies 3444 Conclusions 36References 37
5 Car Manufacturing 4151 Background and Prehistory 4152 Ford Budd and Sloan The History of Mass Car Production 4253 Monocoque Construction Buddrsquos Impact on Car Design 4454 Toyotism 4555 Buddism in Crisis 4656 Lean v Agile 4757 Conclusions 49References 50
6 Recent Trends in Manufacturing Innovation Policy for the Automotive Sector A Survey of the United States Mexico European Union Germany and Spain 5361 Introduction 5362 A Changing Manufacturing Landscape 5563 Restructuring in the Automotive Industry 5664 Automotive Policies in the United States Mexico EU Germany and Spain 57
641 United States 57642 Mexico 59643 European Union 60644 Germany 61645 Spain 62
65 Conclusion 63References 64
7 Labour Relations and Human Resource Management in the Automotive Industry North American Perspectives 6771 Introduction 6772 From Fordist Production to Lean Production The Evolution of
Labour RelationsHuman Resource Management Systems in the North American Auto Industry Prior to 2000 70721 The Classic Fordist Industrial Relations System in the
US and Canadian Automotive Industries 70722 The Impact of Japanese Transplants and Lean Production
Methods on the North American Automotive Labour Relations System 72
73 Developments in North American Auto Labour Relations Since 2000 74731 Concession Bargaining 2003ndash2008 74732 The Impact of the Global Financial Crisis 76733 Post‐Crisis Developments 78
74 Conclusion 78References 80
Contents vii
8 Labour Relations and HRM in the Automotive Industry Japanese Impacts 8381 Introduction The Japanese Car Industry and Toyota Production System 8382 TPS and Japanese HRM 8583 lsquoJapanizationrsquo of the Global Automotive Industry 8884 Changes in Japanese Labour Relations and HRM 9085 Concluding Remarks 92References 93
9 The Rise of South Korean (or Korean) Automobile Industry 9591 Introduction 9592 A Brief History of South Korean Automobile Industry
and the Performance of HMC 96921 Brief History of South Korean Automobile Industry 96922 The Change in Performance of HMG 100
93 Considering Five Success Factors of HMC 102931 Vertical Integration 102932 Modularization of Production and Standardization 102933 Expansion of Overseas Production Capabilities
in Emerging Markets 104934 Product Strategy 104935 Quality Focused and Design Focused Management 105
94 Characteristics of HRM in HMC and Effects on the Management System 106941 Militant Trade Union Movement and Confrontational
Labour‐Management Relations 106942 Fragmentation and Automation of Work 106943 Internal Competition Systems 107
95 Conclusion New Challenges for the Korean Auto Makers as Multinational Enterprises 107
References 108
10 Chinarsquos Car Industry 109101 Background 109102 Pre‐History 110103 Chinarsquos Car Industry 111104 The Role of Government 114
1041 Traditional Automobile Industries 114105 New Energy Vehicles 118
1051 RampD Support 1181052 Industrialization 119
106 Bringing NEVs to Market 1211061 Demonstration and Pilot Projects Strategic Niche Management 1211062 Financial Incentives 122
107 Conclusions 124References 124
viii Contents
11 Forging Ahead or Stagnating An Analysis of Indian Automotive Industry 127111 Introduction 127112 History of the Indian Automotive Industry 128113 Statistics on Automobile Industry Performance 132114 Stagnation of Industry in 2013ndash2014 133115 Factors Critical to the Growth of the Indian Automotive Industry 133116 Challenges and Future of Indian Automotive Industry 134References 136
12 From Factory to End‐User An Overview of Automotive Distribution and the Challenges of Disruptive Change 139121 Shipping and Stocking Cars 140122 Retail and Distribution 143123 Changes to the Dealer Model 146124 The Changing Role of Fleets 148125 Delivering Integrated Services Means Rethinking Skills 150References 150
13 Impacts of Automobility 153131 Introduction 153132 Externalities and Automobility A Broad Perspective 153133 Death and Injuries from Road Traffic 154134 Environmental Impacts 156135 Toxic Emissions 157136 Current Concerns 159137 Role of the Consumer 160138 Conclusions 161References 161
14 Regulating the Car 163141 Regulating for Safety 163
1411 Development of Vehicle Standards 1641412 European Directives 1641413 US Federal Motor Vehicle Safety Standards 166
142 New Car Assessment Programmes 167143 Future Developments 168
1431 Impact of New Vehicle Technologies 169144 Legislating for a Cleaner Environment 170
1441 Fuel Economy Incentives and Disincentives 171145 Climate Change 172146 Future Developments 173References 174
15 Global versus Local Regionalism in a Global Industry 177151 The Old World 177152 Asia 179
1521 The Creation of Two Motoring Cultures India v China 179
Contents ix
153 Latin America 180154 Case Study On the Margins of Mass Production Australia 181References 184
16 The Impact of Electric Automobility 185161 Electric Vehicle Design 185
1611 Battery Electric Vehicles 1861612 Hybrid Electric Vehicles 186
162 Charging Infrastructure ndash UK Case Study 187163 Electric Vehicles in Europe 191
1631 Urban Electric Vehicles 1931632 Rural Electric Vehicles ndash The Welsh Case 193
164 Conclusions 197References 197
17 Alternatives to the Car 199171 Introduction 199172 Defining the Car Legislative and Market Boundaries 200173 The Hidden World of Non‐Car Automobility 202174 Transition by Stealth The 2W‐BEV 203
1741 3W‐BEVs 205175 Conclusions 206References 206
18 New Business Models and the Automotive Industry 209181 Introduction 209182 Fundamentals of the Existing Automotive Industry Business Model 210183 Pressures for Change on the Existing Business Model 212184 Incremental Business Model Evolution in the Automotive Industry 213185 Radical Business Model Innovation in the Automotive Industry 214186 Conclusions and Future Prospects for Business Model Innovation 216References 216
19 Future Challenges for Product and Industry 219191 Introduction 219192 New Engine Technologies 220193 Owning or Sharing 223194 The Future Car 223195 The Future Industry 224References 226
Index 229
Notes on Contributors
Editorsrsquo Profiles
Paul NieuwenhuisCentre for Automotive Industry Research and Electric Vehicle Centre of ExcellenceCardiff Business School Cardiff UniversityCardiff Wales UK
Dr Paul Nieuwenhuis is a senior lecturer at Cardiff University He joined the Centre for Automotive Industry Research (CAIR) at Cardiff University in 1991 and he became one of its two directors in 2006 He was a founder member of the ESRC Centre for Business Relationships Accountability Sustainability and Society (BRASS) and is an associate of the Sustainable Places Research Institute His main interests are historic and environmental and his publica-tions have been in these areas for example The Green Car Guide (1992) and Sustainable Automobility (2014) He also contributed to the Beaulieu Encyclopaedia of the Automobile (2000) which won a Cugnot Award from the Society of Automotive Historians Dr Nieuwenhuis has produced around 300 publications ranging from books and academic papers to conference papers for both academic and business audiences and journalistic pieces Dr Nieuwenhuis is a member of the Guild of Motoring Writers
Peter WellsCentre for Automotive Industry ResearchCardiff Business School Cardiff UniversityCardiff Wales UK
Peter Wells is a professor of sustainable business models at Cardiff Business School where his work has ranged across spatial industrial development economics organizational theory industrial ecology technological change transition theory business models and sustainability ndash all through an applied focus on the global automotive industry Professor Wells has over 550 publications reaching academia industry policy and stakeholder audiences through tradi-tional papers and books Internet publications and more recently webinars
xii Notes on Contributors
Contributorsrsquo Profiles
Katsuki AokiSchool of Business AdministrationMeiji UniversityTokyo Japan
Dr Katsuki Aoki is an associate professor in the School of Business at Meiji University in Japan He received his PhD in business administration from Meiji University in 1999 His main research interests include (i) international comparative studies on the implementation of kaizen activities (ii) the benefits and limitations of the keiretsu system (OEMndashsupplier rela-tionships) in the automotive industry and (iii) mass customization and order fulfilment systems in the automotive industry His paper entitled lsquoTransferring Japanese kaizen activities to over-seas plants in Chinarsquo was selected as one of the most prominent papers at the Emerald Literati Network Awards for Excellence 2009
Liana M CipciganElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Dr Liana M Cipcigan is a senior lecturer in the School of Engineering at Cardiff University leading the research of integration and control of EVs in electricity and transportation net-works She is a member of the Electric Vehicle Centre of Excellence (EVCE) Her current research activities are focused on smart grids distributed generation and EV integration and control She has significant research experience in EU projects FP6 More Microgrids FP7 Mobile Energy Resources in Grids of Electricity (MERGE) and ERDF ENEVATE She is the principal investigator (PI) of the EPSRC projects lsquoSmart Management of Electric Vehiclesrsquo and lsquoElectric Vehicle Value Chain ndash Bridging the Gapsrsquo She is participating in the UKERC project lsquoSmart Grids Scenarios for UKrsquo and TSB project lsquoAgent‐Based Controllers for Electric Vehicles and Micro‐generatorsrsquo She is a member of CEN‐CLC eMobility working group on Smart Charging and IEEE P20301 working group on standards for EVs and related infrastructure
Huw DaviesElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Dr Huw Davies is a lecturer in mechanical engineering at Cardiff University School of Engineering His background is in vehicle engineering and the development of vehicle safety standards He has advised the UK Department for Transport the European Commission and the Automotive Industry At Cardiff University he has developed the transport research theme Safety mobility and emissions are at its core The universal goals are zero collisions zero congestion and zero emissions Dr Davies leads Cardiff Universityrsquos Electric Vehicle Centre of Excellence
Notes on Contributors xiii
Ceri DonovanElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Ceri Donovan is a research assistant at Cardiff University School of Engineering and a member of Cardiff Universityrsquos Electric Vehicle Centre of Excellence She spent most of her time in recent years working on ENEVATE which aimed to accelerate the uptake of e‐mobility in northwest Europe This includes conducting research on all aspects of electric vehicles including market drivers and mobility concepts vehicle safety and regulations She previously worked in defence research primarily focusing on how to integrate new technology onto existing platforms from the procurement as well as the practical perspectives She has an MSc in biometry from the University of Reading
Patrick GalvinInnovation Policy LabMunk School of Global AffairsUniversity of TorontoToronto Ontario Canada
Patrick Galvin is a postdoctoral research fellow with the Innovation Policy Lab at the Munk School of Global Affairs where he is part of a research team investigating the dynamics of devel-oping a new automotive policy for the Canadian automotive industry for the twenty‐first century He is also working on the SSHRC‐funded Creating Digital Opportunity project Prior to his current appointment and after having obtained both his BA (honours) and MA degrees in political science Patrick spent several years working in the housing policy field with a number of consulting firms Patrick enrolled in the PhD programme in politics at the University of Exeter in England He completed his dissertation in November 2012 and he was formally awarded his PhD degree in July 2012 Patrickrsquos PhD dissertation built on his training in public policy and political economy by examining how local government in the city of Toronto develops its cluster‐related innovation policy It focuses on two empirical case studies to see how the city develops its cluster policy for two industrial sectors the aerospace sector and the fashion sector
Elena GoracinovaInnovation Policy LabMunk School of Global AffairsUniversity of TorontoToronto Ontario Canada
Elena Goracinova is a PhD candidate in political science working at the University of Torontorsquos Munk School of Global Affairs Innovation Policy Lab with Professor David Wolfe She received her masterrsquos degree in geography from the University of Toronto with a thesis on manufacturing in developed economies She is interested in studying the role of the state in economic policymaking Her current work focuses on the scope and effectiveness of advanced manufacturing policies in Canada
xiv Notes on Contributors
John HolmesProfessor EmeritusDepartment of GeographyQueenrsquos UniversityKingston Ontario Canada
John Holmes is a professor of geography at Queenrsquos University in Kingston Ontario Canada He received his BSc (honours) and MA (social science) degrees from the University of Sheffield and his PhD from Ohio State University He is also affiliated with the graduate industrial relations programme in the Queenrsquos School of Policy Studies His research focuses on geographical aspects of the political economy of contemporary economic and social change and in particular on the contemporary restructuring and reorganization of production and work in North America Empirical research and writing have focused primarily on the automobile industry For a list of selected publications see httpgeogqueensucafacultyholmesasp
Seunghwan KuFaculty of Business AdministrationKyoto Sangyo UniversityKyoto Japan
Seunghwan Ku is a professor of technology of management of the Faculty of Business Administration Kyoto Sangyo University He received his PhD (management of technology) from the University of Tokyo Japan His dissertation entitled lsquoThe Dynamism of Product Architecture Modularization Knowledge Integration Interfirm Linkagersquo was published by Mineruba Shobo a major publisher in Japan His recent publications include lsquoEconomic Analysis of ICT Innovationrsquo (2011) with M Fujiwara and lsquoShip Development and Shipbuilding Industry The Constraint of Large Artifact Development and the Uncertainty of Business Modelrsquo with H Kato in T Fujimoto ed lsquoCoping with Complex Artifactsrsquo (2013) His current research interests are (i) product development (ii) logistics and inter‐firm linkages (iii) prod-uct strategy and innovation and (iv) supplier system in Korean and Japanese industries the auto sector in particular
Maneesh KumarCentre for Automotive Industry ResearchCardiff Business School Cardiff UniversityCardiff Wales UK
Dr Maneesh Kumar is a senior lecturer at Cardiff Business School Cardiff University UK His research interests are primarily in the area of quality management Lean Six Sigma (LSS) and service recovery within manufacturing service and public sector organizations His recent research within Indian automotive industry focuses on understanding the best‐in‐class practices in diffusing LeanKaizen practice at supply network level and how automotive giants (OEMs) support and develop their suppliers (at Tier 1 and Tier 2 level) His research outputs include an edited book five edited conference proceedings three book chapters and over 80 peer‐reviewed
Notes on Contributors xv
journal publications and conference papers He has been involved in delivering LSS training up to black‐belt level and delivered several workshops on LSS application in several blue chip companies He is also a regular speaker at international conferences and seminars on LSS and process excellence
Xiao LinCentre for Automotive Industry ResearchLogistics and Operations Management SectionCardiff Business School Cardiff UniversityCardiff Wales UK
Xiao Lin is a PhD student in the logistics and operations management section at Cardiff Business School Cardiff University Her research interests include sustainability transition theory business models etc Her PhD research project is specifically focusing on the study of the future prospect for e‐bikes in sustainable mobility in China through various quantitative and qualitative analysis methods Xiao Lin is enthusiastic in contributing to the collaboration of the sustainable community She is a member of the organizing committee of the lsquoThe 2014 Global Research Forum Sustainable Production and Consumption Conferencersquo
Daniel NewmanElectric Vehicle Centre of Excellence and Sustainable Places Research InstituteCardiff UniversityCardiff Wales UK
Dr Daniel Newman is a research assistant at Cardiff Business School working within the Cardiff University Electric Vehicle Centre of Excellence His activities are primarily focused on the ENEVATE project conducting social research investigating the potential for increasing electric vehicle uptake in northwest Europe He was previously a research assistant at the University of Bristol Law School looking at environmental law and health and safety regulations Prior to this he completed an ESRC‐funded PhD in the University of Bristol Law School investigating the state of access to justice which was published as a book by Hart in 2012
Ben WallerSenior Researcher ICDPInternational Car Distribution Programme (ICDP)Cardiff Wales UK
Ben is a senior researcher at the International Car Distribution Programme (ICDP) and based in the United Kingdom ICDP is an international research‐based organization focused on auto-motive distribution including the supply and retailing of new and used vehicles aftersales network structures and operations Through research activities data services education events and consulting ICDP works with vehicle makers dealers suppliers and related orga-nizations to improve the quality and effectiveness of the distribution model Ben has presented to a range of international audiences from academic conferences to senior executives and also authors articles for business press and delivers executive teaching
xvi Notes on Contributors
Lorraine WhitmarshSchool of PsychologyCardiff UniversityCardiff Wales UK
Dr Lorraine Whitmarsh is an environmental psychologist specializing in perceptions and behaviour in relation to climate change energy and transport She is a senior lecturer in the School of Psychology at Cardiff University UK Lorraine is also a partner coordinator for the Tyndall Centre for Climate Change Research and a research associate of Cardiff Universityrsquos Centre for Business Relationships Accountability Sustainability and Society (BRASS) and the Sustainable Places Research Institute She sits on the Climate Change Commission for Wales advising Welsh government on transport and behaviour change
David A WolfeProfessor of Political Science andCo‐director Innovation Policy LabMunk School of Global Affairs University of TorontoToronto Ontario Canada
David A Wolfe is a professor of political science at UTM and a co‐director of the Innovation Policy Lab at the Munk School of Global Affairs in Toronto From 2009 to 2014 he was the Royal Bank Chair in Public and Economic Policy at the University of Toronto He is currently leading a major partnership grant on Creating Digital Opportunity Canadarsquos ICT Industry in Global Perspective funded by the Social Sciences and Humanities Research Council of Canada He is also participating in the project on manufacturing policy and the Canadian auto-motive sector based in the Automotive Policy Research Centre at McMaster University
Dimitrios XeniasSchool of PsychologyCardiff UniversityCardiff Wales UK
Dr Dimitrios Xenias is a social and environmental psychologist focusing on sustainable travel and associated behaviours such as mode choice on domestic energy‐related behaviours and on perceptions of climate change and its communication He is a research associate in the School of Psychology at Cardiff University UK Dimitrios is also an associate of the Tyndall Centre for Climate Change Research and a research associate of Cardiff Universityrsquos Centre for Business Relationships Accountability Sustainability and Society (BRASS) and the Sustainable Places Research Institute
Series Preface
The automotive industry is one of the largest manufacturing sectors in the global community Not only does it generate significant economic benefits to the worldrsquos economy but the auto-mobile is highly linked to a wide variety of international concerns such as energy consump-tion emissions trade and safety The primary objective of the Automotive Series is to publish practical and topical books for researchers and practitioners in the industry and postgraduatesadvanced undergraduates in automotive engineering
The series addresses new and emerging technologies in automotive engineering supporting the development of more fuel‐efficient safer and more environmentally friendly vehicles It covers a wide range of topics including design manufacture and operation and the intention is to provide a source of relevant information that will be of interest and benefit to people working in the field of automotive engineering
This book The Global Automotive Industry presents a broad spectrum view of the automo-tive sector from the technology industry and policy perspectives In the early chapters of the book an understanding of the industry from a social technical and economic perspective is presented This is followed by a discussion of the fabric of next‐generation vehicle systems as it is woven into a global society This discussion is expanded to include the economic impact of the automotive industrial sector on nationsrsquo economies from production operationsrevenue to job growth This text goes beyond regional thinking with respect to automotive production and discusses the historic expansion of automotive manufacturing giants in Korea and the new emerging markets in China and potentially India
The text finishes with an excellent overview of emerging technologies and economies that will be pivotal to the automotive sector These discussions are then presented in the light of new business models in a global marketplace and the impact of regulation on the automobile as well as its manufacture These topics are well integrated into the earlier topics presented in the book and make it a unique and valuable crosscutting source of information for the reader
The Global Automotive Industry integrates these topics in a unique and thought‐provoking manner that provides significant insight into global automotive production regulation and
xviii Series Preface
economic impact on society It is a forward‐thinking text that considers a wide variety of topics that will drive this major industry and the global economy for the foreseeable future It is written by highly recognized experts in the field and is a welcome addition to the Automotive Series
Thomas KurfessJuly 2015
Foreword
The global automotive industry is a complex and demanding topic for any book It is clear following my 30‐year career within the automotive industry that only a comparatively small number of individuals have a comprehensive understanding of a vehiclersquos full construction Even after decades of professional involvement it can be difficult for an individual to have a full appreciation of the subject and its international infrastructure and landscape
From pre‐production to the factory floor and the boardroom knowledge sharing is incred-ibly important to the future of the automotive engineering profession With future mobility solutions being vital to modern society and with the needs of each region differing depending on capabilities and production facilities communication amongst the worldrsquos engineers pro-vides a route to approaching and accommodating the global social political and economic considerations that the future will demand
FISITA has successfully coordinated global communications amongst its network of over 200 000 professional engineers from member societies in 37 countries for over 60 years This demonstrates the point through many generations that sharing of knowledge and ideas amongst an industry as large as automotive including engineers academics and executives is vital as it provides us all with the tools to contribute to a better future
As part of this journey global collaboration within the industry is also necessary in order to deliver a clear message to wider society that the automotive engineering profession is well placed to face the challenges of today and tomorrow
Paul Nieuwenhuis and Peter Wells have provided us with a very good starting point The authors are able to present the wide scope of the industry in a clear way whilst contributing a wealth of knowledge about the global automotive industry
Chris MasonCEO FISITA
The Global Automotive Industry First Edition Edited by Paul Nieuwenhuis and Peter Wells copy 2015 John Wiley amp Sons Ltd Published 2015 by John Wiley amp Sons Ltd
Introduction and OverviewPaul Nieuwenhuis1 and Peter Wells2
1 Centre for Automotive Industry Research and Electric Vehicle Centre of Excellence Cardiff Business School Cardiff University Cardiff Wales UK2 Centre for Automotive Industry Research Cardiff Business School Cardiff University Cardiff Wales UK
11 Introduction
It is an impossible task to do full justice in one book to the global automotive industry with the pervasive impact economic significance and cultural status that it brings As editors our task is as much one of selective omission as one of collation to create an account of the business of mak-ing selling and using cars that is both representative and yet respectful of the diversity we know to be a feature of the industry Moreover this is an industry in the midst of reinventing itself It had seemed to some both inside and outside the industry around the turn of the millennium that this was a lsquosunsetrsquo industry characterized by over‐capacity plant closures job losses declining profitability and a product that seemed unsuited to meeting the environmental and social chal-lenges arising from mass car ownership and use The combination of profound environmental pressures and endemic economic distress appeared to call into question the pre‐eminent position enjoyed by the car in providing for personal mobility and the viability of the industry behind this most contradictory of products These concerns came to a peak with the arrival of the global economic crisis around 2007ndash2008 which resulted in new car sales falling steeply in the established markets and investment freezing while the entire financial community held its collective breath to see whether the world would plunge into an economic abyss Those looking closely at urban developments and the changing cultural priorities of young people started to whisper about the concept of lsquopeak carrsquo in which the high tide of automobility had been reached in the saturated markets of the European Union North America Japan and Korea
Yet only a few years later the industry has reemerged burnished by the embrace of new technologies and with resurgent sales in the previously moribund West being more than matched by the frenetic growth of sales in China and elsewhere Regulatory interventions
1
2 The Global Automotive Industry
such as the European Union fleet average carbon emissions targets that were once seen as burdensome and punitive have arguably helped stimulate the technological renaissance of the industry alongside the realization that there might be other routes to profitability Later chap-ters in the book are more concerned with this recent period of transformation and the possible futures it portends Chapter 16 for example is about the impact of the electric vehicle while Chapter 18 links technology change with possible innovations in business models forced on the industry by such technological changes Chapter 19 is more speculative but offers up some signposts for the future of automobility and the automotive industry
This is not to say that the process of change has been without stress or consequence Restructuring of the industry has continued apace the merger of Chrysler and Fiat came as a consequence of several years of corporate turmoil while the rescue of PSA by the French government and by the Chinese company Dongfeng costs the Peugeot family their control over this long established business ndash the oldest in the industry The great expectations held for battery electric vehicles remain as yet largely unrealized despite the highly visible and expen-sive efforts of companies like Nissan Renault and BMW alongside the publicity‐garnering machine that is Tesla In the meantime high‐profile failures such as the battery swap business Better Place serve as stark reminders that attempts to reinvent this industry especially by new entrants are fraught with hazard At the same time markets in the European Union have not really recovered to pre‐crisis levels and perhaps never will
So despite an apparent lsquobusiness‐as‐usualrsquo attitude permeating the automotive industry at the moment in reality it is subject to potentially radical change Only a few years ago we saw two of the worldrsquos largest car manufacturers General Motors and Chrysler on the brink of collapse Having decided both were lsquotoo big to failrsquo they had to be bailed out by the American tax‐payer Ford managed without direct government support but it is nevertheless quite clear that the collapse of the supply base that would have resulted from a collapse of both their key domestic competitors GM and Chrysler would also have dragged down Ford in due course Within a matter of months the worldrsquos most prominent car industry and the oldest mass production car industry could have disappeared only intervention from the public sector saved this key compo-nent of the private sector underlining that apart from anything else the close synergies and intertwined relationships continue to exist between the private and public sectors in developed countries (Mazzucato 2013) This highlights not only the weaknesses inherent in the close links between the financial and car systems but also indicates that the current mass production system whether seen as Fordist or Buddist (see below) may well be due for a rethink in several respects
In Europe the apparent success of Germany more recently the UK automotive industry is easily misunderstood leading perhaps to overconfidence but do note that the secret of success in Europe is largely confined to the more upmarket segments with the Germans the primary beneficiaries and that this success is very reliant on demand from Asia particularly China it has therefore made Europe ndash and also the United States particularly GM ndash very dependent on that far from stable market as also outlined in more detail in Chapter 10 At the same time pressures to make the car more environmentally compatible as we see it have not only led to cars with much less harmful tailpipe emissions but the more recent pressure to reduce the carbon footprint of cars particularly focused on their emissions of the greenhouse gas carbon dioxide has the potential to radically reshape the industry and its products These regulatory pressures are reviewed in Chapter 14 although the potential impact of this agenda is not yet fully understood but it has already led to a new wave of alternative powertrain vehicles in the market ranging from early petrol‐electric hybrids ndash including the now iconic Toyota Prius ndash via
Introduction and Overview 3
so‐called range‐extended and plug‐in hybrids such as the GM Volt and Ampera to full battery‐electric vehicles such as the Nissan Leaf Renault Zoe and Tesla Model S Such developments as well as the introduction of the even more radical BMW i3 which not only introduces a full battery‐electric powertrain but also houses this within a radical departure from the tried and tested lsquoBuddistrsquo (see Chapter 5) all‐steel body in using a carbon fibre body on an aluminium chassis are clear signs that business‐as‐usual is steadily being undermined even from within the established industry
Despite the size of the industry car making is in reality a very precarious business In its present form it lacks resilience it is not sustainable This is true not just in terms of environmental sustainability where it clearly is not measuring up but even in terms of basic economic sustainability Yet this industry is still crucially important representing a significant part of the economy in many industrialized countries as well as many newly industrializing economies notably China In addition the car‐based transport system or lsquoregimersquo (Geels et al 2012) which extends well beyond the industry that makes cars to the way in which auto-mobility has become integrated in our societies and cultures has become so embedded that its removal would lead to widespread social and economic crisis
In some regards therefore this book may be a testimony to a dying era as much as a hymnal to a new one Thus far the automotive industry has managed to contain the pressures for change both economic and environmental within the broad ambit of the long‐standing business model of the mainstream vehicle manufacturers In parallel those purchasing and using cars in the traditional manner have remained by far the majority compared with more innovative solutions such as car clubs city car sharing schemes and other alternatives that might presage the end of established automobility cultures The question is whether the collective and cumulative impact of all the new developments sweeping through the industry will be sufficient to herald the arrival of a new lsquoautomotive ecosystemrsquo as some have termed it or lsquoregimersquo according to others and one in which the dominance of the established vehicle manufacturers and their entrenched supply chains is challenged by a new order of communi-cations and mobility providers Some caution on these issues is urged here The automotive industry is not immune to hype cycles or the fevered imaginations of those professional change‐mongers with a vested interest in fermenting and emphasizing the new over the continuous
12 Continuity and Change
The book as a whole therefore represents an attempt to capture continuity and change in the global automotive industry this theme is brought to the fore in the first main chapter of the book Chapter 2 as change is very much a feature of the current phase of the automotive system Change of course needs to be seen in historical perspective and as such many of the chapters offer up a historical narrative that builds a temporal dynamic into the account of the subject under consideration There is some need in seeking to understand the structures and practices of the present to delve into the past If nothing else path dependency theory tells us that many decisions are nonlinear irreversible steps that result in distinct historical outcomes bounded by time and place As we have sought to delineate elsewhere the cluster of innovations that created the template for the mass production automotive industry occurred largely in the United States in the early years of the twentieth century the Ford moving assembly line with standardized and inter‐changeable parts the Budd all‐steel body that could be stamped
4 The Global Automotive Industry
welded and painted and the Sloan multi‐brand company with marketing innovations such as consumer credit and annual model changes these developments are outlined in Chapter 5 Despite many years of incremental change the basic architecture of the industry remains in place That such durability is evident speaks volumes for the scope for productivity improve-ment within this basic architecture over many decades and the efficacy of the system as a whole in terms of matching the imperatives of production economics to the demands of the market For this reason key early chapters in the book for example Chapters 3 4 5 and 6 are about the production system and the market for cars There is no subscription here to the simple neoclassical economics assumption that lsquoconsumersrsquo demand and lsquoproducersrsquo provide Rather there is a continuing dynamic tension between supply and demand sides that is never entirely resolved
13 Overview
The chapters in this book are thus essentially an attempt to take stock of the industry in its present state of a well‐established industry on the verge of potentially radical change tracking some of its history ndash trying to answer the question of how did we get here ndash assessing key aspects of its current state while also plotting some possible futures for the industry and its products This book does not seek to present chapters that are held together by a common the-oretical thread Such works can be tremendously informative and insightful (see Geels et al 2012) but of course tend to place primary emphasis on the question of theoretical coherence Rather the approach here has been more agnostic in theoretical terms and has been to seek insights and individual views by those who are established experts in their fields and who are known for their knowledge of the automotive industry (or a specific aspect of it) alongside their particular theoretical or methodological frameworks Each chapter is thus a cameo able to stand alone as a concise insight into one dimension of this multi‐faceted industry but also serves as a piece in the jigsaw that describes and explains how this industry really works
There are some gaps of course It is not possible to give consideration to all the countries producing cars and the unique contexts within which they operate The salience of the lsquovari-eties of capitalismrsquo school of thought (see Section 23) is acknowledged here and some com-parative chapters are pertinent to this school notably those on labourndashmanagement relations in North America and Japan (Chapters 7 and 8 respectively) While the question of labour relations in Japan has remained largely immune to external influence (notwithstanding the substantial impact of Renault on operations at Nissan and the rather lesser impact of Ford on Mazda) the story in North America has a strong thread in which lsquoJapanizationrsquo has been highly significant Chapters 9 10 and 11 cover the broad sweep of the automotive industry in Asia highlighting South Korea China and India respectively ndash both Korea and India have become comparatively neglected in view of the immense attention directed at China Interestingly both these countries are more than passive recipients of automobility and can claim to be home to significant companies within the industry of the modern era while also representing unique markets
An apparent gap in the account includes a chapter that explicitly deals with the global supply chain of components and raw materials to the vehicle manufacturers ndash where typically up to 85 of the ex‐works value of a new car is accounted for by bought in components and materials The theme of supply chain management is an important facet of the industry but
This edition first published 2015copy 2015 John Wiley amp Sons Ltd
Registered OfficeJohn Wiley amp Sons Ltd The Atrium Southern Gate Chichester West Sussex PO19 8SQ United Kingdom
For details of our global editorial offices for customer services and for information about how to apply for permission to reuse the copyright material in this book please see our website at wwwwileycom
The right of the author to be identified as the author of this work has been asserted in accordance with the Copyright Designs and Patents Act 1988
All rights reserved No part of this publication may be reproduced stored in a retrieval system or transmitted in any form or by any means electronic mechanical photocopying recording or otherwise except as permitted by the UK Copyright Designs and Patents Act 1988 without the prior permission of the publisher
Wiley also publishes its books in a variety of electronic formats Some content that appears in print may not be available in electronic books
Designations used by companies to distinguish their products are often claimed as trademarks All brand names and product names used in this book are trade names service marks trademarks or registered trademarks of their respective owners The publisher is not associated with any product or vendor mentioned in this book
Limit of LiabilityDisclaimer of Warranty While the publisher and author have used their best efforts in preparing this book they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose It is sold on the understanding that the publisher is not engaged in rendering professional services and neither the publisher nor the author shall be liable for damages arising herefrom If professional advice or other expert assistance is required the services of a competent professional should be sought
Library of Congress Cataloging‐in‐Publication Data applied for
ISBN 9781118802397
A catalogue record for this book is available from the British Library
Set in 1012pt Times by SPi Global Pondicherry India
1 2015
Contents
Notes on Contributors xiSeries Preface xviiForeword xix
1 Introduction and Overview 111 Introduction 112 Continuity and Change 313 Overview 4References 6
2 Understanding Change and Difference in the Global Automotive Industry 721 Introduction 722 Socio‐Technical Transitions 923 Varieties of Capitalism 1224 Global Value Chains 1425 Change in the Automotive Industry A Synthesis 1526 Conclusions 16References 17
3 The Market for New Cars 1931 Introduction 1932 Market Fragmentation and Lack of Industry Consolidation 2033 Geography of Markets 2234 Mobility Services and the Emergent Automotive Ecosystem 2635 Conclusions 27References 27
4 Understanding People and Cars 2941 Influences on Travel Choices 2942 Influences on Vehicle Choice 33
vi Contents
43 Acceptability of Transport Policies and New Technologies 3444 Conclusions 36References 37
5 Car Manufacturing 4151 Background and Prehistory 4152 Ford Budd and Sloan The History of Mass Car Production 4253 Monocoque Construction Buddrsquos Impact on Car Design 4454 Toyotism 4555 Buddism in Crisis 4656 Lean v Agile 4757 Conclusions 49References 50
6 Recent Trends in Manufacturing Innovation Policy for the Automotive Sector A Survey of the United States Mexico European Union Germany and Spain 5361 Introduction 5362 A Changing Manufacturing Landscape 5563 Restructuring in the Automotive Industry 5664 Automotive Policies in the United States Mexico EU Germany and Spain 57
641 United States 57642 Mexico 59643 European Union 60644 Germany 61645 Spain 62
65 Conclusion 63References 64
7 Labour Relations and Human Resource Management in the Automotive Industry North American Perspectives 6771 Introduction 6772 From Fordist Production to Lean Production The Evolution of
Labour RelationsHuman Resource Management Systems in the North American Auto Industry Prior to 2000 70721 The Classic Fordist Industrial Relations System in the
US and Canadian Automotive Industries 70722 The Impact of Japanese Transplants and Lean Production
Methods on the North American Automotive Labour Relations System 72
73 Developments in North American Auto Labour Relations Since 2000 74731 Concession Bargaining 2003ndash2008 74732 The Impact of the Global Financial Crisis 76733 Post‐Crisis Developments 78
74 Conclusion 78References 80
Contents vii
8 Labour Relations and HRM in the Automotive Industry Japanese Impacts 8381 Introduction The Japanese Car Industry and Toyota Production System 8382 TPS and Japanese HRM 8583 lsquoJapanizationrsquo of the Global Automotive Industry 8884 Changes in Japanese Labour Relations and HRM 9085 Concluding Remarks 92References 93
9 The Rise of South Korean (or Korean) Automobile Industry 9591 Introduction 9592 A Brief History of South Korean Automobile Industry
and the Performance of HMC 96921 Brief History of South Korean Automobile Industry 96922 The Change in Performance of HMG 100
93 Considering Five Success Factors of HMC 102931 Vertical Integration 102932 Modularization of Production and Standardization 102933 Expansion of Overseas Production Capabilities
in Emerging Markets 104934 Product Strategy 104935 Quality Focused and Design Focused Management 105
94 Characteristics of HRM in HMC and Effects on the Management System 106941 Militant Trade Union Movement and Confrontational
Labour‐Management Relations 106942 Fragmentation and Automation of Work 106943 Internal Competition Systems 107
95 Conclusion New Challenges for the Korean Auto Makers as Multinational Enterprises 107
References 108
10 Chinarsquos Car Industry 109101 Background 109102 Pre‐History 110103 Chinarsquos Car Industry 111104 The Role of Government 114
1041 Traditional Automobile Industries 114105 New Energy Vehicles 118
1051 RampD Support 1181052 Industrialization 119
106 Bringing NEVs to Market 1211061 Demonstration and Pilot Projects Strategic Niche Management 1211062 Financial Incentives 122
107 Conclusions 124References 124
viii Contents
11 Forging Ahead or Stagnating An Analysis of Indian Automotive Industry 127111 Introduction 127112 History of the Indian Automotive Industry 128113 Statistics on Automobile Industry Performance 132114 Stagnation of Industry in 2013ndash2014 133115 Factors Critical to the Growth of the Indian Automotive Industry 133116 Challenges and Future of Indian Automotive Industry 134References 136
12 From Factory to End‐User An Overview of Automotive Distribution and the Challenges of Disruptive Change 139121 Shipping and Stocking Cars 140122 Retail and Distribution 143123 Changes to the Dealer Model 146124 The Changing Role of Fleets 148125 Delivering Integrated Services Means Rethinking Skills 150References 150
13 Impacts of Automobility 153131 Introduction 153132 Externalities and Automobility A Broad Perspective 153133 Death and Injuries from Road Traffic 154134 Environmental Impacts 156135 Toxic Emissions 157136 Current Concerns 159137 Role of the Consumer 160138 Conclusions 161References 161
14 Regulating the Car 163141 Regulating for Safety 163
1411 Development of Vehicle Standards 1641412 European Directives 1641413 US Federal Motor Vehicle Safety Standards 166
142 New Car Assessment Programmes 167143 Future Developments 168
1431 Impact of New Vehicle Technologies 169144 Legislating for a Cleaner Environment 170
1441 Fuel Economy Incentives and Disincentives 171145 Climate Change 172146 Future Developments 173References 174
15 Global versus Local Regionalism in a Global Industry 177151 The Old World 177152 Asia 179
1521 The Creation of Two Motoring Cultures India v China 179
Contents ix
153 Latin America 180154 Case Study On the Margins of Mass Production Australia 181References 184
16 The Impact of Electric Automobility 185161 Electric Vehicle Design 185
1611 Battery Electric Vehicles 1861612 Hybrid Electric Vehicles 186
162 Charging Infrastructure ndash UK Case Study 187163 Electric Vehicles in Europe 191
1631 Urban Electric Vehicles 1931632 Rural Electric Vehicles ndash The Welsh Case 193
164 Conclusions 197References 197
17 Alternatives to the Car 199171 Introduction 199172 Defining the Car Legislative and Market Boundaries 200173 The Hidden World of Non‐Car Automobility 202174 Transition by Stealth The 2W‐BEV 203
1741 3W‐BEVs 205175 Conclusions 206References 206
18 New Business Models and the Automotive Industry 209181 Introduction 209182 Fundamentals of the Existing Automotive Industry Business Model 210183 Pressures for Change on the Existing Business Model 212184 Incremental Business Model Evolution in the Automotive Industry 213185 Radical Business Model Innovation in the Automotive Industry 214186 Conclusions and Future Prospects for Business Model Innovation 216References 216
19 Future Challenges for Product and Industry 219191 Introduction 219192 New Engine Technologies 220193 Owning or Sharing 223194 The Future Car 223195 The Future Industry 224References 226
Index 229
Notes on Contributors
Editorsrsquo Profiles
Paul NieuwenhuisCentre for Automotive Industry Research and Electric Vehicle Centre of ExcellenceCardiff Business School Cardiff UniversityCardiff Wales UK
Dr Paul Nieuwenhuis is a senior lecturer at Cardiff University He joined the Centre for Automotive Industry Research (CAIR) at Cardiff University in 1991 and he became one of its two directors in 2006 He was a founder member of the ESRC Centre for Business Relationships Accountability Sustainability and Society (BRASS) and is an associate of the Sustainable Places Research Institute His main interests are historic and environmental and his publica-tions have been in these areas for example The Green Car Guide (1992) and Sustainable Automobility (2014) He also contributed to the Beaulieu Encyclopaedia of the Automobile (2000) which won a Cugnot Award from the Society of Automotive Historians Dr Nieuwenhuis has produced around 300 publications ranging from books and academic papers to conference papers for both academic and business audiences and journalistic pieces Dr Nieuwenhuis is a member of the Guild of Motoring Writers
Peter WellsCentre for Automotive Industry ResearchCardiff Business School Cardiff UniversityCardiff Wales UK
Peter Wells is a professor of sustainable business models at Cardiff Business School where his work has ranged across spatial industrial development economics organizational theory industrial ecology technological change transition theory business models and sustainability ndash all through an applied focus on the global automotive industry Professor Wells has over 550 publications reaching academia industry policy and stakeholder audiences through tradi-tional papers and books Internet publications and more recently webinars
xii Notes on Contributors
Contributorsrsquo Profiles
Katsuki AokiSchool of Business AdministrationMeiji UniversityTokyo Japan
Dr Katsuki Aoki is an associate professor in the School of Business at Meiji University in Japan He received his PhD in business administration from Meiji University in 1999 His main research interests include (i) international comparative studies on the implementation of kaizen activities (ii) the benefits and limitations of the keiretsu system (OEMndashsupplier rela-tionships) in the automotive industry and (iii) mass customization and order fulfilment systems in the automotive industry His paper entitled lsquoTransferring Japanese kaizen activities to over-seas plants in Chinarsquo was selected as one of the most prominent papers at the Emerald Literati Network Awards for Excellence 2009
Liana M CipciganElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Dr Liana M Cipcigan is a senior lecturer in the School of Engineering at Cardiff University leading the research of integration and control of EVs in electricity and transportation net-works She is a member of the Electric Vehicle Centre of Excellence (EVCE) Her current research activities are focused on smart grids distributed generation and EV integration and control She has significant research experience in EU projects FP6 More Microgrids FP7 Mobile Energy Resources in Grids of Electricity (MERGE) and ERDF ENEVATE She is the principal investigator (PI) of the EPSRC projects lsquoSmart Management of Electric Vehiclesrsquo and lsquoElectric Vehicle Value Chain ndash Bridging the Gapsrsquo She is participating in the UKERC project lsquoSmart Grids Scenarios for UKrsquo and TSB project lsquoAgent‐Based Controllers for Electric Vehicles and Micro‐generatorsrsquo She is a member of CEN‐CLC eMobility working group on Smart Charging and IEEE P20301 working group on standards for EVs and related infrastructure
Huw DaviesElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Dr Huw Davies is a lecturer in mechanical engineering at Cardiff University School of Engineering His background is in vehicle engineering and the development of vehicle safety standards He has advised the UK Department for Transport the European Commission and the Automotive Industry At Cardiff University he has developed the transport research theme Safety mobility and emissions are at its core The universal goals are zero collisions zero congestion and zero emissions Dr Davies leads Cardiff Universityrsquos Electric Vehicle Centre of Excellence
Notes on Contributors xiii
Ceri DonovanElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Ceri Donovan is a research assistant at Cardiff University School of Engineering and a member of Cardiff Universityrsquos Electric Vehicle Centre of Excellence She spent most of her time in recent years working on ENEVATE which aimed to accelerate the uptake of e‐mobility in northwest Europe This includes conducting research on all aspects of electric vehicles including market drivers and mobility concepts vehicle safety and regulations She previously worked in defence research primarily focusing on how to integrate new technology onto existing platforms from the procurement as well as the practical perspectives She has an MSc in biometry from the University of Reading
Patrick GalvinInnovation Policy LabMunk School of Global AffairsUniversity of TorontoToronto Ontario Canada
Patrick Galvin is a postdoctoral research fellow with the Innovation Policy Lab at the Munk School of Global Affairs where he is part of a research team investigating the dynamics of devel-oping a new automotive policy for the Canadian automotive industry for the twenty‐first century He is also working on the SSHRC‐funded Creating Digital Opportunity project Prior to his current appointment and after having obtained both his BA (honours) and MA degrees in political science Patrick spent several years working in the housing policy field with a number of consulting firms Patrick enrolled in the PhD programme in politics at the University of Exeter in England He completed his dissertation in November 2012 and he was formally awarded his PhD degree in July 2012 Patrickrsquos PhD dissertation built on his training in public policy and political economy by examining how local government in the city of Toronto develops its cluster‐related innovation policy It focuses on two empirical case studies to see how the city develops its cluster policy for two industrial sectors the aerospace sector and the fashion sector
Elena GoracinovaInnovation Policy LabMunk School of Global AffairsUniversity of TorontoToronto Ontario Canada
Elena Goracinova is a PhD candidate in political science working at the University of Torontorsquos Munk School of Global Affairs Innovation Policy Lab with Professor David Wolfe She received her masterrsquos degree in geography from the University of Toronto with a thesis on manufacturing in developed economies She is interested in studying the role of the state in economic policymaking Her current work focuses on the scope and effectiveness of advanced manufacturing policies in Canada
xiv Notes on Contributors
John HolmesProfessor EmeritusDepartment of GeographyQueenrsquos UniversityKingston Ontario Canada
John Holmes is a professor of geography at Queenrsquos University in Kingston Ontario Canada He received his BSc (honours) and MA (social science) degrees from the University of Sheffield and his PhD from Ohio State University He is also affiliated with the graduate industrial relations programme in the Queenrsquos School of Policy Studies His research focuses on geographical aspects of the political economy of contemporary economic and social change and in particular on the contemporary restructuring and reorganization of production and work in North America Empirical research and writing have focused primarily on the automobile industry For a list of selected publications see httpgeogqueensucafacultyholmesasp
Seunghwan KuFaculty of Business AdministrationKyoto Sangyo UniversityKyoto Japan
Seunghwan Ku is a professor of technology of management of the Faculty of Business Administration Kyoto Sangyo University He received his PhD (management of technology) from the University of Tokyo Japan His dissertation entitled lsquoThe Dynamism of Product Architecture Modularization Knowledge Integration Interfirm Linkagersquo was published by Mineruba Shobo a major publisher in Japan His recent publications include lsquoEconomic Analysis of ICT Innovationrsquo (2011) with M Fujiwara and lsquoShip Development and Shipbuilding Industry The Constraint of Large Artifact Development and the Uncertainty of Business Modelrsquo with H Kato in T Fujimoto ed lsquoCoping with Complex Artifactsrsquo (2013) His current research interests are (i) product development (ii) logistics and inter‐firm linkages (iii) prod-uct strategy and innovation and (iv) supplier system in Korean and Japanese industries the auto sector in particular
Maneesh KumarCentre for Automotive Industry ResearchCardiff Business School Cardiff UniversityCardiff Wales UK
Dr Maneesh Kumar is a senior lecturer at Cardiff Business School Cardiff University UK His research interests are primarily in the area of quality management Lean Six Sigma (LSS) and service recovery within manufacturing service and public sector organizations His recent research within Indian automotive industry focuses on understanding the best‐in‐class practices in diffusing LeanKaizen practice at supply network level and how automotive giants (OEMs) support and develop their suppliers (at Tier 1 and Tier 2 level) His research outputs include an edited book five edited conference proceedings three book chapters and over 80 peer‐reviewed
Notes on Contributors xv
journal publications and conference papers He has been involved in delivering LSS training up to black‐belt level and delivered several workshops on LSS application in several blue chip companies He is also a regular speaker at international conferences and seminars on LSS and process excellence
Xiao LinCentre for Automotive Industry ResearchLogistics and Operations Management SectionCardiff Business School Cardiff UniversityCardiff Wales UK
Xiao Lin is a PhD student in the logistics and operations management section at Cardiff Business School Cardiff University Her research interests include sustainability transition theory business models etc Her PhD research project is specifically focusing on the study of the future prospect for e‐bikes in sustainable mobility in China through various quantitative and qualitative analysis methods Xiao Lin is enthusiastic in contributing to the collaboration of the sustainable community She is a member of the organizing committee of the lsquoThe 2014 Global Research Forum Sustainable Production and Consumption Conferencersquo
Daniel NewmanElectric Vehicle Centre of Excellence and Sustainable Places Research InstituteCardiff UniversityCardiff Wales UK
Dr Daniel Newman is a research assistant at Cardiff Business School working within the Cardiff University Electric Vehicle Centre of Excellence His activities are primarily focused on the ENEVATE project conducting social research investigating the potential for increasing electric vehicle uptake in northwest Europe He was previously a research assistant at the University of Bristol Law School looking at environmental law and health and safety regulations Prior to this he completed an ESRC‐funded PhD in the University of Bristol Law School investigating the state of access to justice which was published as a book by Hart in 2012
Ben WallerSenior Researcher ICDPInternational Car Distribution Programme (ICDP)Cardiff Wales UK
Ben is a senior researcher at the International Car Distribution Programme (ICDP) and based in the United Kingdom ICDP is an international research‐based organization focused on auto-motive distribution including the supply and retailing of new and used vehicles aftersales network structures and operations Through research activities data services education events and consulting ICDP works with vehicle makers dealers suppliers and related orga-nizations to improve the quality and effectiveness of the distribution model Ben has presented to a range of international audiences from academic conferences to senior executives and also authors articles for business press and delivers executive teaching
xvi Notes on Contributors
Lorraine WhitmarshSchool of PsychologyCardiff UniversityCardiff Wales UK
Dr Lorraine Whitmarsh is an environmental psychologist specializing in perceptions and behaviour in relation to climate change energy and transport She is a senior lecturer in the School of Psychology at Cardiff University UK Lorraine is also a partner coordinator for the Tyndall Centre for Climate Change Research and a research associate of Cardiff Universityrsquos Centre for Business Relationships Accountability Sustainability and Society (BRASS) and the Sustainable Places Research Institute She sits on the Climate Change Commission for Wales advising Welsh government on transport and behaviour change
David A WolfeProfessor of Political Science andCo‐director Innovation Policy LabMunk School of Global Affairs University of TorontoToronto Ontario Canada
David A Wolfe is a professor of political science at UTM and a co‐director of the Innovation Policy Lab at the Munk School of Global Affairs in Toronto From 2009 to 2014 he was the Royal Bank Chair in Public and Economic Policy at the University of Toronto He is currently leading a major partnership grant on Creating Digital Opportunity Canadarsquos ICT Industry in Global Perspective funded by the Social Sciences and Humanities Research Council of Canada He is also participating in the project on manufacturing policy and the Canadian auto-motive sector based in the Automotive Policy Research Centre at McMaster University
Dimitrios XeniasSchool of PsychologyCardiff UniversityCardiff Wales UK
Dr Dimitrios Xenias is a social and environmental psychologist focusing on sustainable travel and associated behaviours such as mode choice on domestic energy‐related behaviours and on perceptions of climate change and its communication He is a research associate in the School of Psychology at Cardiff University UK Dimitrios is also an associate of the Tyndall Centre for Climate Change Research and a research associate of Cardiff Universityrsquos Centre for Business Relationships Accountability Sustainability and Society (BRASS) and the Sustainable Places Research Institute
Series Preface
The automotive industry is one of the largest manufacturing sectors in the global community Not only does it generate significant economic benefits to the worldrsquos economy but the auto-mobile is highly linked to a wide variety of international concerns such as energy consump-tion emissions trade and safety The primary objective of the Automotive Series is to publish practical and topical books for researchers and practitioners in the industry and postgraduatesadvanced undergraduates in automotive engineering
The series addresses new and emerging technologies in automotive engineering supporting the development of more fuel‐efficient safer and more environmentally friendly vehicles It covers a wide range of topics including design manufacture and operation and the intention is to provide a source of relevant information that will be of interest and benefit to people working in the field of automotive engineering
This book The Global Automotive Industry presents a broad spectrum view of the automo-tive sector from the technology industry and policy perspectives In the early chapters of the book an understanding of the industry from a social technical and economic perspective is presented This is followed by a discussion of the fabric of next‐generation vehicle systems as it is woven into a global society This discussion is expanded to include the economic impact of the automotive industrial sector on nationsrsquo economies from production operationsrevenue to job growth This text goes beyond regional thinking with respect to automotive production and discusses the historic expansion of automotive manufacturing giants in Korea and the new emerging markets in China and potentially India
The text finishes with an excellent overview of emerging technologies and economies that will be pivotal to the automotive sector These discussions are then presented in the light of new business models in a global marketplace and the impact of regulation on the automobile as well as its manufacture These topics are well integrated into the earlier topics presented in the book and make it a unique and valuable crosscutting source of information for the reader
The Global Automotive Industry integrates these topics in a unique and thought‐provoking manner that provides significant insight into global automotive production regulation and
xviii Series Preface
economic impact on society It is a forward‐thinking text that considers a wide variety of topics that will drive this major industry and the global economy for the foreseeable future It is written by highly recognized experts in the field and is a welcome addition to the Automotive Series
Thomas KurfessJuly 2015
Foreword
The global automotive industry is a complex and demanding topic for any book It is clear following my 30‐year career within the automotive industry that only a comparatively small number of individuals have a comprehensive understanding of a vehiclersquos full construction Even after decades of professional involvement it can be difficult for an individual to have a full appreciation of the subject and its international infrastructure and landscape
From pre‐production to the factory floor and the boardroom knowledge sharing is incred-ibly important to the future of the automotive engineering profession With future mobility solutions being vital to modern society and with the needs of each region differing depending on capabilities and production facilities communication amongst the worldrsquos engineers pro-vides a route to approaching and accommodating the global social political and economic considerations that the future will demand
FISITA has successfully coordinated global communications amongst its network of over 200 000 professional engineers from member societies in 37 countries for over 60 years This demonstrates the point through many generations that sharing of knowledge and ideas amongst an industry as large as automotive including engineers academics and executives is vital as it provides us all with the tools to contribute to a better future
As part of this journey global collaboration within the industry is also necessary in order to deliver a clear message to wider society that the automotive engineering profession is well placed to face the challenges of today and tomorrow
Paul Nieuwenhuis and Peter Wells have provided us with a very good starting point The authors are able to present the wide scope of the industry in a clear way whilst contributing a wealth of knowledge about the global automotive industry
Chris MasonCEO FISITA
The Global Automotive Industry First Edition Edited by Paul Nieuwenhuis and Peter Wells copy 2015 John Wiley amp Sons Ltd Published 2015 by John Wiley amp Sons Ltd
Introduction and OverviewPaul Nieuwenhuis1 and Peter Wells2
1 Centre for Automotive Industry Research and Electric Vehicle Centre of Excellence Cardiff Business School Cardiff University Cardiff Wales UK2 Centre for Automotive Industry Research Cardiff Business School Cardiff University Cardiff Wales UK
11 Introduction
It is an impossible task to do full justice in one book to the global automotive industry with the pervasive impact economic significance and cultural status that it brings As editors our task is as much one of selective omission as one of collation to create an account of the business of mak-ing selling and using cars that is both representative and yet respectful of the diversity we know to be a feature of the industry Moreover this is an industry in the midst of reinventing itself It had seemed to some both inside and outside the industry around the turn of the millennium that this was a lsquosunsetrsquo industry characterized by over‐capacity plant closures job losses declining profitability and a product that seemed unsuited to meeting the environmental and social chal-lenges arising from mass car ownership and use The combination of profound environmental pressures and endemic economic distress appeared to call into question the pre‐eminent position enjoyed by the car in providing for personal mobility and the viability of the industry behind this most contradictory of products These concerns came to a peak with the arrival of the global economic crisis around 2007ndash2008 which resulted in new car sales falling steeply in the established markets and investment freezing while the entire financial community held its collective breath to see whether the world would plunge into an economic abyss Those looking closely at urban developments and the changing cultural priorities of young people started to whisper about the concept of lsquopeak carrsquo in which the high tide of automobility had been reached in the saturated markets of the European Union North America Japan and Korea
Yet only a few years later the industry has reemerged burnished by the embrace of new technologies and with resurgent sales in the previously moribund West being more than matched by the frenetic growth of sales in China and elsewhere Regulatory interventions
1
2 The Global Automotive Industry
such as the European Union fleet average carbon emissions targets that were once seen as burdensome and punitive have arguably helped stimulate the technological renaissance of the industry alongside the realization that there might be other routes to profitability Later chap-ters in the book are more concerned with this recent period of transformation and the possible futures it portends Chapter 16 for example is about the impact of the electric vehicle while Chapter 18 links technology change with possible innovations in business models forced on the industry by such technological changes Chapter 19 is more speculative but offers up some signposts for the future of automobility and the automotive industry
This is not to say that the process of change has been without stress or consequence Restructuring of the industry has continued apace the merger of Chrysler and Fiat came as a consequence of several years of corporate turmoil while the rescue of PSA by the French government and by the Chinese company Dongfeng costs the Peugeot family their control over this long established business ndash the oldest in the industry The great expectations held for battery electric vehicles remain as yet largely unrealized despite the highly visible and expen-sive efforts of companies like Nissan Renault and BMW alongside the publicity‐garnering machine that is Tesla In the meantime high‐profile failures such as the battery swap business Better Place serve as stark reminders that attempts to reinvent this industry especially by new entrants are fraught with hazard At the same time markets in the European Union have not really recovered to pre‐crisis levels and perhaps never will
So despite an apparent lsquobusiness‐as‐usualrsquo attitude permeating the automotive industry at the moment in reality it is subject to potentially radical change Only a few years ago we saw two of the worldrsquos largest car manufacturers General Motors and Chrysler on the brink of collapse Having decided both were lsquotoo big to failrsquo they had to be bailed out by the American tax‐payer Ford managed without direct government support but it is nevertheless quite clear that the collapse of the supply base that would have resulted from a collapse of both their key domestic competitors GM and Chrysler would also have dragged down Ford in due course Within a matter of months the worldrsquos most prominent car industry and the oldest mass production car industry could have disappeared only intervention from the public sector saved this key compo-nent of the private sector underlining that apart from anything else the close synergies and intertwined relationships continue to exist between the private and public sectors in developed countries (Mazzucato 2013) This highlights not only the weaknesses inherent in the close links between the financial and car systems but also indicates that the current mass production system whether seen as Fordist or Buddist (see below) may well be due for a rethink in several respects
In Europe the apparent success of Germany more recently the UK automotive industry is easily misunderstood leading perhaps to overconfidence but do note that the secret of success in Europe is largely confined to the more upmarket segments with the Germans the primary beneficiaries and that this success is very reliant on demand from Asia particularly China it has therefore made Europe ndash and also the United States particularly GM ndash very dependent on that far from stable market as also outlined in more detail in Chapter 10 At the same time pressures to make the car more environmentally compatible as we see it have not only led to cars with much less harmful tailpipe emissions but the more recent pressure to reduce the carbon footprint of cars particularly focused on their emissions of the greenhouse gas carbon dioxide has the potential to radically reshape the industry and its products These regulatory pressures are reviewed in Chapter 14 although the potential impact of this agenda is not yet fully understood but it has already led to a new wave of alternative powertrain vehicles in the market ranging from early petrol‐electric hybrids ndash including the now iconic Toyota Prius ndash via
Introduction and Overview 3
so‐called range‐extended and plug‐in hybrids such as the GM Volt and Ampera to full battery‐electric vehicles such as the Nissan Leaf Renault Zoe and Tesla Model S Such developments as well as the introduction of the even more radical BMW i3 which not only introduces a full battery‐electric powertrain but also houses this within a radical departure from the tried and tested lsquoBuddistrsquo (see Chapter 5) all‐steel body in using a carbon fibre body on an aluminium chassis are clear signs that business‐as‐usual is steadily being undermined even from within the established industry
Despite the size of the industry car making is in reality a very precarious business In its present form it lacks resilience it is not sustainable This is true not just in terms of environmental sustainability where it clearly is not measuring up but even in terms of basic economic sustainability Yet this industry is still crucially important representing a significant part of the economy in many industrialized countries as well as many newly industrializing economies notably China In addition the car‐based transport system or lsquoregimersquo (Geels et al 2012) which extends well beyond the industry that makes cars to the way in which auto-mobility has become integrated in our societies and cultures has become so embedded that its removal would lead to widespread social and economic crisis
In some regards therefore this book may be a testimony to a dying era as much as a hymnal to a new one Thus far the automotive industry has managed to contain the pressures for change both economic and environmental within the broad ambit of the long‐standing business model of the mainstream vehicle manufacturers In parallel those purchasing and using cars in the traditional manner have remained by far the majority compared with more innovative solutions such as car clubs city car sharing schemes and other alternatives that might presage the end of established automobility cultures The question is whether the collective and cumulative impact of all the new developments sweeping through the industry will be sufficient to herald the arrival of a new lsquoautomotive ecosystemrsquo as some have termed it or lsquoregimersquo according to others and one in which the dominance of the established vehicle manufacturers and their entrenched supply chains is challenged by a new order of communi-cations and mobility providers Some caution on these issues is urged here The automotive industry is not immune to hype cycles or the fevered imaginations of those professional change‐mongers with a vested interest in fermenting and emphasizing the new over the continuous
12 Continuity and Change
The book as a whole therefore represents an attempt to capture continuity and change in the global automotive industry this theme is brought to the fore in the first main chapter of the book Chapter 2 as change is very much a feature of the current phase of the automotive system Change of course needs to be seen in historical perspective and as such many of the chapters offer up a historical narrative that builds a temporal dynamic into the account of the subject under consideration There is some need in seeking to understand the structures and practices of the present to delve into the past If nothing else path dependency theory tells us that many decisions are nonlinear irreversible steps that result in distinct historical outcomes bounded by time and place As we have sought to delineate elsewhere the cluster of innovations that created the template for the mass production automotive industry occurred largely in the United States in the early years of the twentieth century the Ford moving assembly line with standardized and inter‐changeable parts the Budd all‐steel body that could be stamped
4 The Global Automotive Industry
welded and painted and the Sloan multi‐brand company with marketing innovations such as consumer credit and annual model changes these developments are outlined in Chapter 5 Despite many years of incremental change the basic architecture of the industry remains in place That such durability is evident speaks volumes for the scope for productivity improve-ment within this basic architecture over many decades and the efficacy of the system as a whole in terms of matching the imperatives of production economics to the demands of the market For this reason key early chapters in the book for example Chapters 3 4 5 and 6 are about the production system and the market for cars There is no subscription here to the simple neoclassical economics assumption that lsquoconsumersrsquo demand and lsquoproducersrsquo provide Rather there is a continuing dynamic tension between supply and demand sides that is never entirely resolved
13 Overview
The chapters in this book are thus essentially an attempt to take stock of the industry in its present state of a well‐established industry on the verge of potentially radical change tracking some of its history ndash trying to answer the question of how did we get here ndash assessing key aspects of its current state while also plotting some possible futures for the industry and its products This book does not seek to present chapters that are held together by a common the-oretical thread Such works can be tremendously informative and insightful (see Geels et al 2012) but of course tend to place primary emphasis on the question of theoretical coherence Rather the approach here has been more agnostic in theoretical terms and has been to seek insights and individual views by those who are established experts in their fields and who are known for their knowledge of the automotive industry (or a specific aspect of it) alongside their particular theoretical or methodological frameworks Each chapter is thus a cameo able to stand alone as a concise insight into one dimension of this multi‐faceted industry but also serves as a piece in the jigsaw that describes and explains how this industry really works
There are some gaps of course It is not possible to give consideration to all the countries producing cars and the unique contexts within which they operate The salience of the lsquovari-eties of capitalismrsquo school of thought (see Section 23) is acknowledged here and some com-parative chapters are pertinent to this school notably those on labourndashmanagement relations in North America and Japan (Chapters 7 and 8 respectively) While the question of labour relations in Japan has remained largely immune to external influence (notwithstanding the substantial impact of Renault on operations at Nissan and the rather lesser impact of Ford on Mazda) the story in North America has a strong thread in which lsquoJapanizationrsquo has been highly significant Chapters 9 10 and 11 cover the broad sweep of the automotive industry in Asia highlighting South Korea China and India respectively ndash both Korea and India have become comparatively neglected in view of the immense attention directed at China Interestingly both these countries are more than passive recipients of automobility and can claim to be home to significant companies within the industry of the modern era while also representing unique markets
An apparent gap in the account includes a chapter that explicitly deals with the global supply chain of components and raw materials to the vehicle manufacturers ndash where typically up to 85 of the ex‐works value of a new car is accounted for by bought in components and materials The theme of supply chain management is an important facet of the industry but
Contents
Notes on Contributors xiSeries Preface xviiForeword xix
1 Introduction and Overview 111 Introduction 112 Continuity and Change 313 Overview 4References 6
2 Understanding Change and Difference in the Global Automotive Industry 721 Introduction 722 Socio‐Technical Transitions 923 Varieties of Capitalism 1224 Global Value Chains 1425 Change in the Automotive Industry A Synthesis 1526 Conclusions 16References 17
3 The Market for New Cars 1931 Introduction 1932 Market Fragmentation and Lack of Industry Consolidation 2033 Geography of Markets 2234 Mobility Services and the Emergent Automotive Ecosystem 2635 Conclusions 27References 27
4 Understanding People and Cars 2941 Influences on Travel Choices 2942 Influences on Vehicle Choice 33
vi Contents
43 Acceptability of Transport Policies and New Technologies 3444 Conclusions 36References 37
5 Car Manufacturing 4151 Background and Prehistory 4152 Ford Budd and Sloan The History of Mass Car Production 4253 Monocoque Construction Buddrsquos Impact on Car Design 4454 Toyotism 4555 Buddism in Crisis 4656 Lean v Agile 4757 Conclusions 49References 50
6 Recent Trends in Manufacturing Innovation Policy for the Automotive Sector A Survey of the United States Mexico European Union Germany and Spain 5361 Introduction 5362 A Changing Manufacturing Landscape 5563 Restructuring in the Automotive Industry 5664 Automotive Policies in the United States Mexico EU Germany and Spain 57
641 United States 57642 Mexico 59643 European Union 60644 Germany 61645 Spain 62
65 Conclusion 63References 64
7 Labour Relations and Human Resource Management in the Automotive Industry North American Perspectives 6771 Introduction 6772 From Fordist Production to Lean Production The Evolution of
Labour RelationsHuman Resource Management Systems in the North American Auto Industry Prior to 2000 70721 The Classic Fordist Industrial Relations System in the
US and Canadian Automotive Industries 70722 The Impact of Japanese Transplants and Lean Production
Methods on the North American Automotive Labour Relations System 72
73 Developments in North American Auto Labour Relations Since 2000 74731 Concession Bargaining 2003ndash2008 74732 The Impact of the Global Financial Crisis 76733 Post‐Crisis Developments 78
74 Conclusion 78References 80
Contents vii
8 Labour Relations and HRM in the Automotive Industry Japanese Impacts 8381 Introduction The Japanese Car Industry and Toyota Production System 8382 TPS and Japanese HRM 8583 lsquoJapanizationrsquo of the Global Automotive Industry 8884 Changes in Japanese Labour Relations and HRM 9085 Concluding Remarks 92References 93
9 The Rise of South Korean (or Korean) Automobile Industry 9591 Introduction 9592 A Brief History of South Korean Automobile Industry
and the Performance of HMC 96921 Brief History of South Korean Automobile Industry 96922 The Change in Performance of HMG 100
93 Considering Five Success Factors of HMC 102931 Vertical Integration 102932 Modularization of Production and Standardization 102933 Expansion of Overseas Production Capabilities
in Emerging Markets 104934 Product Strategy 104935 Quality Focused and Design Focused Management 105
94 Characteristics of HRM in HMC and Effects on the Management System 106941 Militant Trade Union Movement and Confrontational
Labour‐Management Relations 106942 Fragmentation and Automation of Work 106943 Internal Competition Systems 107
95 Conclusion New Challenges for the Korean Auto Makers as Multinational Enterprises 107
References 108
10 Chinarsquos Car Industry 109101 Background 109102 Pre‐History 110103 Chinarsquos Car Industry 111104 The Role of Government 114
1041 Traditional Automobile Industries 114105 New Energy Vehicles 118
1051 RampD Support 1181052 Industrialization 119
106 Bringing NEVs to Market 1211061 Demonstration and Pilot Projects Strategic Niche Management 1211062 Financial Incentives 122
107 Conclusions 124References 124
viii Contents
11 Forging Ahead or Stagnating An Analysis of Indian Automotive Industry 127111 Introduction 127112 History of the Indian Automotive Industry 128113 Statistics on Automobile Industry Performance 132114 Stagnation of Industry in 2013ndash2014 133115 Factors Critical to the Growth of the Indian Automotive Industry 133116 Challenges and Future of Indian Automotive Industry 134References 136
12 From Factory to End‐User An Overview of Automotive Distribution and the Challenges of Disruptive Change 139121 Shipping and Stocking Cars 140122 Retail and Distribution 143123 Changes to the Dealer Model 146124 The Changing Role of Fleets 148125 Delivering Integrated Services Means Rethinking Skills 150References 150
13 Impacts of Automobility 153131 Introduction 153132 Externalities and Automobility A Broad Perspective 153133 Death and Injuries from Road Traffic 154134 Environmental Impacts 156135 Toxic Emissions 157136 Current Concerns 159137 Role of the Consumer 160138 Conclusions 161References 161
14 Regulating the Car 163141 Regulating for Safety 163
1411 Development of Vehicle Standards 1641412 European Directives 1641413 US Federal Motor Vehicle Safety Standards 166
142 New Car Assessment Programmes 167143 Future Developments 168
1431 Impact of New Vehicle Technologies 169144 Legislating for a Cleaner Environment 170
1441 Fuel Economy Incentives and Disincentives 171145 Climate Change 172146 Future Developments 173References 174
15 Global versus Local Regionalism in a Global Industry 177151 The Old World 177152 Asia 179
1521 The Creation of Two Motoring Cultures India v China 179
Contents ix
153 Latin America 180154 Case Study On the Margins of Mass Production Australia 181References 184
16 The Impact of Electric Automobility 185161 Electric Vehicle Design 185
1611 Battery Electric Vehicles 1861612 Hybrid Electric Vehicles 186
162 Charging Infrastructure ndash UK Case Study 187163 Electric Vehicles in Europe 191
1631 Urban Electric Vehicles 1931632 Rural Electric Vehicles ndash The Welsh Case 193
164 Conclusions 197References 197
17 Alternatives to the Car 199171 Introduction 199172 Defining the Car Legislative and Market Boundaries 200173 The Hidden World of Non‐Car Automobility 202174 Transition by Stealth The 2W‐BEV 203
1741 3W‐BEVs 205175 Conclusions 206References 206
18 New Business Models and the Automotive Industry 209181 Introduction 209182 Fundamentals of the Existing Automotive Industry Business Model 210183 Pressures for Change on the Existing Business Model 212184 Incremental Business Model Evolution in the Automotive Industry 213185 Radical Business Model Innovation in the Automotive Industry 214186 Conclusions and Future Prospects for Business Model Innovation 216References 216
19 Future Challenges for Product and Industry 219191 Introduction 219192 New Engine Technologies 220193 Owning or Sharing 223194 The Future Car 223195 The Future Industry 224References 226
Index 229
Notes on Contributors
Editorsrsquo Profiles
Paul NieuwenhuisCentre for Automotive Industry Research and Electric Vehicle Centre of ExcellenceCardiff Business School Cardiff UniversityCardiff Wales UK
Dr Paul Nieuwenhuis is a senior lecturer at Cardiff University He joined the Centre for Automotive Industry Research (CAIR) at Cardiff University in 1991 and he became one of its two directors in 2006 He was a founder member of the ESRC Centre for Business Relationships Accountability Sustainability and Society (BRASS) and is an associate of the Sustainable Places Research Institute His main interests are historic and environmental and his publica-tions have been in these areas for example The Green Car Guide (1992) and Sustainable Automobility (2014) He also contributed to the Beaulieu Encyclopaedia of the Automobile (2000) which won a Cugnot Award from the Society of Automotive Historians Dr Nieuwenhuis has produced around 300 publications ranging from books and academic papers to conference papers for both academic and business audiences and journalistic pieces Dr Nieuwenhuis is a member of the Guild of Motoring Writers
Peter WellsCentre for Automotive Industry ResearchCardiff Business School Cardiff UniversityCardiff Wales UK
Peter Wells is a professor of sustainable business models at Cardiff Business School where his work has ranged across spatial industrial development economics organizational theory industrial ecology technological change transition theory business models and sustainability ndash all through an applied focus on the global automotive industry Professor Wells has over 550 publications reaching academia industry policy and stakeholder audiences through tradi-tional papers and books Internet publications and more recently webinars
xii Notes on Contributors
Contributorsrsquo Profiles
Katsuki AokiSchool of Business AdministrationMeiji UniversityTokyo Japan
Dr Katsuki Aoki is an associate professor in the School of Business at Meiji University in Japan He received his PhD in business administration from Meiji University in 1999 His main research interests include (i) international comparative studies on the implementation of kaizen activities (ii) the benefits and limitations of the keiretsu system (OEMndashsupplier rela-tionships) in the automotive industry and (iii) mass customization and order fulfilment systems in the automotive industry His paper entitled lsquoTransferring Japanese kaizen activities to over-seas plants in Chinarsquo was selected as one of the most prominent papers at the Emerald Literati Network Awards for Excellence 2009
Liana M CipciganElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Dr Liana M Cipcigan is a senior lecturer in the School of Engineering at Cardiff University leading the research of integration and control of EVs in electricity and transportation net-works She is a member of the Electric Vehicle Centre of Excellence (EVCE) Her current research activities are focused on smart grids distributed generation and EV integration and control She has significant research experience in EU projects FP6 More Microgrids FP7 Mobile Energy Resources in Grids of Electricity (MERGE) and ERDF ENEVATE She is the principal investigator (PI) of the EPSRC projects lsquoSmart Management of Electric Vehiclesrsquo and lsquoElectric Vehicle Value Chain ndash Bridging the Gapsrsquo She is participating in the UKERC project lsquoSmart Grids Scenarios for UKrsquo and TSB project lsquoAgent‐Based Controllers for Electric Vehicles and Micro‐generatorsrsquo She is a member of CEN‐CLC eMobility working group on Smart Charging and IEEE P20301 working group on standards for EVs and related infrastructure
Huw DaviesElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Dr Huw Davies is a lecturer in mechanical engineering at Cardiff University School of Engineering His background is in vehicle engineering and the development of vehicle safety standards He has advised the UK Department for Transport the European Commission and the Automotive Industry At Cardiff University he has developed the transport research theme Safety mobility and emissions are at its core The universal goals are zero collisions zero congestion and zero emissions Dr Davies leads Cardiff Universityrsquos Electric Vehicle Centre of Excellence
Notes on Contributors xiii
Ceri DonovanElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Ceri Donovan is a research assistant at Cardiff University School of Engineering and a member of Cardiff Universityrsquos Electric Vehicle Centre of Excellence She spent most of her time in recent years working on ENEVATE which aimed to accelerate the uptake of e‐mobility in northwest Europe This includes conducting research on all aspects of electric vehicles including market drivers and mobility concepts vehicle safety and regulations She previously worked in defence research primarily focusing on how to integrate new technology onto existing platforms from the procurement as well as the practical perspectives She has an MSc in biometry from the University of Reading
Patrick GalvinInnovation Policy LabMunk School of Global AffairsUniversity of TorontoToronto Ontario Canada
Patrick Galvin is a postdoctoral research fellow with the Innovation Policy Lab at the Munk School of Global Affairs where he is part of a research team investigating the dynamics of devel-oping a new automotive policy for the Canadian automotive industry for the twenty‐first century He is also working on the SSHRC‐funded Creating Digital Opportunity project Prior to his current appointment and after having obtained both his BA (honours) and MA degrees in political science Patrick spent several years working in the housing policy field with a number of consulting firms Patrick enrolled in the PhD programme in politics at the University of Exeter in England He completed his dissertation in November 2012 and he was formally awarded his PhD degree in July 2012 Patrickrsquos PhD dissertation built on his training in public policy and political economy by examining how local government in the city of Toronto develops its cluster‐related innovation policy It focuses on two empirical case studies to see how the city develops its cluster policy for two industrial sectors the aerospace sector and the fashion sector
Elena GoracinovaInnovation Policy LabMunk School of Global AffairsUniversity of TorontoToronto Ontario Canada
Elena Goracinova is a PhD candidate in political science working at the University of Torontorsquos Munk School of Global Affairs Innovation Policy Lab with Professor David Wolfe She received her masterrsquos degree in geography from the University of Toronto with a thesis on manufacturing in developed economies She is interested in studying the role of the state in economic policymaking Her current work focuses on the scope and effectiveness of advanced manufacturing policies in Canada
xiv Notes on Contributors
John HolmesProfessor EmeritusDepartment of GeographyQueenrsquos UniversityKingston Ontario Canada
John Holmes is a professor of geography at Queenrsquos University in Kingston Ontario Canada He received his BSc (honours) and MA (social science) degrees from the University of Sheffield and his PhD from Ohio State University He is also affiliated with the graduate industrial relations programme in the Queenrsquos School of Policy Studies His research focuses on geographical aspects of the political economy of contemporary economic and social change and in particular on the contemporary restructuring and reorganization of production and work in North America Empirical research and writing have focused primarily on the automobile industry For a list of selected publications see httpgeogqueensucafacultyholmesasp
Seunghwan KuFaculty of Business AdministrationKyoto Sangyo UniversityKyoto Japan
Seunghwan Ku is a professor of technology of management of the Faculty of Business Administration Kyoto Sangyo University He received his PhD (management of technology) from the University of Tokyo Japan His dissertation entitled lsquoThe Dynamism of Product Architecture Modularization Knowledge Integration Interfirm Linkagersquo was published by Mineruba Shobo a major publisher in Japan His recent publications include lsquoEconomic Analysis of ICT Innovationrsquo (2011) with M Fujiwara and lsquoShip Development and Shipbuilding Industry The Constraint of Large Artifact Development and the Uncertainty of Business Modelrsquo with H Kato in T Fujimoto ed lsquoCoping with Complex Artifactsrsquo (2013) His current research interests are (i) product development (ii) logistics and inter‐firm linkages (iii) prod-uct strategy and innovation and (iv) supplier system in Korean and Japanese industries the auto sector in particular
Maneesh KumarCentre for Automotive Industry ResearchCardiff Business School Cardiff UniversityCardiff Wales UK
Dr Maneesh Kumar is a senior lecturer at Cardiff Business School Cardiff University UK His research interests are primarily in the area of quality management Lean Six Sigma (LSS) and service recovery within manufacturing service and public sector organizations His recent research within Indian automotive industry focuses on understanding the best‐in‐class practices in diffusing LeanKaizen practice at supply network level and how automotive giants (OEMs) support and develop their suppliers (at Tier 1 and Tier 2 level) His research outputs include an edited book five edited conference proceedings three book chapters and over 80 peer‐reviewed
Notes on Contributors xv
journal publications and conference papers He has been involved in delivering LSS training up to black‐belt level and delivered several workshops on LSS application in several blue chip companies He is also a regular speaker at international conferences and seminars on LSS and process excellence
Xiao LinCentre for Automotive Industry ResearchLogistics and Operations Management SectionCardiff Business School Cardiff UniversityCardiff Wales UK
Xiao Lin is a PhD student in the logistics and operations management section at Cardiff Business School Cardiff University Her research interests include sustainability transition theory business models etc Her PhD research project is specifically focusing on the study of the future prospect for e‐bikes in sustainable mobility in China through various quantitative and qualitative analysis methods Xiao Lin is enthusiastic in contributing to the collaboration of the sustainable community She is a member of the organizing committee of the lsquoThe 2014 Global Research Forum Sustainable Production and Consumption Conferencersquo
Daniel NewmanElectric Vehicle Centre of Excellence and Sustainable Places Research InstituteCardiff UniversityCardiff Wales UK
Dr Daniel Newman is a research assistant at Cardiff Business School working within the Cardiff University Electric Vehicle Centre of Excellence His activities are primarily focused on the ENEVATE project conducting social research investigating the potential for increasing electric vehicle uptake in northwest Europe He was previously a research assistant at the University of Bristol Law School looking at environmental law and health and safety regulations Prior to this he completed an ESRC‐funded PhD in the University of Bristol Law School investigating the state of access to justice which was published as a book by Hart in 2012
Ben WallerSenior Researcher ICDPInternational Car Distribution Programme (ICDP)Cardiff Wales UK
Ben is a senior researcher at the International Car Distribution Programme (ICDP) and based in the United Kingdom ICDP is an international research‐based organization focused on auto-motive distribution including the supply and retailing of new and used vehicles aftersales network structures and operations Through research activities data services education events and consulting ICDP works with vehicle makers dealers suppliers and related orga-nizations to improve the quality and effectiveness of the distribution model Ben has presented to a range of international audiences from academic conferences to senior executives and also authors articles for business press and delivers executive teaching
xvi Notes on Contributors
Lorraine WhitmarshSchool of PsychologyCardiff UniversityCardiff Wales UK
Dr Lorraine Whitmarsh is an environmental psychologist specializing in perceptions and behaviour in relation to climate change energy and transport She is a senior lecturer in the School of Psychology at Cardiff University UK Lorraine is also a partner coordinator for the Tyndall Centre for Climate Change Research and a research associate of Cardiff Universityrsquos Centre for Business Relationships Accountability Sustainability and Society (BRASS) and the Sustainable Places Research Institute She sits on the Climate Change Commission for Wales advising Welsh government on transport and behaviour change
David A WolfeProfessor of Political Science andCo‐director Innovation Policy LabMunk School of Global Affairs University of TorontoToronto Ontario Canada
David A Wolfe is a professor of political science at UTM and a co‐director of the Innovation Policy Lab at the Munk School of Global Affairs in Toronto From 2009 to 2014 he was the Royal Bank Chair in Public and Economic Policy at the University of Toronto He is currently leading a major partnership grant on Creating Digital Opportunity Canadarsquos ICT Industry in Global Perspective funded by the Social Sciences and Humanities Research Council of Canada He is also participating in the project on manufacturing policy and the Canadian auto-motive sector based in the Automotive Policy Research Centre at McMaster University
Dimitrios XeniasSchool of PsychologyCardiff UniversityCardiff Wales UK
Dr Dimitrios Xenias is a social and environmental psychologist focusing on sustainable travel and associated behaviours such as mode choice on domestic energy‐related behaviours and on perceptions of climate change and its communication He is a research associate in the School of Psychology at Cardiff University UK Dimitrios is also an associate of the Tyndall Centre for Climate Change Research and a research associate of Cardiff Universityrsquos Centre for Business Relationships Accountability Sustainability and Society (BRASS) and the Sustainable Places Research Institute
Series Preface
The automotive industry is one of the largest manufacturing sectors in the global community Not only does it generate significant economic benefits to the worldrsquos economy but the auto-mobile is highly linked to a wide variety of international concerns such as energy consump-tion emissions trade and safety The primary objective of the Automotive Series is to publish practical and topical books for researchers and practitioners in the industry and postgraduatesadvanced undergraduates in automotive engineering
The series addresses new and emerging technologies in automotive engineering supporting the development of more fuel‐efficient safer and more environmentally friendly vehicles It covers a wide range of topics including design manufacture and operation and the intention is to provide a source of relevant information that will be of interest and benefit to people working in the field of automotive engineering
This book The Global Automotive Industry presents a broad spectrum view of the automo-tive sector from the technology industry and policy perspectives In the early chapters of the book an understanding of the industry from a social technical and economic perspective is presented This is followed by a discussion of the fabric of next‐generation vehicle systems as it is woven into a global society This discussion is expanded to include the economic impact of the automotive industrial sector on nationsrsquo economies from production operationsrevenue to job growth This text goes beyond regional thinking with respect to automotive production and discusses the historic expansion of automotive manufacturing giants in Korea and the new emerging markets in China and potentially India
The text finishes with an excellent overview of emerging technologies and economies that will be pivotal to the automotive sector These discussions are then presented in the light of new business models in a global marketplace and the impact of regulation on the automobile as well as its manufacture These topics are well integrated into the earlier topics presented in the book and make it a unique and valuable crosscutting source of information for the reader
The Global Automotive Industry integrates these topics in a unique and thought‐provoking manner that provides significant insight into global automotive production regulation and
xviii Series Preface
economic impact on society It is a forward‐thinking text that considers a wide variety of topics that will drive this major industry and the global economy for the foreseeable future It is written by highly recognized experts in the field and is a welcome addition to the Automotive Series
Thomas KurfessJuly 2015
Foreword
The global automotive industry is a complex and demanding topic for any book It is clear following my 30‐year career within the automotive industry that only a comparatively small number of individuals have a comprehensive understanding of a vehiclersquos full construction Even after decades of professional involvement it can be difficult for an individual to have a full appreciation of the subject and its international infrastructure and landscape
From pre‐production to the factory floor and the boardroom knowledge sharing is incred-ibly important to the future of the automotive engineering profession With future mobility solutions being vital to modern society and with the needs of each region differing depending on capabilities and production facilities communication amongst the worldrsquos engineers pro-vides a route to approaching and accommodating the global social political and economic considerations that the future will demand
FISITA has successfully coordinated global communications amongst its network of over 200 000 professional engineers from member societies in 37 countries for over 60 years This demonstrates the point through many generations that sharing of knowledge and ideas amongst an industry as large as automotive including engineers academics and executives is vital as it provides us all with the tools to contribute to a better future
As part of this journey global collaboration within the industry is also necessary in order to deliver a clear message to wider society that the automotive engineering profession is well placed to face the challenges of today and tomorrow
Paul Nieuwenhuis and Peter Wells have provided us with a very good starting point The authors are able to present the wide scope of the industry in a clear way whilst contributing a wealth of knowledge about the global automotive industry
Chris MasonCEO FISITA
The Global Automotive Industry First Edition Edited by Paul Nieuwenhuis and Peter Wells copy 2015 John Wiley amp Sons Ltd Published 2015 by John Wiley amp Sons Ltd
Introduction and OverviewPaul Nieuwenhuis1 and Peter Wells2
1 Centre for Automotive Industry Research and Electric Vehicle Centre of Excellence Cardiff Business School Cardiff University Cardiff Wales UK2 Centre for Automotive Industry Research Cardiff Business School Cardiff University Cardiff Wales UK
11 Introduction
It is an impossible task to do full justice in one book to the global automotive industry with the pervasive impact economic significance and cultural status that it brings As editors our task is as much one of selective omission as one of collation to create an account of the business of mak-ing selling and using cars that is both representative and yet respectful of the diversity we know to be a feature of the industry Moreover this is an industry in the midst of reinventing itself It had seemed to some both inside and outside the industry around the turn of the millennium that this was a lsquosunsetrsquo industry characterized by over‐capacity plant closures job losses declining profitability and a product that seemed unsuited to meeting the environmental and social chal-lenges arising from mass car ownership and use The combination of profound environmental pressures and endemic economic distress appeared to call into question the pre‐eminent position enjoyed by the car in providing for personal mobility and the viability of the industry behind this most contradictory of products These concerns came to a peak with the arrival of the global economic crisis around 2007ndash2008 which resulted in new car sales falling steeply in the established markets and investment freezing while the entire financial community held its collective breath to see whether the world would plunge into an economic abyss Those looking closely at urban developments and the changing cultural priorities of young people started to whisper about the concept of lsquopeak carrsquo in which the high tide of automobility had been reached in the saturated markets of the European Union North America Japan and Korea
Yet only a few years later the industry has reemerged burnished by the embrace of new technologies and with resurgent sales in the previously moribund West being more than matched by the frenetic growth of sales in China and elsewhere Regulatory interventions
1
2 The Global Automotive Industry
such as the European Union fleet average carbon emissions targets that were once seen as burdensome and punitive have arguably helped stimulate the technological renaissance of the industry alongside the realization that there might be other routes to profitability Later chap-ters in the book are more concerned with this recent period of transformation and the possible futures it portends Chapter 16 for example is about the impact of the electric vehicle while Chapter 18 links technology change with possible innovations in business models forced on the industry by such technological changes Chapter 19 is more speculative but offers up some signposts for the future of automobility and the automotive industry
This is not to say that the process of change has been without stress or consequence Restructuring of the industry has continued apace the merger of Chrysler and Fiat came as a consequence of several years of corporate turmoil while the rescue of PSA by the French government and by the Chinese company Dongfeng costs the Peugeot family their control over this long established business ndash the oldest in the industry The great expectations held for battery electric vehicles remain as yet largely unrealized despite the highly visible and expen-sive efforts of companies like Nissan Renault and BMW alongside the publicity‐garnering machine that is Tesla In the meantime high‐profile failures such as the battery swap business Better Place serve as stark reminders that attempts to reinvent this industry especially by new entrants are fraught with hazard At the same time markets in the European Union have not really recovered to pre‐crisis levels and perhaps never will
So despite an apparent lsquobusiness‐as‐usualrsquo attitude permeating the automotive industry at the moment in reality it is subject to potentially radical change Only a few years ago we saw two of the worldrsquos largest car manufacturers General Motors and Chrysler on the brink of collapse Having decided both were lsquotoo big to failrsquo they had to be bailed out by the American tax‐payer Ford managed without direct government support but it is nevertheless quite clear that the collapse of the supply base that would have resulted from a collapse of both their key domestic competitors GM and Chrysler would also have dragged down Ford in due course Within a matter of months the worldrsquos most prominent car industry and the oldest mass production car industry could have disappeared only intervention from the public sector saved this key compo-nent of the private sector underlining that apart from anything else the close synergies and intertwined relationships continue to exist between the private and public sectors in developed countries (Mazzucato 2013) This highlights not only the weaknesses inherent in the close links between the financial and car systems but also indicates that the current mass production system whether seen as Fordist or Buddist (see below) may well be due for a rethink in several respects
In Europe the apparent success of Germany more recently the UK automotive industry is easily misunderstood leading perhaps to overconfidence but do note that the secret of success in Europe is largely confined to the more upmarket segments with the Germans the primary beneficiaries and that this success is very reliant on demand from Asia particularly China it has therefore made Europe ndash and also the United States particularly GM ndash very dependent on that far from stable market as also outlined in more detail in Chapter 10 At the same time pressures to make the car more environmentally compatible as we see it have not only led to cars with much less harmful tailpipe emissions but the more recent pressure to reduce the carbon footprint of cars particularly focused on their emissions of the greenhouse gas carbon dioxide has the potential to radically reshape the industry and its products These regulatory pressures are reviewed in Chapter 14 although the potential impact of this agenda is not yet fully understood but it has already led to a new wave of alternative powertrain vehicles in the market ranging from early petrol‐electric hybrids ndash including the now iconic Toyota Prius ndash via
Introduction and Overview 3
so‐called range‐extended and plug‐in hybrids such as the GM Volt and Ampera to full battery‐electric vehicles such as the Nissan Leaf Renault Zoe and Tesla Model S Such developments as well as the introduction of the even more radical BMW i3 which not only introduces a full battery‐electric powertrain but also houses this within a radical departure from the tried and tested lsquoBuddistrsquo (see Chapter 5) all‐steel body in using a carbon fibre body on an aluminium chassis are clear signs that business‐as‐usual is steadily being undermined even from within the established industry
Despite the size of the industry car making is in reality a very precarious business In its present form it lacks resilience it is not sustainable This is true not just in terms of environmental sustainability where it clearly is not measuring up but even in terms of basic economic sustainability Yet this industry is still crucially important representing a significant part of the economy in many industrialized countries as well as many newly industrializing economies notably China In addition the car‐based transport system or lsquoregimersquo (Geels et al 2012) which extends well beyond the industry that makes cars to the way in which auto-mobility has become integrated in our societies and cultures has become so embedded that its removal would lead to widespread social and economic crisis
In some regards therefore this book may be a testimony to a dying era as much as a hymnal to a new one Thus far the automotive industry has managed to contain the pressures for change both economic and environmental within the broad ambit of the long‐standing business model of the mainstream vehicle manufacturers In parallel those purchasing and using cars in the traditional manner have remained by far the majority compared with more innovative solutions such as car clubs city car sharing schemes and other alternatives that might presage the end of established automobility cultures The question is whether the collective and cumulative impact of all the new developments sweeping through the industry will be sufficient to herald the arrival of a new lsquoautomotive ecosystemrsquo as some have termed it or lsquoregimersquo according to others and one in which the dominance of the established vehicle manufacturers and their entrenched supply chains is challenged by a new order of communi-cations and mobility providers Some caution on these issues is urged here The automotive industry is not immune to hype cycles or the fevered imaginations of those professional change‐mongers with a vested interest in fermenting and emphasizing the new over the continuous
12 Continuity and Change
The book as a whole therefore represents an attempt to capture continuity and change in the global automotive industry this theme is brought to the fore in the first main chapter of the book Chapter 2 as change is very much a feature of the current phase of the automotive system Change of course needs to be seen in historical perspective and as such many of the chapters offer up a historical narrative that builds a temporal dynamic into the account of the subject under consideration There is some need in seeking to understand the structures and practices of the present to delve into the past If nothing else path dependency theory tells us that many decisions are nonlinear irreversible steps that result in distinct historical outcomes bounded by time and place As we have sought to delineate elsewhere the cluster of innovations that created the template for the mass production automotive industry occurred largely in the United States in the early years of the twentieth century the Ford moving assembly line with standardized and inter‐changeable parts the Budd all‐steel body that could be stamped
4 The Global Automotive Industry
welded and painted and the Sloan multi‐brand company with marketing innovations such as consumer credit and annual model changes these developments are outlined in Chapter 5 Despite many years of incremental change the basic architecture of the industry remains in place That such durability is evident speaks volumes for the scope for productivity improve-ment within this basic architecture over many decades and the efficacy of the system as a whole in terms of matching the imperatives of production economics to the demands of the market For this reason key early chapters in the book for example Chapters 3 4 5 and 6 are about the production system and the market for cars There is no subscription here to the simple neoclassical economics assumption that lsquoconsumersrsquo demand and lsquoproducersrsquo provide Rather there is a continuing dynamic tension between supply and demand sides that is never entirely resolved
13 Overview
The chapters in this book are thus essentially an attempt to take stock of the industry in its present state of a well‐established industry on the verge of potentially radical change tracking some of its history ndash trying to answer the question of how did we get here ndash assessing key aspects of its current state while also plotting some possible futures for the industry and its products This book does not seek to present chapters that are held together by a common the-oretical thread Such works can be tremendously informative and insightful (see Geels et al 2012) but of course tend to place primary emphasis on the question of theoretical coherence Rather the approach here has been more agnostic in theoretical terms and has been to seek insights and individual views by those who are established experts in their fields and who are known for their knowledge of the automotive industry (or a specific aspect of it) alongside their particular theoretical or methodological frameworks Each chapter is thus a cameo able to stand alone as a concise insight into one dimension of this multi‐faceted industry but also serves as a piece in the jigsaw that describes and explains how this industry really works
There are some gaps of course It is not possible to give consideration to all the countries producing cars and the unique contexts within which they operate The salience of the lsquovari-eties of capitalismrsquo school of thought (see Section 23) is acknowledged here and some com-parative chapters are pertinent to this school notably those on labourndashmanagement relations in North America and Japan (Chapters 7 and 8 respectively) While the question of labour relations in Japan has remained largely immune to external influence (notwithstanding the substantial impact of Renault on operations at Nissan and the rather lesser impact of Ford on Mazda) the story in North America has a strong thread in which lsquoJapanizationrsquo has been highly significant Chapters 9 10 and 11 cover the broad sweep of the automotive industry in Asia highlighting South Korea China and India respectively ndash both Korea and India have become comparatively neglected in view of the immense attention directed at China Interestingly both these countries are more than passive recipients of automobility and can claim to be home to significant companies within the industry of the modern era while also representing unique markets
An apparent gap in the account includes a chapter that explicitly deals with the global supply chain of components and raw materials to the vehicle manufacturers ndash where typically up to 85 of the ex‐works value of a new car is accounted for by bought in components and materials The theme of supply chain management is an important facet of the industry but
vi Contents
43 Acceptability of Transport Policies and New Technologies 3444 Conclusions 36References 37
5 Car Manufacturing 4151 Background and Prehistory 4152 Ford Budd and Sloan The History of Mass Car Production 4253 Monocoque Construction Buddrsquos Impact on Car Design 4454 Toyotism 4555 Buddism in Crisis 4656 Lean v Agile 4757 Conclusions 49References 50
6 Recent Trends in Manufacturing Innovation Policy for the Automotive Sector A Survey of the United States Mexico European Union Germany and Spain 5361 Introduction 5362 A Changing Manufacturing Landscape 5563 Restructuring in the Automotive Industry 5664 Automotive Policies in the United States Mexico EU Germany and Spain 57
641 United States 57642 Mexico 59643 European Union 60644 Germany 61645 Spain 62
65 Conclusion 63References 64
7 Labour Relations and Human Resource Management in the Automotive Industry North American Perspectives 6771 Introduction 6772 From Fordist Production to Lean Production The Evolution of
Labour RelationsHuman Resource Management Systems in the North American Auto Industry Prior to 2000 70721 The Classic Fordist Industrial Relations System in the
US and Canadian Automotive Industries 70722 The Impact of Japanese Transplants and Lean Production
Methods on the North American Automotive Labour Relations System 72
73 Developments in North American Auto Labour Relations Since 2000 74731 Concession Bargaining 2003ndash2008 74732 The Impact of the Global Financial Crisis 76733 Post‐Crisis Developments 78
74 Conclusion 78References 80
Contents vii
8 Labour Relations and HRM in the Automotive Industry Japanese Impacts 8381 Introduction The Japanese Car Industry and Toyota Production System 8382 TPS and Japanese HRM 8583 lsquoJapanizationrsquo of the Global Automotive Industry 8884 Changes in Japanese Labour Relations and HRM 9085 Concluding Remarks 92References 93
9 The Rise of South Korean (or Korean) Automobile Industry 9591 Introduction 9592 A Brief History of South Korean Automobile Industry
and the Performance of HMC 96921 Brief History of South Korean Automobile Industry 96922 The Change in Performance of HMG 100
93 Considering Five Success Factors of HMC 102931 Vertical Integration 102932 Modularization of Production and Standardization 102933 Expansion of Overseas Production Capabilities
in Emerging Markets 104934 Product Strategy 104935 Quality Focused and Design Focused Management 105
94 Characteristics of HRM in HMC and Effects on the Management System 106941 Militant Trade Union Movement and Confrontational
Labour‐Management Relations 106942 Fragmentation and Automation of Work 106943 Internal Competition Systems 107
95 Conclusion New Challenges for the Korean Auto Makers as Multinational Enterprises 107
References 108
10 Chinarsquos Car Industry 109101 Background 109102 Pre‐History 110103 Chinarsquos Car Industry 111104 The Role of Government 114
1041 Traditional Automobile Industries 114105 New Energy Vehicles 118
1051 RampD Support 1181052 Industrialization 119
106 Bringing NEVs to Market 1211061 Demonstration and Pilot Projects Strategic Niche Management 1211062 Financial Incentives 122
107 Conclusions 124References 124
viii Contents
11 Forging Ahead or Stagnating An Analysis of Indian Automotive Industry 127111 Introduction 127112 History of the Indian Automotive Industry 128113 Statistics on Automobile Industry Performance 132114 Stagnation of Industry in 2013ndash2014 133115 Factors Critical to the Growth of the Indian Automotive Industry 133116 Challenges and Future of Indian Automotive Industry 134References 136
12 From Factory to End‐User An Overview of Automotive Distribution and the Challenges of Disruptive Change 139121 Shipping and Stocking Cars 140122 Retail and Distribution 143123 Changes to the Dealer Model 146124 The Changing Role of Fleets 148125 Delivering Integrated Services Means Rethinking Skills 150References 150
13 Impacts of Automobility 153131 Introduction 153132 Externalities and Automobility A Broad Perspective 153133 Death and Injuries from Road Traffic 154134 Environmental Impacts 156135 Toxic Emissions 157136 Current Concerns 159137 Role of the Consumer 160138 Conclusions 161References 161
14 Regulating the Car 163141 Regulating for Safety 163
1411 Development of Vehicle Standards 1641412 European Directives 1641413 US Federal Motor Vehicle Safety Standards 166
142 New Car Assessment Programmes 167143 Future Developments 168
1431 Impact of New Vehicle Technologies 169144 Legislating for a Cleaner Environment 170
1441 Fuel Economy Incentives and Disincentives 171145 Climate Change 172146 Future Developments 173References 174
15 Global versus Local Regionalism in a Global Industry 177151 The Old World 177152 Asia 179
1521 The Creation of Two Motoring Cultures India v China 179
Contents ix
153 Latin America 180154 Case Study On the Margins of Mass Production Australia 181References 184
16 The Impact of Electric Automobility 185161 Electric Vehicle Design 185
1611 Battery Electric Vehicles 1861612 Hybrid Electric Vehicles 186
162 Charging Infrastructure ndash UK Case Study 187163 Electric Vehicles in Europe 191
1631 Urban Electric Vehicles 1931632 Rural Electric Vehicles ndash The Welsh Case 193
164 Conclusions 197References 197
17 Alternatives to the Car 199171 Introduction 199172 Defining the Car Legislative and Market Boundaries 200173 The Hidden World of Non‐Car Automobility 202174 Transition by Stealth The 2W‐BEV 203
1741 3W‐BEVs 205175 Conclusions 206References 206
18 New Business Models and the Automotive Industry 209181 Introduction 209182 Fundamentals of the Existing Automotive Industry Business Model 210183 Pressures for Change on the Existing Business Model 212184 Incremental Business Model Evolution in the Automotive Industry 213185 Radical Business Model Innovation in the Automotive Industry 214186 Conclusions and Future Prospects for Business Model Innovation 216References 216
19 Future Challenges for Product and Industry 219191 Introduction 219192 New Engine Technologies 220193 Owning or Sharing 223194 The Future Car 223195 The Future Industry 224References 226
Index 229
Notes on Contributors
Editorsrsquo Profiles
Paul NieuwenhuisCentre for Automotive Industry Research and Electric Vehicle Centre of ExcellenceCardiff Business School Cardiff UniversityCardiff Wales UK
Dr Paul Nieuwenhuis is a senior lecturer at Cardiff University He joined the Centre for Automotive Industry Research (CAIR) at Cardiff University in 1991 and he became one of its two directors in 2006 He was a founder member of the ESRC Centre for Business Relationships Accountability Sustainability and Society (BRASS) and is an associate of the Sustainable Places Research Institute His main interests are historic and environmental and his publica-tions have been in these areas for example The Green Car Guide (1992) and Sustainable Automobility (2014) He also contributed to the Beaulieu Encyclopaedia of the Automobile (2000) which won a Cugnot Award from the Society of Automotive Historians Dr Nieuwenhuis has produced around 300 publications ranging from books and academic papers to conference papers for both academic and business audiences and journalistic pieces Dr Nieuwenhuis is a member of the Guild of Motoring Writers
Peter WellsCentre for Automotive Industry ResearchCardiff Business School Cardiff UniversityCardiff Wales UK
Peter Wells is a professor of sustainable business models at Cardiff Business School where his work has ranged across spatial industrial development economics organizational theory industrial ecology technological change transition theory business models and sustainability ndash all through an applied focus on the global automotive industry Professor Wells has over 550 publications reaching academia industry policy and stakeholder audiences through tradi-tional papers and books Internet publications and more recently webinars
xii Notes on Contributors
Contributorsrsquo Profiles
Katsuki AokiSchool of Business AdministrationMeiji UniversityTokyo Japan
Dr Katsuki Aoki is an associate professor in the School of Business at Meiji University in Japan He received his PhD in business administration from Meiji University in 1999 His main research interests include (i) international comparative studies on the implementation of kaizen activities (ii) the benefits and limitations of the keiretsu system (OEMndashsupplier rela-tionships) in the automotive industry and (iii) mass customization and order fulfilment systems in the automotive industry His paper entitled lsquoTransferring Japanese kaizen activities to over-seas plants in Chinarsquo was selected as one of the most prominent papers at the Emerald Literati Network Awards for Excellence 2009
Liana M CipciganElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Dr Liana M Cipcigan is a senior lecturer in the School of Engineering at Cardiff University leading the research of integration and control of EVs in electricity and transportation net-works She is a member of the Electric Vehicle Centre of Excellence (EVCE) Her current research activities are focused on smart grids distributed generation and EV integration and control She has significant research experience in EU projects FP6 More Microgrids FP7 Mobile Energy Resources in Grids of Electricity (MERGE) and ERDF ENEVATE She is the principal investigator (PI) of the EPSRC projects lsquoSmart Management of Electric Vehiclesrsquo and lsquoElectric Vehicle Value Chain ndash Bridging the Gapsrsquo She is participating in the UKERC project lsquoSmart Grids Scenarios for UKrsquo and TSB project lsquoAgent‐Based Controllers for Electric Vehicles and Micro‐generatorsrsquo She is a member of CEN‐CLC eMobility working group on Smart Charging and IEEE P20301 working group on standards for EVs and related infrastructure
Huw DaviesElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Dr Huw Davies is a lecturer in mechanical engineering at Cardiff University School of Engineering His background is in vehicle engineering and the development of vehicle safety standards He has advised the UK Department for Transport the European Commission and the Automotive Industry At Cardiff University he has developed the transport research theme Safety mobility and emissions are at its core The universal goals are zero collisions zero congestion and zero emissions Dr Davies leads Cardiff Universityrsquos Electric Vehicle Centre of Excellence
Notes on Contributors xiii
Ceri DonovanElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Ceri Donovan is a research assistant at Cardiff University School of Engineering and a member of Cardiff Universityrsquos Electric Vehicle Centre of Excellence She spent most of her time in recent years working on ENEVATE which aimed to accelerate the uptake of e‐mobility in northwest Europe This includes conducting research on all aspects of electric vehicles including market drivers and mobility concepts vehicle safety and regulations She previously worked in defence research primarily focusing on how to integrate new technology onto existing platforms from the procurement as well as the practical perspectives She has an MSc in biometry from the University of Reading
Patrick GalvinInnovation Policy LabMunk School of Global AffairsUniversity of TorontoToronto Ontario Canada
Patrick Galvin is a postdoctoral research fellow with the Innovation Policy Lab at the Munk School of Global Affairs where he is part of a research team investigating the dynamics of devel-oping a new automotive policy for the Canadian automotive industry for the twenty‐first century He is also working on the SSHRC‐funded Creating Digital Opportunity project Prior to his current appointment and after having obtained both his BA (honours) and MA degrees in political science Patrick spent several years working in the housing policy field with a number of consulting firms Patrick enrolled in the PhD programme in politics at the University of Exeter in England He completed his dissertation in November 2012 and he was formally awarded his PhD degree in July 2012 Patrickrsquos PhD dissertation built on his training in public policy and political economy by examining how local government in the city of Toronto develops its cluster‐related innovation policy It focuses on two empirical case studies to see how the city develops its cluster policy for two industrial sectors the aerospace sector and the fashion sector
Elena GoracinovaInnovation Policy LabMunk School of Global AffairsUniversity of TorontoToronto Ontario Canada
Elena Goracinova is a PhD candidate in political science working at the University of Torontorsquos Munk School of Global Affairs Innovation Policy Lab with Professor David Wolfe She received her masterrsquos degree in geography from the University of Toronto with a thesis on manufacturing in developed economies She is interested in studying the role of the state in economic policymaking Her current work focuses on the scope and effectiveness of advanced manufacturing policies in Canada
xiv Notes on Contributors
John HolmesProfessor EmeritusDepartment of GeographyQueenrsquos UniversityKingston Ontario Canada
John Holmes is a professor of geography at Queenrsquos University in Kingston Ontario Canada He received his BSc (honours) and MA (social science) degrees from the University of Sheffield and his PhD from Ohio State University He is also affiliated with the graduate industrial relations programme in the Queenrsquos School of Policy Studies His research focuses on geographical aspects of the political economy of contemporary economic and social change and in particular on the contemporary restructuring and reorganization of production and work in North America Empirical research and writing have focused primarily on the automobile industry For a list of selected publications see httpgeogqueensucafacultyholmesasp
Seunghwan KuFaculty of Business AdministrationKyoto Sangyo UniversityKyoto Japan
Seunghwan Ku is a professor of technology of management of the Faculty of Business Administration Kyoto Sangyo University He received his PhD (management of technology) from the University of Tokyo Japan His dissertation entitled lsquoThe Dynamism of Product Architecture Modularization Knowledge Integration Interfirm Linkagersquo was published by Mineruba Shobo a major publisher in Japan His recent publications include lsquoEconomic Analysis of ICT Innovationrsquo (2011) with M Fujiwara and lsquoShip Development and Shipbuilding Industry The Constraint of Large Artifact Development and the Uncertainty of Business Modelrsquo with H Kato in T Fujimoto ed lsquoCoping with Complex Artifactsrsquo (2013) His current research interests are (i) product development (ii) logistics and inter‐firm linkages (iii) prod-uct strategy and innovation and (iv) supplier system in Korean and Japanese industries the auto sector in particular
Maneesh KumarCentre for Automotive Industry ResearchCardiff Business School Cardiff UniversityCardiff Wales UK
Dr Maneesh Kumar is a senior lecturer at Cardiff Business School Cardiff University UK His research interests are primarily in the area of quality management Lean Six Sigma (LSS) and service recovery within manufacturing service and public sector organizations His recent research within Indian automotive industry focuses on understanding the best‐in‐class practices in diffusing LeanKaizen practice at supply network level and how automotive giants (OEMs) support and develop their suppliers (at Tier 1 and Tier 2 level) His research outputs include an edited book five edited conference proceedings three book chapters and over 80 peer‐reviewed
Notes on Contributors xv
journal publications and conference papers He has been involved in delivering LSS training up to black‐belt level and delivered several workshops on LSS application in several blue chip companies He is also a regular speaker at international conferences and seminars on LSS and process excellence
Xiao LinCentre for Automotive Industry ResearchLogistics and Operations Management SectionCardiff Business School Cardiff UniversityCardiff Wales UK
Xiao Lin is a PhD student in the logistics and operations management section at Cardiff Business School Cardiff University Her research interests include sustainability transition theory business models etc Her PhD research project is specifically focusing on the study of the future prospect for e‐bikes in sustainable mobility in China through various quantitative and qualitative analysis methods Xiao Lin is enthusiastic in contributing to the collaboration of the sustainable community She is a member of the organizing committee of the lsquoThe 2014 Global Research Forum Sustainable Production and Consumption Conferencersquo
Daniel NewmanElectric Vehicle Centre of Excellence and Sustainable Places Research InstituteCardiff UniversityCardiff Wales UK
Dr Daniel Newman is a research assistant at Cardiff Business School working within the Cardiff University Electric Vehicle Centre of Excellence His activities are primarily focused on the ENEVATE project conducting social research investigating the potential for increasing electric vehicle uptake in northwest Europe He was previously a research assistant at the University of Bristol Law School looking at environmental law and health and safety regulations Prior to this he completed an ESRC‐funded PhD in the University of Bristol Law School investigating the state of access to justice which was published as a book by Hart in 2012
Ben WallerSenior Researcher ICDPInternational Car Distribution Programme (ICDP)Cardiff Wales UK
Ben is a senior researcher at the International Car Distribution Programme (ICDP) and based in the United Kingdom ICDP is an international research‐based organization focused on auto-motive distribution including the supply and retailing of new and used vehicles aftersales network structures and operations Through research activities data services education events and consulting ICDP works with vehicle makers dealers suppliers and related orga-nizations to improve the quality and effectiveness of the distribution model Ben has presented to a range of international audiences from academic conferences to senior executives and also authors articles for business press and delivers executive teaching
xvi Notes on Contributors
Lorraine WhitmarshSchool of PsychologyCardiff UniversityCardiff Wales UK
Dr Lorraine Whitmarsh is an environmental psychologist specializing in perceptions and behaviour in relation to climate change energy and transport She is a senior lecturer in the School of Psychology at Cardiff University UK Lorraine is also a partner coordinator for the Tyndall Centre for Climate Change Research and a research associate of Cardiff Universityrsquos Centre for Business Relationships Accountability Sustainability and Society (BRASS) and the Sustainable Places Research Institute She sits on the Climate Change Commission for Wales advising Welsh government on transport and behaviour change
David A WolfeProfessor of Political Science andCo‐director Innovation Policy LabMunk School of Global Affairs University of TorontoToronto Ontario Canada
David A Wolfe is a professor of political science at UTM and a co‐director of the Innovation Policy Lab at the Munk School of Global Affairs in Toronto From 2009 to 2014 he was the Royal Bank Chair in Public and Economic Policy at the University of Toronto He is currently leading a major partnership grant on Creating Digital Opportunity Canadarsquos ICT Industry in Global Perspective funded by the Social Sciences and Humanities Research Council of Canada He is also participating in the project on manufacturing policy and the Canadian auto-motive sector based in the Automotive Policy Research Centre at McMaster University
Dimitrios XeniasSchool of PsychologyCardiff UniversityCardiff Wales UK
Dr Dimitrios Xenias is a social and environmental psychologist focusing on sustainable travel and associated behaviours such as mode choice on domestic energy‐related behaviours and on perceptions of climate change and its communication He is a research associate in the School of Psychology at Cardiff University UK Dimitrios is also an associate of the Tyndall Centre for Climate Change Research and a research associate of Cardiff Universityrsquos Centre for Business Relationships Accountability Sustainability and Society (BRASS) and the Sustainable Places Research Institute
Series Preface
The automotive industry is one of the largest manufacturing sectors in the global community Not only does it generate significant economic benefits to the worldrsquos economy but the auto-mobile is highly linked to a wide variety of international concerns such as energy consump-tion emissions trade and safety The primary objective of the Automotive Series is to publish practical and topical books for researchers and practitioners in the industry and postgraduatesadvanced undergraduates in automotive engineering
The series addresses new and emerging technologies in automotive engineering supporting the development of more fuel‐efficient safer and more environmentally friendly vehicles It covers a wide range of topics including design manufacture and operation and the intention is to provide a source of relevant information that will be of interest and benefit to people working in the field of automotive engineering
This book The Global Automotive Industry presents a broad spectrum view of the automo-tive sector from the technology industry and policy perspectives In the early chapters of the book an understanding of the industry from a social technical and economic perspective is presented This is followed by a discussion of the fabric of next‐generation vehicle systems as it is woven into a global society This discussion is expanded to include the economic impact of the automotive industrial sector on nationsrsquo economies from production operationsrevenue to job growth This text goes beyond regional thinking with respect to automotive production and discusses the historic expansion of automotive manufacturing giants in Korea and the new emerging markets in China and potentially India
The text finishes with an excellent overview of emerging technologies and economies that will be pivotal to the automotive sector These discussions are then presented in the light of new business models in a global marketplace and the impact of regulation on the automobile as well as its manufacture These topics are well integrated into the earlier topics presented in the book and make it a unique and valuable crosscutting source of information for the reader
The Global Automotive Industry integrates these topics in a unique and thought‐provoking manner that provides significant insight into global automotive production regulation and
xviii Series Preface
economic impact on society It is a forward‐thinking text that considers a wide variety of topics that will drive this major industry and the global economy for the foreseeable future It is written by highly recognized experts in the field and is a welcome addition to the Automotive Series
Thomas KurfessJuly 2015
Foreword
The global automotive industry is a complex and demanding topic for any book It is clear following my 30‐year career within the automotive industry that only a comparatively small number of individuals have a comprehensive understanding of a vehiclersquos full construction Even after decades of professional involvement it can be difficult for an individual to have a full appreciation of the subject and its international infrastructure and landscape
From pre‐production to the factory floor and the boardroom knowledge sharing is incred-ibly important to the future of the automotive engineering profession With future mobility solutions being vital to modern society and with the needs of each region differing depending on capabilities and production facilities communication amongst the worldrsquos engineers pro-vides a route to approaching and accommodating the global social political and economic considerations that the future will demand
FISITA has successfully coordinated global communications amongst its network of over 200 000 professional engineers from member societies in 37 countries for over 60 years This demonstrates the point through many generations that sharing of knowledge and ideas amongst an industry as large as automotive including engineers academics and executives is vital as it provides us all with the tools to contribute to a better future
As part of this journey global collaboration within the industry is also necessary in order to deliver a clear message to wider society that the automotive engineering profession is well placed to face the challenges of today and tomorrow
Paul Nieuwenhuis and Peter Wells have provided us with a very good starting point The authors are able to present the wide scope of the industry in a clear way whilst contributing a wealth of knowledge about the global automotive industry
Chris MasonCEO FISITA
The Global Automotive Industry First Edition Edited by Paul Nieuwenhuis and Peter Wells copy 2015 John Wiley amp Sons Ltd Published 2015 by John Wiley amp Sons Ltd
Introduction and OverviewPaul Nieuwenhuis1 and Peter Wells2
1 Centre for Automotive Industry Research and Electric Vehicle Centre of Excellence Cardiff Business School Cardiff University Cardiff Wales UK2 Centre for Automotive Industry Research Cardiff Business School Cardiff University Cardiff Wales UK
11 Introduction
It is an impossible task to do full justice in one book to the global automotive industry with the pervasive impact economic significance and cultural status that it brings As editors our task is as much one of selective omission as one of collation to create an account of the business of mak-ing selling and using cars that is both representative and yet respectful of the diversity we know to be a feature of the industry Moreover this is an industry in the midst of reinventing itself It had seemed to some both inside and outside the industry around the turn of the millennium that this was a lsquosunsetrsquo industry characterized by over‐capacity plant closures job losses declining profitability and a product that seemed unsuited to meeting the environmental and social chal-lenges arising from mass car ownership and use The combination of profound environmental pressures and endemic economic distress appeared to call into question the pre‐eminent position enjoyed by the car in providing for personal mobility and the viability of the industry behind this most contradictory of products These concerns came to a peak with the arrival of the global economic crisis around 2007ndash2008 which resulted in new car sales falling steeply in the established markets and investment freezing while the entire financial community held its collective breath to see whether the world would plunge into an economic abyss Those looking closely at urban developments and the changing cultural priorities of young people started to whisper about the concept of lsquopeak carrsquo in which the high tide of automobility had been reached in the saturated markets of the European Union North America Japan and Korea
Yet only a few years later the industry has reemerged burnished by the embrace of new technologies and with resurgent sales in the previously moribund West being more than matched by the frenetic growth of sales in China and elsewhere Regulatory interventions
1
2 The Global Automotive Industry
such as the European Union fleet average carbon emissions targets that were once seen as burdensome and punitive have arguably helped stimulate the technological renaissance of the industry alongside the realization that there might be other routes to profitability Later chap-ters in the book are more concerned with this recent period of transformation and the possible futures it portends Chapter 16 for example is about the impact of the electric vehicle while Chapter 18 links technology change with possible innovations in business models forced on the industry by such technological changes Chapter 19 is more speculative but offers up some signposts for the future of automobility and the automotive industry
This is not to say that the process of change has been without stress or consequence Restructuring of the industry has continued apace the merger of Chrysler and Fiat came as a consequence of several years of corporate turmoil while the rescue of PSA by the French government and by the Chinese company Dongfeng costs the Peugeot family their control over this long established business ndash the oldest in the industry The great expectations held for battery electric vehicles remain as yet largely unrealized despite the highly visible and expen-sive efforts of companies like Nissan Renault and BMW alongside the publicity‐garnering machine that is Tesla In the meantime high‐profile failures such as the battery swap business Better Place serve as stark reminders that attempts to reinvent this industry especially by new entrants are fraught with hazard At the same time markets in the European Union have not really recovered to pre‐crisis levels and perhaps never will
So despite an apparent lsquobusiness‐as‐usualrsquo attitude permeating the automotive industry at the moment in reality it is subject to potentially radical change Only a few years ago we saw two of the worldrsquos largest car manufacturers General Motors and Chrysler on the brink of collapse Having decided both were lsquotoo big to failrsquo they had to be bailed out by the American tax‐payer Ford managed without direct government support but it is nevertheless quite clear that the collapse of the supply base that would have resulted from a collapse of both their key domestic competitors GM and Chrysler would also have dragged down Ford in due course Within a matter of months the worldrsquos most prominent car industry and the oldest mass production car industry could have disappeared only intervention from the public sector saved this key compo-nent of the private sector underlining that apart from anything else the close synergies and intertwined relationships continue to exist between the private and public sectors in developed countries (Mazzucato 2013) This highlights not only the weaknesses inherent in the close links between the financial and car systems but also indicates that the current mass production system whether seen as Fordist or Buddist (see below) may well be due for a rethink in several respects
In Europe the apparent success of Germany more recently the UK automotive industry is easily misunderstood leading perhaps to overconfidence but do note that the secret of success in Europe is largely confined to the more upmarket segments with the Germans the primary beneficiaries and that this success is very reliant on demand from Asia particularly China it has therefore made Europe ndash and also the United States particularly GM ndash very dependent on that far from stable market as also outlined in more detail in Chapter 10 At the same time pressures to make the car more environmentally compatible as we see it have not only led to cars with much less harmful tailpipe emissions but the more recent pressure to reduce the carbon footprint of cars particularly focused on their emissions of the greenhouse gas carbon dioxide has the potential to radically reshape the industry and its products These regulatory pressures are reviewed in Chapter 14 although the potential impact of this agenda is not yet fully understood but it has already led to a new wave of alternative powertrain vehicles in the market ranging from early petrol‐electric hybrids ndash including the now iconic Toyota Prius ndash via
Introduction and Overview 3
so‐called range‐extended and plug‐in hybrids such as the GM Volt and Ampera to full battery‐electric vehicles such as the Nissan Leaf Renault Zoe and Tesla Model S Such developments as well as the introduction of the even more radical BMW i3 which not only introduces a full battery‐electric powertrain but also houses this within a radical departure from the tried and tested lsquoBuddistrsquo (see Chapter 5) all‐steel body in using a carbon fibre body on an aluminium chassis are clear signs that business‐as‐usual is steadily being undermined even from within the established industry
Despite the size of the industry car making is in reality a very precarious business In its present form it lacks resilience it is not sustainable This is true not just in terms of environmental sustainability where it clearly is not measuring up but even in terms of basic economic sustainability Yet this industry is still crucially important representing a significant part of the economy in many industrialized countries as well as many newly industrializing economies notably China In addition the car‐based transport system or lsquoregimersquo (Geels et al 2012) which extends well beyond the industry that makes cars to the way in which auto-mobility has become integrated in our societies and cultures has become so embedded that its removal would lead to widespread social and economic crisis
In some regards therefore this book may be a testimony to a dying era as much as a hymnal to a new one Thus far the automotive industry has managed to contain the pressures for change both economic and environmental within the broad ambit of the long‐standing business model of the mainstream vehicle manufacturers In parallel those purchasing and using cars in the traditional manner have remained by far the majority compared with more innovative solutions such as car clubs city car sharing schemes and other alternatives that might presage the end of established automobility cultures The question is whether the collective and cumulative impact of all the new developments sweeping through the industry will be sufficient to herald the arrival of a new lsquoautomotive ecosystemrsquo as some have termed it or lsquoregimersquo according to others and one in which the dominance of the established vehicle manufacturers and their entrenched supply chains is challenged by a new order of communi-cations and mobility providers Some caution on these issues is urged here The automotive industry is not immune to hype cycles or the fevered imaginations of those professional change‐mongers with a vested interest in fermenting and emphasizing the new over the continuous
12 Continuity and Change
The book as a whole therefore represents an attempt to capture continuity and change in the global automotive industry this theme is brought to the fore in the first main chapter of the book Chapter 2 as change is very much a feature of the current phase of the automotive system Change of course needs to be seen in historical perspective and as such many of the chapters offer up a historical narrative that builds a temporal dynamic into the account of the subject under consideration There is some need in seeking to understand the structures and practices of the present to delve into the past If nothing else path dependency theory tells us that many decisions are nonlinear irreversible steps that result in distinct historical outcomes bounded by time and place As we have sought to delineate elsewhere the cluster of innovations that created the template for the mass production automotive industry occurred largely in the United States in the early years of the twentieth century the Ford moving assembly line with standardized and inter‐changeable parts the Budd all‐steel body that could be stamped
4 The Global Automotive Industry
welded and painted and the Sloan multi‐brand company with marketing innovations such as consumer credit and annual model changes these developments are outlined in Chapter 5 Despite many years of incremental change the basic architecture of the industry remains in place That such durability is evident speaks volumes for the scope for productivity improve-ment within this basic architecture over many decades and the efficacy of the system as a whole in terms of matching the imperatives of production economics to the demands of the market For this reason key early chapters in the book for example Chapters 3 4 5 and 6 are about the production system and the market for cars There is no subscription here to the simple neoclassical economics assumption that lsquoconsumersrsquo demand and lsquoproducersrsquo provide Rather there is a continuing dynamic tension between supply and demand sides that is never entirely resolved
13 Overview
The chapters in this book are thus essentially an attempt to take stock of the industry in its present state of a well‐established industry on the verge of potentially radical change tracking some of its history ndash trying to answer the question of how did we get here ndash assessing key aspects of its current state while also plotting some possible futures for the industry and its products This book does not seek to present chapters that are held together by a common the-oretical thread Such works can be tremendously informative and insightful (see Geels et al 2012) but of course tend to place primary emphasis on the question of theoretical coherence Rather the approach here has been more agnostic in theoretical terms and has been to seek insights and individual views by those who are established experts in their fields and who are known for their knowledge of the automotive industry (or a specific aspect of it) alongside their particular theoretical or methodological frameworks Each chapter is thus a cameo able to stand alone as a concise insight into one dimension of this multi‐faceted industry but also serves as a piece in the jigsaw that describes and explains how this industry really works
There are some gaps of course It is not possible to give consideration to all the countries producing cars and the unique contexts within which they operate The salience of the lsquovari-eties of capitalismrsquo school of thought (see Section 23) is acknowledged here and some com-parative chapters are pertinent to this school notably those on labourndashmanagement relations in North America and Japan (Chapters 7 and 8 respectively) While the question of labour relations in Japan has remained largely immune to external influence (notwithstanding the substantial impact of Renault on operations at Nissan and the rather lesser impact of Ford on Mazda) the story in North America has a strong thread in which lsquoJapanizationrsquo has been highly significant Chapters 9 10 and 11 cover the broad sweep of the automotive industry in Asia highlighting South Korea China and India respectively ndash both Korea and India have become comparatively neglected in view of the immense attention directed at China Interestingly both these countries are more than passive recipients of automobility and can claim to be home to significant companies within the industry of the modern era while also representing unique markets
An apparent gap in the account includes a chapter that explicitly deals with the global supply chain of components and raw materials to the vehicle manufacturers ndash where typically up to 85 of the ex‐works value of a new car is accounted for by bought in components and materials The theme of supply chain management is an important facet of the industry but
Contents vii
8 Labour Relations and HRM in the Automotive Industry Japanese Impacts 8381 Introduction The Japanese Car Industry and Toyota Production System 8382 TPS and Japanese HRM 8583 lsquoJapanizationrsquo of the Global Automotive Industry 8884 Changes in Japanese Labour Relations and HRM 9085 Concluding Remarks 92References 93
9 The Rise of South Korean (or Korean) Automobile Industry 9591 Introduction 9592 A Brief History of South Korean Automobile Industry
and the Performance of HMC 96921 Brief History of South Korean Automobile Industry 96922 The Change in Performance of HMG 100
93 Considering Five Success Factors of HMC 102931 Vertical Integration 102932 Modularization of Production and Standardization 102933 Expansion of Overseas Production Capabilities
in Emerging Markets 104934 Product Strategy 104935 Quality Focused and Design Focused Management 105
94 Characteristics of HRM in HMC and Effects on the Management System 106941 Militant Trade Union Movement and Confrontational
Labour‐Management Relations 106942 Fragmentation and Automation of Work 106943 Internal Competition Systems 107
95 Conclusion New Challenges for the Korean Auto Makers as Multinational Enterprises 107
References 108
10 Chinarsquos Car Industry 109101 Background 109102 Pre‐History 110103 Chinarsquos Car Industry 111104 The Role of Government 114
1041 Traditional Automobile Industries 114105 New Energy Vehicles 118
1051 RampD Support 1181052 Industrialization 119
106 Bringing NEVs to Market 1211061 Demonstration and Pilot Projects Strategic Niche Management 1211062 Financial Incentives 122
107 Conclusions 124References 124
viii Contents
11 Forging Ahead or Stagnating An Analysis of Indian Automotive Industry 127111 Introduction 127112 History of the Indian Automotive Industry 128113 Statistics on Automobile Industry Performance 132114 Stagnation of Industry in 2013ndash2014 133115 Factors Critical to the Growth of the Indian Automotive Industry 133116 Challenges and Future of Indian Automotive Industry 134References 136
12 From Factory to End‐User An Overview of Automotive Distribution and the Challenges of Disruptive Change 139121 Shipping and Stocking Cars 140122 Retail and Distribution 143123 Changes to the Dealer Model 146124 The Changing Role of Fleets 148125 Delivering Integrated Services Means Rethinking Skills 150References 150
13 Impacts of Automobility 153131 Introduction 153132 Externalities and Automobility A Broad Perspective 153133 Death and Injuries from Road Traffic 154134 Environmental Impacts 156135 Toxic Emissions 157136 Current Concerns 159137 Role of the Consumer 160138 Conclusions 161References 161
14 Regulating the Car 163141 Regulating for Safety 163
1411 Development of Vehicle Standards 1641412 European Directives 1641413 US Federal Motor Vehicle Safety Standards 166
142 New Car Assessment Programmes 167143 Future Developments 168
1431 Impact of New Vehicle Technologies 169144 Legislating for a Cleaner Environment 170
1441 Fuel Economy Incentives and Disincentives 171145 Climate Change 172146 Future Developments 173References 174
15 Global versus Local Regionalism in a Global Industry 177151 The Old World 177152 Asia 179
1521 The Creation of Two Motoring Cultures India v China 179
Contents ix
153 Latin America 180154 Case Study On the Margins of Mass Production Australia 181References 184
16 The Impact of Electric Automobility 185161 Electric Vehicle Design 185
1611 Battery Electric Vehicles 1861612 Hybrid Electric Vehicles 186
162 Charging Infrastructure ndash UK Case Study 187163 Electric Vehicles in Europe 191
1631 Urban Electric Vehicles 1931632 Rural Electric Vehicles ndash The Welsh Case 193
164 Conclusions 197References 197
17 Alternatives to the Car 199171 Introduction 199172 Defining the Car Legislative and Market Boundaries 200173 The Hidden World of Non‐Car Automobility 202174 Transition by Stealth The 2W‐BEV 203
1741 3W‐BEVs 205175 Conclusions 206References 206
18 New Business Models and the Automotive Industry 209181 Introduction 209182 Fundamentals of the Existing Automotive Industry Business Model 210183 Pressures for Change on the Existing Business Model 212184 Incremental Business Model Evolution in the Automotive Industry 213185 Radical Business Model Innovation in the Automotive Industry 214186 Conclusions and Future Prospects for Business Model Innovation 216References 216
19 Future Challenges for Product and Industry 219191 Introduction 219192 New Engine Technologies 220193 Owning or Sharing 223194 The Future Car 223195 The Future Industry 224References 226
Index 229
Notes on Contributors
Editorsrsquo Profiles
Paul NieuwenhuisCentre for Automotive Industry Research and Electric Vehicle Centre of ExcellenceCardiff Business School Cardiff UniversityCardiff Wales UK
Dr Paul Nieuwenhuis is a senior lecturer at Cardiff University He joined the Centre for Automotive Industry Research (CAIR) at Cardiff University in 1991 and he became one of its two directors in 2006 He was a founder member of the ESRC Centre for Business Relationships Accountability Sustainability and Society (BRASS) and is an associate of the Sustainable Places Research Institute His main interests are historic and environmental and his publica-tions have been in these areas for example The Green Car Guide (1992) and Sustainable Automobility (2014) He also contributed to the Beaulieu Encyclopaedia of the Automobile (2000) which won a Cugnot Award from the Society of Automotive Historians Dr Nieuwenhuis has produced around 300 publications ranging from books and academic papers to conference papers for both academic and business audiences and journalistic pieces Dr Nieuwenhuis is a member of the Guild of Motoring Writers
Peter WellsCentre for Automotive Industry ResearchCardiff Business School Cardiff UniversityCardiff Wales UK
Peter Wells is a professor of sustainable business models at Cardiff Business School where his work has ranged across spatial industrial development economics organizational theory industrial ecology technological change transition theory business models and sustainability ndash all through an applied focus on the global automotive industry Professor Wells has over 550 publications reaching academia industry policy and stakeholder audiences through tradi-tional papers and books Internet publications and more recently webinars
xii Notes on Contributors
Contributorsrsquo Profiles
Katsuki AokiSchool of Business AdministrationMeiji UniversityTokyo Japan
Dr Katsuki Aoki is an associate professor in the School of Business at Meiji University in Japan He received his PhD in business administration from Meiji University in 1999 His main research interests include (i) international comparative studies on the implementation of kaizen activities (ii) the benefits and limitations of the keiretsu system (OEMndashsupplier rela-tionships) in the automotive industry and (iii) mass customization and order fulfilment systems in the automotive industry His paper entitled lsquoTransferring Japanese kaizen activities to over-seas plants in Chinarsquo was selected as one of the most prominent papers at the Emerald Literati Network Awards for Excellence 2009
Liana M CipciganElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Dr Liana M Cipcigan is a senior lecturer in the School of Engineering at Cardiff University leading the research of integration and control of EVs in electricity and transportation net-works She is a member of the Electric Vehicle Centre of Excellence (EVCE) Her current research activities are focused on smart grids distributed generation and EV integration and control She has significant research experience in EU projects FP6 More Microgrids FP7 Mobile Energy Resources in Grids of Electricity (MERGE) and ERDF ENEVATE She is the principal investigator (PI) of the EPSRC projects lsquoSmart Management of Electric Vehiclesrsquo and lsquoElectric Vehicle Value Chain ndash Bridging the Gapsrsquo She is participating in the UKERC project lsquoSmart Grids Scenarios for UKrsquo and TSB project lsquoAgent‐Based Controllers for Electric Vehicles and Micro‐generatorsrsquo She is a member of CEN‐CLC eMobility working group on Smart Charging and IEEE P20301 working group on standards for EVs and related infrastructure
Huw DaviesElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Dr Huw Davies is a lecturer in mechanical engineering at Cardiff University School of Engineering His background is in vehicle engineering and the development of vehicle safety standards He has advised the UK Department for Transport the European Commission and the Automotive Industry At Cardiff University he has developed the transport research theme Safety mobility and emissions are at its core The universal goals are zero collisions zero congestion and zero emissions Dr Davies leads Cardiff Universityrsquos Electric Vehicle Centre of Excellence
Notes on Contributors xiii
Ceri DonovanElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Ceri Donovan is a research assistant at Cardiff University School of Engineering and a member of Cardiff Universityrsquos Electric Vehicle Centre of Excellence She spent most of her time in recent years working on ENEVATE which aimed to accelerate the uptake of e‐mobility in northwest Europe This includes conducting research on all aspects of electric vehicles including market drivers and mobility concepts vehicle safety and regulations She previously worked in defence research primarily focusing on how to integrate new technology onto existing platforms from the procurement as well as the practical perspectives She has an MSc in biometry from the University of Reading
Patrick GalvinInnovation Policy LabMunk School of Global AffairsUniversity of TorontoToronto Ontario Canada
Patrick Galvin is a postdoctoral research fellow with the Innovation Policy Lab at the Munk School of Global Affairs where he is part of a research team investigating the dynamics of devel-oping a new automotive policy for the Canadian automotive industry for the twenty‐first century He is also working on the SSHRC‐funded Creating Digital Opportunity project Prior to his current appointment and after having obtained both his BA (honours) and MA degrees in political science Patrick spent several years working in the housing policy field with a number of consulting firms Patrick enrolled in the PhD programme in politics at the University of Exeter in England He completed his dissertation in November 2012 and he was formally awarded his PhD degree in July 2012 Patrickrsquos PhD dissertation built on his training in public policy and political economy by examining how local government in the city of Toronto develops its cluster‐related innovation policy It focuses on two empirical case studies to see how the city develops its cluster policy for two industrial sectors the aerospace sector and the fashion sector
Elena GoracinovaInnovation Policy LabMunk School of Global AffairsUniversity of TorontoToronto Ontario Canada
Elena Goracinova is a PhD candidate in political science working at the University of Torontorsquos Munk School of Global Affairs Innovation Policy Lab with Professor David Wolfe She received her masterrsquos degree in geography from the University of Toronto with a thesis on manufacturing in developed economies She is interested in studying the role of the state in economic policymaking Her current work focuses on the scope and effectiveness of advanced manufacturing policies in Canada
xiv Notes on Contributors
John HolmesProfessor EmeritusDepartment of GeographyQueenrsquos UniversityKingston Ontario Canada
John Holmes is a professor of geography at Queenrsquos University in Kingston Ontario Canada He received his BSc (honours) and MA (social science) degrees from the University of Sheffield and his PhD from Ohio State University He is also affiliated with the graduate industrial relations programme in the Queenrsquos School of Policy Studies His research focuses on geographical aspects of the political economy of contemporary economic and social change and in particular on the contemporary restructuring and reorganization of production and work in North America Empirical research and writing have focused primarily on the automobile industry For a list of selected publications see httpgeogqueensucafacultyholmesasp
Seunghwan KuFaculty of Business AdministrationKyoto Sangyo UniversityKyoto Japan
Seunghwan Ku is a professor of technology of management of the Faculty of Business Administration Kyoto Sangyo University He received his PhD (management of technology) from the University of Tokyo Japan His dissertation entitled lsquoThe Dynamism of Product Architecture Modularization Knowledge Integration Interfirm Linkagersquo was published by Mineruba Shobo a major publisher in Japan His recent publications include lsquoEconomic Analysis of ICT Innovationrsquo (2011) with M Fujiwara and lsquoShip Development and Shipbuilding Industry The Constraint of Large Artifact Development and the Uncertainty of Business Modelrsquo with H Kato in T Fujimoto ed lsquoCoping with Complex Artifactsrsquo (2013) His current research interests are (i) product development (ii) logistics and inter‐firm linkages (iii) prod-uct strategy and innovation and (iv) supplier system in Korean and Japanese industries the auto sector in particular
Maneesh KumarCentre for Automotive Industry ResearchCardiff Business School Cardiff UniversityCardiff Wales UK
Dr Maneesh Kumar is a senior lecturer at Cardiff Business School Cardiff University UK His research interests are primarily in the area of quality management Lean Six Sigma (LSS) and service recovery within manufacturing service and public sector organizations His recent research within Indian automotive industry focuses on understanding the best‐in‐class practices in diffusing LeanKaizen practice at supply network level and how automotive giants (OEMs) support and develop their suppliers (at Tier 1 and Tier 2 level) His research outputs include an edited book five edited conference proceedings three book chapters and over 80 peer‐reviewed
Notes on Contributors xv
journal publications and conference papers He has been involved in delivering LSS training up to black‐belt level and delivered several workshops on LSS application in several blue chip companies He is also a regular speaker at international conferences and seminars on LSS and process excellence
Xiao LinCentre for Automotive Industry ResearchLogistics and Operations Management SectionCardiff Business School Cardiff UniversityCardiff Wales UK
Xiao Lin is a PhD student in the logistics and operations management section at Cardiff Business School Cardiff University Her research interests include sustainability transition theory business models etc Her PhD research project is specifically focusing on the study of the future prospect for e‐bikes in sustainable mobility in China through various quantitative and qualitative analysis methods Xiao Lin is enthusiastic in contributing to the collaboration of the sustainable community She is a member of the organizing committee of the lsquoThe 2014 Global Research Forum Sustainable Production and Consumption Conferencersquo
Daniel NewmanElectric Vehicle Centre of Excellence and Sustainable Places Research InstituteCardiff UniversityCardiff Wales UK
Dr Daniel Newman is a research assistant at Cardiff Business School working within the Cardiff University Electric Vehicle Centre of Excellence His activities are primarily focused on the ENEVATE project conducting social research investigating the potential for increasing electric vehicle uptake in northwest Europe He was previously a research assistant at the University of Bristol Law School looking at environmental law and health and safety regulations Prior to this he completed an ESRC‐funded PhD in the University of Bristol Law School investigating the state of access to justice which was published as a book by Hart in 2012
Ben WallerSenior Researcher ICDPInternational Car Distribution Programme (ICDP)Cardiff Wales UK
Ben is a senior researcher at the International Car Distribution Programme (ICDP) and based in the United Kingdom ICDP is an international research‐based organization focused on auto-motive distribution including the supply and retailing of new and used vehicles aftersales network structures and operations Through research activities data services education events and consulting ICDP works with vehicle makers dealers suppliers and related orga-nizations to improve the quality and effectiveness of the distribution model Ben has presented to a range of international audiences from academic conferences to senior executives and also authors articles for business press and delivers executive teaching
xvi Notes on Contributors
Lorraine WhitmarshSchool of PsychologyCardiff UniversityCardiff Wales UK
Dr Lorraine Whitmarsh is an environmental psychologist specializing in perceptions and behaviour in relation to climate change energy and transport She is a senior lecturer in the School of Psychology at Cardiff University UK Lorraine is also a partner coordinator for the Tyndall Centre for Climate Change Research and a research associate of Cardiff Universityrsquos Centre for Business Relationships Accountability Sustainability and Society (BRASS) and the Sustainable Places Research Institute She sits on the Climate Change Commission for Wales advising Welsh government on transport and behaviour change
David A WolfeProfessor of Political Science andCo‐director Innovation Policy LabMunk School of Global Affairs University of TorontoToronto Ontario Canada
David A Wolfe is a professor of political science at UTM and a co‐director of the Innovation Policy Lab at the Munk School of Global Affairs in Toronto From 2009 to 2014 he was the Royal Bank Chair in Public and Economic Policy at the University of Toronto He is currently leading a major partnership grant on Creating Digital Opportunity Canadarsquos ICT Industry in Global Perspective funded by the Social Sciences and Humanities Research Council of Canada He is also participating in the project on manufacturing policy and the Canadian auto-motive sector based in the Automotive Policy Research Centre at McMaster University
Dimitrios XeniasSchool of PsychologyCardiff UniversityCardiff Wales UK
Dr Dimitrios Xenias is a social and environmental psychologist focusing on sustainable travel and associated behaviours such as mode choice on domestic energy‐related behaviours and on perceptions of climate change and its communication He is a research associate in the School of Psychology at Cardiff University UK Dimitrios is also an associate of the Tyndall Centre for Climate Change Research and a research associate of Cardiff Universityrsquos Centre for Business Relationships Accountability Sustainability and Society (BRASS) and the Sustainable Places Research Institute
Series Preface
The automotive industry is one of the largest manufacturing sectors in the global community Not only does it generate significant economic benefits to the worldrsquos economy but the auto-mobile is highly linked to a wide variety of international concerns such as energy consump-tion emissions trade and safety The primary objective of the Automotive Series is to publish practical and topical books for researchers and practitioners in the industry and postgraduatesadvanced undergraduates in automotive engineering
The series addresses new and emerging technologies in automotive engineering supporting the development of more fuel‐efficient safer and more environmentally friendly vehicles It covers a wide range of topics including design manufacture and operation and the intention is to provide a source of relevant information that will be of interest and benefit to people working in the field of automotive engineering
This book The Global Automotive Industry presents a broad spectrum view of the automo-tive sector from the technology industry and policy perspectives In the early chapters of the book an understanding of the industry from a social technical and economic perspective is presented This is followed by a discussion of the fabric of next‐generation vehicle systems as it is woven into a global society This discussion is expanded to include the economic impact of the automotive industrial sector on nationsrsquo economies from production operationsrevenue to job growth This text goes beyond regional thinking with respect to automotive production and discusses the historic expansion of automotive manufacturing giants in Korea and the new emerging markets in China and potentially India
The text finishes with an excellent overview of emerging technologies and economies that will be pivotal to the automotive sector These discussions are then presented in the light of new business models in a global marketplace and the impact of regulation on the automobile as well as its manufacture These topics are well integrated into the earlier topics presented in the book and make it a unique and valuable crosscutting source of information for the reader
The Global Automotive Industry integrates these topics in a unique and thought‐provoking manner that provides significant insight into global automotive production regulation and
xviii Series Preface
economic impact on society It is a forward‐thinking text that considers a wide variety of topics that will drive this major industry and the global economy for the foreseeable future It is written by highly recognized experts in the field and is a welcome addition to the Automotive Series
Thomas KurfessJuly 2015
Foreword
The global automotive industry is a complex and demanding topic for any book It is clear following my 30‐year career within the automotive industry that only a comparatively small number of individuals have a comprehensive understanding of a vehiclersquos full construction Even after decades of professional involvement it can be difficult for an individual to have a full appreciation of the subject and its international infrastructure and landscape
From pre‐production to the factory floor and the boardroom knowledge sharing is incred-ibly important to the future of the automotive engineering profession With future mobility solutions being vital to modern society and with the needs of each region differing depending on capabilities and production facilities communication amongst the worldrsquos engineers pro-vides a route to approaching and accommodating the global social political and economic considerations that the future will demand
FISITA has successfully coordinated global communications amongst its network of over 200 000 professional engineers from member societies in 37 countries for over 60 years This demonstrates the point through many generations that sharing of knowledge and ideas amongst an industry as large as automotive including engineers academics and executives is vital as it provides us all with the tools to contribute to a better future
As part of this journey global collaboration within the industry is also necessary in order to deliver a clear message to wider society that the automotive engineering profession is well placed to face the challenges of today and tomorrow
Paul Nieuwenhuis and Peter Wells have provided us with a very good starting point The authors are able to present the wide scope of the industry in a clear way whilst contributing a wealth of knowledge about the global automotive industry
Chris MasonCEO FISITA
The Global Automotive Industry First Edition Edited by Paul Nieuwenhuis and Peter Wells copy 2015 John Wiley amp Sons Ltd Published 2015 by John Wiley amp Sons Ltd
Introduction and OverviewPaul Nieuwenhuis1 and Peter Wells2
1 Centre for Automotive Industry Research and Electric Vehicle Centre of Excellence Cardiff Business School Cardiff University Cardiff Wales UK2 Centre for Automotive Industry Research Cardiff Business School Cardiff University Cardiff Wales UK
11 Introduction
It is an impossible task to do full justice in one book to the global automotive industry with the pervasive impact economic significance and cultural status that it brings As editors our task is as much one of selective omission as one of collation to create an account of the business of mak-ing selling and using cars that is both representative and yet respectful of the diversity we know to be a feature of the industry Moreover this is an industry in the midst of reinventing itself It had seemed to some both inside and outside the industry around the turn of the millennium that this was a lsquosunsetrsquo industry characterized by over‐capacity plant closures job losses declining profitability and a product that seemed unsuited to meeting the environmental and social chal-lenges arising from mass car ownership and use The combination of profound environmental pressures and endemic economic distress appeared to call into question the pre‐eminent position enjoyed by the car in providing for personal mobility and the viability of the industry behind this most contradictory of products These concerns came to a peak with the arrival of the global economic crisis around 2007ndash2008 which resulted in new car sales falling steeply in the established markets and investment freezing while the entire financial community held its collective breath to see whether the world would plunge into an economic abyss Those looking closely at urban developments and the changing cultural priorities of young people started to whisper about the concept of lsquopeak carrsquo in which the high tide of automobility had been reached in the saturated markets of the European Union North America Japan and Korea
Yet only a few years later the industry has reemerged burnished by the embrace of new technologies and with resurgent sales in the previously moribund West being more than matched by the frenetic growth of sales in China and elsewhere Regulatory interventions
1
2 The Global Automotive Industry
such as the European Union fleet average carbon emissions targets that were once seen as burdensome and punitive have arguably helped stimulate the technological renaissance of the industry alongside the realization that there might be other routes to profitability Later chap-ters in the book are more concerned with this recent period of transformation and the possible futures it portends Chapter 16 for example is about the impact of the electric vehicle while Chapter 18 links technology change with possible innovations in business models forced on the industry by such technological changes Chapter 19 is more speculative but offers up some signposts for the future of automobility and the automotive industry
This is not to say that the process of change has been without stress or consequence Restructuring of the industry has continued apace the merger of Chrysler and Fiat came as a consequence of several years of corporate turmoil while the rescue of PSA by the French government and by the Chinese company Dongfeng costs the Peugeot family their control over this long established business ndash the oldest in the industry The great expectations held for battery electric vehicles remain as yet largely unrealized despite the highly visible and expen-sive efforts of companies like Nissan Renault and BMW alongside the publicity‐garnering machine that is Tesla In the meantime high‐profile failures such as the battery swap business Better Place serve as stark reminders that attempts to reinvent this industry especially by new entrants are fraught with hazard At the same time markets in the European Union have not really recovered to pre‐crisis levels and perhaps never will
So despite an apparent lsquobusiness‐as‐usualrsquo attitude permeating the automotive industry at the moment in reality it is subject to potentially radical change Only a few years ago we saw two of the worldrsquos largest car manufacturers General Motors and Chrysler on the brink of collapse Having decided both were lsquotoo big to failrsquo they had to be bailed out by the American tax‐payer Ford managed without direct government support but it is nevertheless quite clear that the collapse of the supply base that would have resulted from a collapse of both their key domestic competitors GM and Chrysler would also have dragged down Ford in due course Within a matter of months the worldrsquos most prominent car industry and the oldest mass production car industry could have disappeared only intervention from the public sector saved this key compo-nent of the private sector underlining that apart from anything else the close synergies and intertwined relationships continue to exist between the private and public sectors in developed countries (Mazzucato 2013) This highlights not only the weaknesses inherent in the close links between the financial and car systems but also indicates that the current mass production system whether seen as Fordist or Buddist (see below) may well be due for a rethink in several respects
In Europe the apparent success of Germany more recently the UK automotive industry is easily misunderstood leading perhaps to overconfidence but do note that the secret of success in Europe is largely confined to the more upmarket segments with the Germans the primary beneficiaries and that this success is very reliant on demand from Asia particularly China it has therefore made Europe ndash and also the United States particularly GM ndash very dependent on that far from stable market as also outlined in more detail in Chapter 10 At the same time pressures to make the car more environmentally compatible as we see it have not only led to cars with much less harmful tailpipe emissions but the more recent pressure to reduce the carbon footprint of cars particularly focused on their emissions of the greenhouse gas carbon dioxide has the potential to radically reshape the industry and its products These regulatory pressures are reviewed in Chapter 14 although the potential impact of this agenda is not yet fully understood but it has already led to a new wave of alternative powertrain vehicles in the market ranging from early petrol‐electric hybrids ndash including the now iconic Toyota Prius ndash via
Introduction and Overview 3
so‐called range‐extended and plug‐in hybrids such as the GM Volt and Ampera to full battery‐electric vehicles such as the Nissan Leaf Renault Zoe and Tesla Model S Such developments as well as the introduction of the even more radical BMW i3 which not only introduces a full battery‐electric powertrain but also houses this within a radical departure from the tried and tested lsquoBuddistrsquo (see Chapter 5) all‐steel body in using a carbon fibre body on an aluminium chassis are clear signs that business‐as‐usual is steadily being undermined even from within the established industry
Despite the size of the industry car making is in reality a very precarious business In its present form it lacks resilience it is not sustainable This is true not just in terms of environmental sustainability where it clearly is not measuring up but even in terms of basic economic sustainability Yet this industry is still crucially important representing a significant part of the economy in many industrialized countries as well as many newly industrializing economies notably China In addition the car‐based transport system or lsquoregimersquo (Geels et al 2012) which extends well beyond the industry that makes cars to the way in which auto-mobility has become integrated in our societies and cultures has become so embedded that its removal would lead to widespread social and economic crisis
In some regards therefore this book may be a testimony to a dying era as much as a hymnal to a new one Thus far the automotive industry has managed to contain the pressures for change both economic and environmental within the broad ambit of the long‐standing business model of the mainstream vehicle manufacturers In parallel those purchasing and using cars in the traditional manner have remained by far the majority compared with more innovative solutions such as car clubs city car sharing schemes and other alternatives that might presage the end of established automobility cultures The question is whether the collective and cumulative impact of all the new developments sweeping through the industry will be sufficient to herald the arrival of a new lsquoautomotive ecosystemrsquo as some have termed it or lsquoregimersquo according to others and one in which the dominance of the established vehicle manufacturers and their entrenched supply chains is challenged by a new order of communi-cations and mobility providers Some caution on these issues is urged here The automotive industry is not immune to hype cycles or the fevered imaginations of those professional change‐mongers with a vested interest in fermenting and emphasizing the new over the continuous
12 Continuity and Change
The book as a whole therefore represents an attempt to capture continuity and change in the global automotive industry this theme is brought to the fore in the first main chapter of the book Chapter 2 as change is very much a feature of the current phase of the automotive system Change of course needs to be seen in historical perspective and as such many of the chapters offer up a historical narrative that builds a temporal dynamic into the account of the subject under consideration There is some need in seeking to understand the structures and practices of the present to delve into the past If nothing else path dependency theory tells us that many decisions are nonlinear irreversible steps that result in distinct historical outcomes bounded by time and place As we have sought to delineate elsewhere the cluster of innovations that created the template for the mass production automotive industry occurred largely in the United States in the early years of the twentieth century the Ford moving assembly line with standardized and inter‐changeable parts the Budd all‐steel body that could be stamped
4 The Global Automotive Industry
welded and painted and the Sloan multi‐brand company with marketing innovations such as consumer credit and annual model changes these developments are outlined in Chapter 5 Despite many years of incremental change the basic architecture of the industry remains in place That such durability is evident speaks volumes for the scope for productivity improve-ment within this basic architecture over many decades and the efficacy of the system as a whole in terms of matching the imperatives of production economics to the demands of the market For this reason key early chapters in the book for example Chapters 3 4 5 and 6 are about the production system and the market for cars There is no subscription here to the simple neoclassical economics assumption that lsquoconsumersrsquo demand and lsquoproducersrsquo provide Rather there is a continuing dynamic tension between supply and demand sides that is never entirely resolved
13 Overview
The chapters in this book are thus essentially an attempt to take stock of the industry in its present state of a well‐established industry on the verge of potentially radical change tracking some of its history ndash trying to answer the question of how did we get here ndash assessing key aspects of its current state while also plotting some possible futures for the industry and its products This book does not seek to present chapters that are held together by a common the-oretical thread Such works can be tremendously informative and insightful (see Geels et al 2012) but of course tend to place primary emphasis on the question of theoretical coherence Rather the approach here has been more agnostic in theoretical terms and has been to seek insights and individual views by those who are established experts in their fields and who are known for their knowledge of the automotive industry (or a specific aspect of it) alongside their particular theoretical or methodological frameworks Each chapter is thus a cameo able to stand alone as a concise insight into one dimension of this multi‐faceted industry but also serves as a piece in the jigsaw that describes and explains how this industry really works
There are some gaps of course It is not possible to give consideration to all the countries producing cars and the unique contexts within which they operate The salience of the lsquovari-eties of capitalismrsquo school of thought (see Section 23) is acknowledged here and some com-parative chapters are pertinent to this school notably those on labourndashmanagement relations in North America and Japan (Chapters 7 and 8 respectively) While the question of labour relations in Japan has remained largely immune to external influence (notwithstanding the substantial impact of Renault on operations at Nissan and the rather lesser impact of Ford on Mazda) the story in North America has a strong thread in which lsquoJapanizationrsquo has been highly significant Chapters 9 10 and 11 cover the broad sweep of the automotive industry in Asia highlighting South Korea China and India respectively ndash both Korea and India have become comparatively neglected in view of the immense attention directed at China Interestingly both these countries are more than passive recipients of automobility and can claim to be home to significant companies within the industry of the modern era while also representing unique markets
An apparent gap in the account includes a chapter that explicitly deals with the global supply chain of components and raw materials to the vehicle manufacturers ndash where typically up to 85 of the ex‐works value of a new car is accounted for by bought in components and materials The theme of supply chain management is an important facet of the industry but
viii Contents
11 Forging Ahead or Stagnating An Analysis of Indian Automotive Industry 127111 Introduction 127112 History of the Indian Automotive Industry 128113 Statistics on Automobile Industry Performance 132114 Stagnation of Industry in 2013ndash2014 133115 Factors Critical to the Growth of the Indian Automotive Industry 133116 Challenges and Future of Indian Automotive Industry 134References 136
12 From Factory to End‐User An Overview of Automotive Distribution and the Challenges of Disruptive Change 139121 Shipping and Stocking Cars 140122 Retail and Distribution 143123 Changes to the Dealer Model 146124 The Changing Role of Fleets 148125 Delivering Integrated Services Means Rethinking Skills 150References 150
13 Impacts of Automobility 153131 Introduction 153132 Externalities and Automobility A Broad Perspective 153133 Death and Injuries from Road Traffic 154134 Environmental Impacts 156135 Toxic Emissions 157136 Current Concerns 159137 Role of the Consumer 160138 Conclusions 161References 161
14 Regulating the Car 163141 Regulating for Safety 163
1411 Development of Vehicle Standards 1641412 European Directives 1641413 US Federal Motor Vehicle Safety Standards 166
142 New Car Assessment Programmes 167143 Future Developments 168
1431 Impact of New Vehicle Technologies 169144 Legislating for a Cleaner Environment 170
1441 Fuel Economy Incentives and Disincentives 171145 Climate Change 172146 Future Developments 173References 174
15 Global versus Local Regionalism in a Global Industry 177151 The Old World 177152 Asia 179
1521 The Creation of Two Motoring Cultures India v China 179
Contents ix
153 Latin America 180154 Case Study On the Margins of Mass Production Australia 181References 184
16 The Impact of Electric Automobility 185161 Electric Vehicle Design 185
1611 Battery Electric Vehicles 1861612 Hybrid Electric Vehicles 186
162 Charging Infrastructure ndash UK Case Study 187163 Electric Vehicles in Europe 191
1631 Urban Electric Vehicles 1931632 Rural Electric Vehicles ndash The Welsh Case 193
164 Conclusions 197References 197
17 Alternatives to the Car 199171 Introduction 199172 Defining the Car Legislative and Market Boundaries 200173 The Hidden World of Non‐Car Automobility 202174 Transition by Stealth The 2W‐BEV 203
1741 3W‐BEVs 205175 Conclusions 206References 206
18 New Business Models and the Automotive Industry 209181 Introduction 209182 Fundamentals of the Existing Automotive Industry Business Model 210183 Pressures for Change on the Existing Business Model 212184 Incremental Business Model Evolution in the Automotive Industry 213185 Radical Business Model Innovation in the Automotive Industry 214186 Conclusions and Future Prospects for Business Model Innovation 216References 216
19 Future Challenges for Product and Industry 219191 Introduction 219192 New Engine Technologies 220193 Owning or Sharing 223194 The Future Car 223195 The Future Industry 224References 226
Index 229
Notes on Contributors
Editorsrsquo Profiles
Paul NieuwenhuisCentre for Automotive Industry Research and Electric Vehicle Centre of ExcellenceCardiff Business School Cardiff UniversityCardiff Wales UK
Dr Paul Nieuwenhuis is a senior lecturer at Cardiff University He joined the Centre for Automotive Industry Research (CAIR) at Cardiff University in 1991 and he became one of its two directors in 2006 He was a founder member of the ESRC Centre for Business Relationships Accountability Sustainability and Society (BRASS) and is an associate of the Sustainable Places Research Institute His main interests are historic and environmental and his publica-tions have been in these areas for example The Green Car Guide (1992) and Sustainable Automobility (2014) He also contributed to the Beaulieu Encyclopaedia of the Automobile (2000) which won a Cugnot Award from the Society of Automotive Historians Dr Nieuwenhuis has produced around 300 publications ranging from books and academic papers to conference papers for both academic and business audiences and journalistic pieces Dr Nieuwenhuis is a member of the Guild of Motoring Writers
Peter WellsCentre for Automotive Industry ResearchCardiff Business School Cardiff UniversityCardiff Wales UK
Peter Wells is a professor of sustainable business models at Cardiff Business School where his work has ranged across spatial industrial development economics organizational theory industrial ecology technological change transition theory business models and sustainability ndash all through an applied focus on the global automotive industry Professor Wells has over 550 publications reaching academia industry policy and stakeholder audiences through tradi-tional papers and books Internet publications and more recently webinars
xii Notes on Contributors
Contributorsrsquo Profiles
Katsuki AokiSchool of Business AdministrationMeiji UniversityTokyo Japan
Dr Katsuki Aoki is an associate professor in the School of Business at Meiji University in Japan He received his PhD in business administration from Meiji University in 1999 His main research interests include (i) international comparative studies on the implementation of kaizen activities (ii) the benefits and limitations of the keiretsu system (OEMndashsupplier rela-tionships) in the automotive industry and (iii) mass customization and order fulfilment systems in the automotive industry His paper entitled lsquoTransferring Japanese kaizen activities to over-seas plants in Chinarsquo was selected as one of the most prominent papers at the Emerald Literati Network Awards for Excellence 2009
Liana M CipciganElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Dr Liana M Cipcigan is a senior lecturer in the School of Engineering at Cardiff University leading the research of integration and control of EVs in electricity and transportation net-works She is a member of the Electric Vehicle Centre of Excellence (EVCE) Her current research activities are focused on smart grids distributed generation and EV integration and control She has significant research experience in EU projects FP6 More Microgrids FP7 Mobile Energy Resources in Grids of Electricity (MERGE) and ERDF ENEVATE She is the principal investigator (PI) of the EPSRC projects lsquoSmart Management of Electric Vehiclesrsquo and lsquoElectric Vehicle Value Chain ndash Bridging the Gapsrsquo She is participating in the UKERC project lsquoSmart Grids Scenarios for UKrsquo and TSB project lsquoAgent‐Based Controllers for Electric Vehicles and Micro‐generatorsrsquo She is a member of CEN‐CLC eMobility working group on Smart Charging and IEEE P20301 working group on standards for EVs and related infrastructure
Huw DaviesElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Dr Huw Davies is a lecturer in mechanical engineering at Cardiff University School of Engineering His background is in vehicle engineering and the development of vehicle safety standards He has advised the UK Department for Transport the European Commission and the Automotive Industry At Cardiff University he has developed the transport research theme Safety mobility and emissions are at its core The universal goals are zero collisions zero congestion and zero emissions Dr Davies leads Cardiff Universityrsquos Electric Vehicle Centre of Excellence
Notes on Contributors xiii
Ceri DonovanElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Ceri Donovan is a research assistant at Cardiff University School of Engineering and a member of Cardiff Universityrsquos Electric Vehicle Centre of Excellence She spent most of her time in recent years working on ENEVATE which aimed to accelerate the uptake of e‐mobility in northwest Europe This includes conducting research on all aspects of electric vehicles including market drivers and mobility concepts vehicle safety and regulations She previously worked in defence research primarily focusing on how to integrate new technology onto existing platforms from the procurement as well as the practical perspectives She has an MSc in biometry from the University of Reading
Patrick GalvinInnovation Policy LabMunk School of Global AffairsUniversity of TorontoToronto Ontario Canada
Patrick Galvin is a postdoctoral research fellow with the Innovation Policy Lab at the Munk School of Global Affairs where he is part of a research team investigating the dynamics of devel-oping a new automotive policy for the Canadian automotive industry for the twenty‐first century He is also working on the SSHRC‐funded Creating Digital Opportunity project Prior to his current appointment and after having obtained both his BA (honours) and MA degrees in political science Patrick spent several years working in the housing policy field with a number of consulting firms Patrick enrolled in the PhD programme in politics at the University of Exeter in England He completed his dissertation in November 2012 and he was formally awarded his PhD degree in July 2012 Patrickrsquos PhD dissertation built on his training in public policy and political economy by examining how local government in the city of Toronto develops its cluster‐related innovation policy It focuses on two empirical case studies to see how the city develops its cluster policy for two industrial sectors the aerospace sector and the fashion sector
Elena GoracinovaInnovation Policy LabMunk School of Global AffairsUniversity of TorontoToronto Ontario Canada
Elena Goracinova is a PhD candidate in political science working at the University of Torontorsquos Munk School of Global Affairs Innovation Policy Lab with Professor David Wolfe She received her masterrsquos degree in geography from the University of Toronto with a thesis on manufacturing in developed economies She is interested in studying the role of the state in economic policymaking Her current work focuses on the scope and effectiveness of advanced manufacturing policies in Canada
xiv Notes on Contributors
John HolmesProfessor EmeritusDepartment of GeographyQueenrsquos UniversityKingston Ontario Canada
John Holmes is a professor of geography at Queenrsquos University in Kingston Ontario Canada He received his BSc (honours) and MA (social science) degrees from the University of Sheffield and his PhD from Ohio State University He is also affiliated with the graduate industrial relations programme in the Queenrsquos School of Policy Studies His research focuses on geographical aspects of the political economy of contemporary economic and social change and in particular on the contemporary restructuring and reorganization of production and work in North America Empirical research and writing have focused primarily on the automobile industry For a list of selected publications see httpgeogqueensucafacultyholmesasp
Seunghwan KuFaculty of Business AdministrationKyoto Sangyo UniversityKyoto Japan
Seunghwan Ku is a professor of technology of management of the Faculty of Business Administration Kyoto Sangyo University He received his PhD (management of technology) from the University of Tokyo Japan His dissertation entitled lsquoThe Dynamism of Product Architecture Modularization Knowledge Integration Interfirm Linkagersquo was published by Mineruba Shobo a major publisher in Japan His recent publications include lsquoEconomic Analysis of ICT Innovationrsquo (2011) with M Fujiwara and lsquoShip Development and Shipbuilding Industry The Constraint of Large Artifact Development and the Uncertainty of Business Modelrsquo with H Kato in T Fujimoto ed lsquoCoping with Complex Artifactsrsquo (2013) His current research interests are (i) product development (ii) logistics and inter‐firm linkages (iii) prod-uct strategy and innovation and (iv) supplier system in Korean and Japanese industries the auto sector in particular
Maneesh KumarCentre for Automotive Industry ResearchCardiff Business School Cardiff UniversityCardiff Wales UK
Dr Maneesh Kumar is a senior lecturer at Cardiff Business School Cardiff University UK His research interests are primarily in the area of quality management Lean Six Sigma (LSS) and service recovery within manufacturing service and public sector organizations His recent research within Indian automotive industry focuses on understanding the best‐in‐class practices in diffusing LeanKaizen practice at supply network level and how automotive giants (OEMs) support and develop their suppliers (at Tier 1 and Tier 2 level) His research outputs include an edited book five edited conference proceedings three book chapters and over 80 peer‐reviewed
Notes on Contributors xv
journal publications and conference papers He has been involved in delivering LSS training up to black‐belt level and delivered several workshops on LSS application in several blue chip companies He is also a regular speaker at international conferences and seminars on LSS and process excellence
Xiao LinCentre for Automotive Industry ResearchLogistics and Operations Management SectionCardiff Business School Cardiff UniversityCardiff Wales UK
Xiao Lin is a PhD student in the logistics and operations management section at Cardiff Business School Cardiff University Her research interests include sustainability transition theory business models etc Her PhD research project is specifically focusing on the study of the future prospect for e‐bikes in sustainable mobility in China through various quantitative and qualitative analysis methods Xiao Lin is enthusiastic in contributing to the collaboration of the sustainable community She is a member of the organizing committee of the lsquoThe 2014 Global Research Forum Sustainable Production and Consumption Conferencersquo
Daniel NewmanElectric Vehicle Centre of Excellence and Sustainable Places Research InstituteCardiff UniversityCardiff Wales UK
Dr Daniel Newman is a research assistant at Cardiff Business School working within the Cardiff University Electric Vehicle Centre of Excellence His activities are primarily focused on the ENEVATE project conducting social research investigating the potential for increasing electric vehicle uptake in northwest Europe He was previously a research assistant at the University of Bristol Law School looking at environmental law and health and safety regulations Prior to this he completed an ESRC‐funded PhD in the University of Bristol Law School investigating the state of access to justice which was published as a book by Hart in 2012
Ben WallerSenior Researcher ICDPInternational Car Distribution Programme (ICDP)Cardiff Wales UK
Ben is a senior researcher at the International Car Distribution Programme (ICDP) and based in the United Kingdom ICDP is an international research‐based organization focused on auto-motive distribution including the supply and retailing of new and used vehicles aftersales network structures and operations Through research activities data services education events and consulting ICDP works with vehicle makers dealers suppliers and related orga-nizations to improve the quality and effectiveness of the distribution model Ben has presented to a range of international audiences from academic conferences to senior executives and also authors articles for business press and delivers executive teaching
xvi Notes on Contributors
Lorraine WhitmarshSchool of PsychologyCardiff UniversityCardiff Wales UK
Dr Lorraine Whitmarsh is an environmental psychologist specializing in perceptions and behaviour in relation to climate change energy and transport She is a senior lecturer in the School of Psychology at Cardiff University UK Lorraine is also a partner coordinator for the Tyndall Centre for Climate Change Research and a research associate of Cardiff Universityrsquos Centre for Business Relationships Accountability Sustainability and Society (BRASS) and the Sustainable Places Research Institute She sits on the Climate Change Commission for Wales advising Welsh government on transport and behaviour change
David A WolfeProfessor of Political Science andCo‐director Innovation Policy LabMunk School of Global Affairs University of TorontoToronto Ontario Canada
David A Wolfe is a professor of political science at UTM and a co‐director of the Innovation Policy Lab at the Munk School of Global Affairs in Toronto From 2009 to 2014 he was the Royal Bank Chair in Public and Economic Policy at the University of Toronto He is currently leading a major partnership grant on Creating Digital Opportunity Canadarsquos ICT Industry in Global Perspective funded by the Social Sciences and Humanities Research Council of Canada He is also participating in the project on manufacturing policy and the Canadian auto-motive sector based in the Automotive Policy Research Centre at McMaster University
Dimitrios XeniasSchool of PsychologyCardiff UniversityCardiff Wales UK
Dr Dimitrios Xenias is a social and environmental psychologist focusing on sustainable travel and associated behaviours such as mode choice on domestic energy‐related behaviours and on perceptions of climate change and its communication He is a research associate in the School of Psychology at Cardiff University UK Dimitrios is also an associate of the Tyndall Centre for Climate Change Research and a research associate of Cardiff Universityrsquos Centre for Business Relationships Accountability Sustainability and Society (BRASS) and the Sustainable Places Research Institute
Series Preface
The automotive industry is one of the largest manufacturing sectors in the global community Not only does it generate significant economic benefits to the worldrsquos economy but the auto-mobile is highly linked to a wide variety of international concerns such as energy consump-tion emissions trade and safety The primary objective of the Automotive Series is to publish practical and topical books for researchers and practitioners in the industry and postgraduatesadvanced undergraduates in automotive engineering
The series addresses new and emerging technologies in automotive engineering supporting the development of more fuel‐efficient safer and more environmentally friendly vehicles It covers a wide range of topics including design manufacture and operation and the intention is to provide a source of relevant information that will be of interest and benefit to people working in the field of automotive engineering
This book The Global Automotive Industry presents a broad spectrum view of the automo-tive sector from the technology industry and policy perspectives In the early chapters of the book an understanding of the industry from a social technical and economic perspective is presented This is followed by a discussion of the fabric of next‐generation vehicle systems as it is woven into a global society This discussion is expanded to include the economic impact of the automotive industrial sector on nationsrsquo economies from production operationsrevenue to job growth This text goes beyond regional thinking with respect to automotive production and discusses the historic expansion of automotive manufacturing giants in Korea and the new emerging markets in China and potentially India
The text finishes with an excellent overview of emerging technologies and economies that will be pivotal to the automotive sector These discussions are then presented in the light of new business models in a global marketplace and the impact of regulation on the automobile as well as its manufacture These topics are well integrated into the earlier topics presented in the book and make it a unique and valuable crosscutting source of information for the reader
The Global Automotive Industry integrates these topics in a unique and thought‐provoking manner that provides significant insight into global automotive production regulation and
xviii Series Preface
economic impact on society It is a forward‐thinking text that considers a wide variety of topics that will drive this major industry and the global economy for the foreseeable future It is written by highly recognized experts in the field and is a welcome addition to the Automotive Series
Thomas KurfessJuly 2015
Foreword
The global automotive industry is a complex and demanding topic for any book It is clear following my 30‐year career within the automotive industry that only a comparatively small number of individuals have a comprehensive understanding of a vehiclersquos full construction Even after decades of professional involvement it can be difficult for an individual to have a full appreciation of the subject and its international infrastructure and landscape
From pre‐production to the factory floor and the boardroom knowledge sharing is incred-ibly important to the future of the automotive engineering profession With future mobility solutions being vital to modern society and with the needs of each region differing depending on capabilities and production facilities communication amongst the worldrsquos engineers pro-vides a route to approaching and accommodating the global social political and economic considerations that the future will demand
FISITA has successfully coordinated global communications amongst its network of over 200 000 professional engineers from member societies in 37 countries for over 60 years This demonstrates the point through many generations that sharing of knowledge and ideas amongst an industry as large as automotive including engineers academics and executives is vital as it provides us all with the tools to contribute to a better future
As part of this journey global collaboration within the industry is also necessary in order to deliver a clear message to wider society that the automotive engineering profession is well placed to face the challenges of today and tomorrow
Paul Nieuwenhuis and Peter Wells have provided us with a very good starting point The authors are able to present the wide scope of the industry in a clear way whilst contributing a wealth of knowledge about the global automotive industry
Chris MasonCEO FISITA
The Global Automotive Industry First Edition Edited by Paul Nieuwenhuis and Peter Wells copy 2015 John Wiley amp Sons Ltd Published 2015 by John Wiley amp Sons Ltd
Introduction and OverviewPaul Nieuwenhuis1 and Peter Wells2
1 Centre for Automotive Industry Research and Electric Vehicle Centre of Excellence Cardiff Business School Cardiff University Cardiff Wales UK2 Centre for Automotive Industry Research Cardiff Business School Cardiff University Cardiff Wales UK
11 Introduction
It is an impossible task to do full justice in one book to the global automotive industry with the pervasive impact economic significance and cultural status that it brings As editors our task is as much one of selective omission as one of collation to create an account of the business of mak-ing selling and using cars that is both representative and yet respectful of the diversity we know to be a feature of the industry Moreover this is an industry in the midst of reinventing itself It had seemed to some both inside and outside the industry around the turn of the millennium that this was a lsquosunsetrsquo industry characterized by over‐capacity plant closures job losses declining profitability and a product that seemed unsuited to meeting the environmental and social chal-lenges arising from mass car ownership and use The combination of profound environmental pressures and endemic economic distress appeared to call into question the pre‐eminent position enjoyed by the car in providing for personal mobility and the viability of the industry behind this most contradictory of products These concerns came to a peak with the arrival of the global economic crisis around 2007ndash2008 which resulted in new car sales falling steeply in the established markets and investment freezing while the entire financial community held its collective breath to see whether the world would plunge into an economic abyss Those looking closely at urban developments and the changing cultural priorities of young people started to whisper about the concept of lsquopeak carrsquo in which the high tide of automobility had been reached in the saturated markets of the European Union North America Japan and Korea
Yet only a few years later the industry has reemerged burnished by the embrace of new technologies and with resurgent sales in the previously moribund West being more than matched by the frenetic growth of sales in China and elsewhere Regulatory interventions
1
2 The Global Automotive Industry
such as the European Union fleet average carbon emissions targets that were once seen as burdensome and punitive have arguably helped stimulate the technological renaissance of the industry alongside the realization that there might be other routes to profitability Later chap-ters in the book are more concerned with this recent period of transformation and the possible futures it portends Chapter 16 for example is about the impact of the electric vehicle while Chapter 18 links technology change with possible innovations in business models forced on the industry by such technological changes Chapter 19 is more speculative but offers up some signposts for the future of automobility and the automotive industry
This is not to say that the process of change has been without stress or consequence Restructuring of the industry has continued apace the merger of Chrysler and Fiat came as a consequence of several years of corporate turmoil while the rescue of PSA by the French government and by the Chinese company Dongfeng costs the Peugeot family their control over this long established business ndash the oldest in the industry The great expectations held for battery electric vehicles remain as yet largely unrealized despite the highly visible and expen-sive efforts of companies like Nissan Renault and BMW alongside the publicity‐garnering machine that is Tesla In the meantime high‐profile failures such as the battery swap business Better Place serve as stark reminders that attempts to reinvent this industry especially by new entrants are fraught with hazard At the same time markets in the European Union have not really recovered to pre‐crisis levels and perhaps never will
So despite an apparent lsquobusiness‐as‐usualrsquo attitude permeating the automotive industry at the moment in reality it is subject to potentially radical change Only a few years ago we saw two of the worldrsquos largest car manufacturers General Motors and Chrysler on the brink of collapse Having decided both were lsquotoo big to failrsquo they had to be bailed out by the American tax‐payer Ford managed without direct government support but it is nevertheless quite clear that the collapse of the supply base that would have resulted from a collapse of both their key domestic competitors GM and Chrysler would also have dragged down Ford in due course Within a matter of months the worldrsquos most prominent car industry and the oldest mass production car industry could have disappeared only intervention from the public sector saved this key compo-nent of the private sector underlining that apart from anything else the close synergies and intertwined relationships continue to exist between the private and public sectors in developed countries (Mazzucato 2013) This highlights not only the weaknesses inherent in the close links between the financial and car systems but also indicates that the current mass production system whether seen as Fordist or Buddist (see below) may well be due for a rethink in several respects
In Europe the apparent success of Germany more recently the UK automotive industry is easily misunderstood leading perhaps to overconfidence but do note that the secret of success in Europe is largely confined to the more upmarket segments with the Germans the primary beneficiaries and that this success is very reliant on demand from Asia particularly China it has therefore made Europe ndash and also the United States particularly GM ndash very dependent on that far from stable market as also outlined in more detail in Chapter 10 At the same time pressures to make the car more environmentally compatible as we see it have not only led to cars with much less harmful tailpipe emissions but the more recent pressure to reduce the carbon footprint of cars particularly focused on their emissions of the greenhouse gas carbon dioxide has the potential to radically reshape the industry and its products These regulatory pressures are reviewed in Chapter 14 although the potential impact of this agenda is not yet fully understood but it has already led to a new wave of alternative powertrain vehicles in the market ranging from early petrol‐electric hybrids ndash including the now iconic Toyota Prius ndash via
Introduction and Overview 3
so‐called range‐extended and plug‐in hybrids such as the GM Volt and Ampera to full battery‐electric vehicles such as the Nissan Leaf Renault Zoe and Tesla Model S Such developments as well as the introduction of the even more radical BMW i3 which not only introduces a full battery‐electric powertrain but also houses this within a radical departure from the tried and tested lsquoBuddistrsquo (see Chapter 5) all‐steel body in using a carbon fibre body on an aluminium chassis are clear signs that business‐as‐usual is steadily being undermined even from within the established industry
Despite the size of the industry car making is in reality a very precarious business In its present form it lacks resilience it is not sustainable This is true not just in terms of environmental sustainability where it clearly is not measuring up but even in terms of basic economic sustainability Yet this industry is still crucially important representing a significant part of the economy in many industrialized countries as well as many newly industrializing economies notably China In addition the car‐based transport system or lsquoregimersquo (Geels et al 2012) which extends well beyond the industry that makes cars to the way in which auto-mobility has become integrated in our societies and cultures has become so embedded that its removal would lead to widespread social and economic crisis
In some regards therefore this book may be a testimony to a dying era as much as a hymnal to a new one Thus far the automotive industry has managed to contain the pressures for change both economic and environmental within the broad ambit of the long‐standing business model of the mainstream vehicle manufacturers In parallel those purchasing and using cars in the traditional manner have remained by far the majority compared with more innovative solutions such as car clubs city car sharing schemes and other alternatives that might presage the end of established automobility cultures The question is whether the collective and cumulative impact of all the new developments sweeping through the industry will be sufficient to herald the arrival of a new lsquoautomotive ecosystemrsquo as some have termed it or lsquoregimersquo according to others and one in which the dominance of the established vehicle manufacturers and their entrenched supply chains is challenged by a new order of communi-cations and mobility providers Some caution on these issues is urged here The automotive industry is not immune to hype cycles or the fevered imaginations of those professional change‐mongers with a vested interest in fermenting and emphasizing the new over the continuous
12 Continuity and Change
The book as a whole therefore represents an attempt to capture continuity and change in the global automotive industry this theme is brought to the fore in the first main chapter of the book Chapter 2 as change is very much a feature of the current phase of the automotive system Change of course needs to be seen in historical perspective and as such many of the chapters offer up a historical narrative that builds a temporal dynamic into the account of the subject under consideration There is some need in seeking to understand the structures and practices of the present to delve into the past If nothing else path dependency theory tells us that many decisions are nonlinear irreversible steps that result in distinct historical outcomes bounded by time and place As we have sought to delineate elsewhere the cluster of innovations that created the template for the mass production automotive industry occurred largely in the United States in the early years of the twentieth century the Ford moving assembly line with standardized and inter‐changeable parts the Budd all‐steel body that could be stamped
4 The Global Automotive Industry
welded and painted and the Sloan multi‐brand company with marketing innovations such as consumer credit and annual model changes these developments are outlined in Chapter 5 Despite many years of incremental change the basic architecture of the industry remains in place That such durability is evident speaks volumes for the scope for productivity improve-ment within this basic architecture over many decades and the efficacy of the system as a whole in terms of matching the imperatives of production economics to the demands of the market For this reason key early chapters in the book for example Chapters 3 4 5 and 6 are about the production system and the market for cars There is no subscription here to the simple neoclassical economics assumption that lsquoconsumersrsquo demand and lsquoproducersrsquo provide Rather there is a continuing dynamic tension between supply and demand sides that is never entirely resolved
13 Overview
The chapters in this book are thus essentially an attempt to take stock of the industry in its present state of a well‐established industry on the verge of potentially radical change tracking some of its history ndash trying to answer the question of how did we get here ndash assessing key aspects of its current state while also plotting some possible futures for the industry and its products This book does not seek to present chapters that are held together by a common the-oretical thread Such works can be tremendously informative and insightful (see Geels et al 2012) but of course tend to place primary emphasis on the question of theoretical coherence Rather the approach here has been more agnostic in theoretical terms and has been to seek insights and individual views by those who are established experts in their fields and who are known for their knowledge of the automotive industry (or a specific aspect of it) alongside their particular theoretical or methodological frameworks Each chapter is thus a cameo able to stand alone as a concise insight into one dimension of this multi‐faceted industry but also serves as a piece in the jigsaw that describes and explains how this industry really works
There are some gaps of course It is not possible to give consideration to all the countries producing cars and the unique contexts within which they operate The salience of the lsquovari-eties of capitalismrsquo school of thought (see Section 23) is acknowledged here and some com-parative chapters are pertinent to this school notably those on labourndashmanagement relations in North America and Japan (Chapters 7 and 8 respectively) While the question of labour relations in Japan has remained largely immune to external influence (notwithstanding the substantial impact of Renault on operations at Nissan and the rather lesser impact of Ford on Mazda) the story in North America has a strong thread in which lsquoJapanizationrsquo has been highly significant Chapters 9 10 and 11 cover the broad sweep of the automotive industry in Asia highlighting South Korea China and India respectively ndash both Korea and India have become comparatively neglected in view of the immense attention directed at China Interestingly both these countries are more than passive recipients of automobility and can claim to be home to significant companies within the industry of the modern era while also representing unique markets
An apparent gap in the account includes a chapter that explicitly deals with the global supply chain of components and raw materials to the vehicle manufacturers ndash where typically up to 85 of the ex‐works value of a new car is accounted for by bought in components and materials The theme of supply chain management is an important facet of the industry but
Contents ix
153 Latin America 180154 Case Study On the Margins of Mass Production Australia 181References 184
16 The Impact of Electric Automobility 185161 Electric Vehicle Design 185
1611 Battery Electric Vehicles 1861612 Hybrid Electric Vehicles 186
162 Charging Infrastructure ndash UK Case Study 187163 Electric Vehicles in Europe 191
1631 Urban Electric Vehicles 1931632 Rural Electric Vehicles ndash The Welsh Case 193
164 Conclusions 197References 197
17 Alternatives to the Car 199171 Introduction 199172 Defining the Car Legislative and Market Boundaries 200173 The Hidden World of Non‐Car Automobility 202174 Transition by Stealth The 2W‐BEV 203
1741 3W‐BEVs 205175 Conclusions 206References 206
18 New Business Models and the Automotive Industry 209181 Introduction 209182 Fundamentals of the Existing Automotive Industry Business Model 210183 Pressures for Change on the Existing Business Model 212184 Incremental Business Model Evolution in the Automotive Industry 213185 Radical Business Model Innovation in the Automotive Industry 214186 Conclusions and Future Prospects for Business Model Innovation 216References 216
19 Future Challenges for Product and Industry 219191 Introduction 219192 New Engine Technologies 220193 Owning or Sharing 223194 The Future Car 223195 The Future Industry 224References 226
Index 229
Notes on Contributors
Editorsrsquo Profiles
Paul NieuwenhuisCentre for Automotive Industry Research and Electric Vehicle Centre of ExcellenceCardiff Business School Cardiff UniversityCardiff Wales UK
Dr Paul Nieuwenhuis is a senior lecturer at Cardiff University He joined the Centre for Automotive Industry Research (CAIR) at Cardiff University in 1991 and he became one of its two directors in 2006 He was a founder member of the ESRC Centre for Business Relationships Accountability Sustainability and Society (BRASS) and is an associate of the Sustainable Places Research Institute His main interests are historic and environmental and his publica-tions have been in these areas for example The Green Car Guide (1992) and Sustainable Automobility (2014) He also contributed to the Beaulieu Encyclopaedia of the Automobile (2000) which won a Cugnot Award from the Society of Automotive Historians Dr Nieuwenhuis has produced around 300 publications ranging from books and academic papers to conference papers for both academic and business audiences and journalistic pieces Dr Nieuwenhuis is a member of the Guild of Motoring Writers
Peter WellsCentre for Automotive Industry ResearchCardiff Business School Cardiff UniversityCardiff Wales UK
Peter Wells is a professor of sustainable business models at Cardiff Business School where his work has ranged across spatial industrial development economics organizational theory industrial ecology technological change transition theory business models and sustainability ndash all through an applied focus on the global automotive industry Professor Wells has over 550 publications reaching academia industry policy and stakeholder audiences through tradi-tional papers and books Internet publications and more recently webinars
xii Notes on Contributors
Contributorsrsquo Profiles
Katsuki AokiSchool of Business AdministrationMeiji UniversityTokyo Japan
Dr Katsuki Aoki is an associate professor in the School of Business at Meiji University in Japan He received his PhD in business administration from Meiji University in 1999 His main research interests include (i) international comparative studies on the implementation of kaizen activities (ii) the benefits and limitations of the keiretsu system (OEMndashsupplier rela-tionships) in the automotive industry and (iii) mass customization and order fulfilment systems in the automotive industry His paper entitled lsquoTransferring Japanese kaizen activities to over-seas plants in Chinarsquo was selected as one of the most prominent papers at the Emerald Literati Network Awards for Excellence 2009
Liana M CipciganElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Dr Liana M Cipcigan is a senior lecturer in the School of Engineering at Cardiff University leading the research of integration and control of EVs in electricity and transportation net-works She is a member of the Electric Vehicle Centre of Excellence (EVCE) Her current research activities are focused on smart grids distributed generation and EV integration and control She has significant research experience in EU projects FP6 More Microgrids FP7 Mobile Energy Resources in Grids of Electricity (MERGE) and ERDF ENEVATE She is the principal investigator (PI) of the EPSRC projects lsquoSmart Management of Electric Vehiclesrsquo and lsquoElectric Vehicle Value Chain ndash Bridging the Gapsrsquo She is participating in the UKERC project lsquoSmart Grids Scenarios for UKrsquo and TSB project lsquoAgent‐Based Controllers for Electric Vehicles and Micro‐generatorsrsquo She is a member of CEN‐CLC eMobility working group on Smart Charging and IEEE P20301 working group on standards for EVs and related infrastructure
Huw DaviesElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Dr Huw Davies is a lecturer in mechanical engineering at Cardiff University School of Engineering His background is in vehicle engineering and the development of vehicle safety standards He has advised the UK Department for Transport the European Commission and the Automotive Industry At Cardiff University he has developed the transport research theme Safety mobility and emissions are at its core The universal goals are zero collisions zero congestion and zero emissions Dr Davies leads Cardiff Universityrsquos Electric Vehicle Centre of Excellence
Notes on Contributors xiii
Ceri DonovanElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Ceri Donovan is a research assistant at Cardiff University School of Engineering and a member of Cardiff Universityrsquos Electric Vehicle Centre of Excellence She spent most of her time in recent years working on ENEVATE which aimed to accelerate the uptake of e‐mobility in northwest Europe This includes conducting research on all aspects of electric vehicles including market drivers and mobility concepts vehicle safety and regulations She previously worked in defence research primarily focusing on how to integrate new technology onto existing platforms from the procurement as well as the practical perspectives She has an MSc in biometry from the University of Reading
Patrick GalvinInnovation Policy LabMunk School of Global AffairsUniversity of TorontoToronto Ontario Canada
Patrick Galvin is a postdoctoral research fellow with the Innovation Policy Lab at the Munk School of Global Affairs where he is part of a research team investigating the dynamics of devel-oping a new automotive policy for the Canadian automotive industry for the twenty‐first century He is also working on the SSHRC‐funded Creating Digital Opportunity project Prior to his current appointment and after having obtained both his BA (honours) and MA degrees in political science Patrick spent several years working in the housing policy field with a number of consulting firms Patrick enrolled in the PhD programme in politics at the University of Exeter in England He completed his dissertation in November 2012 and he was formally awarded his PhD degree in July 2012 Patrickrsquos PhD dissertation built on his training in public policy and political economy by examining how local government in the city of Toronto develops its cluster‐related innovation policy It focuses on two empirical case studies to see how the city develops its cluster policy for two industrial sectors the aerospace sector and the fashion sector
Elena GoracinovaInnovation Policy LabMunk School of Global AffairsUniversity of TorontoToronto Ontario Canada
Elena Goracinova is a PhD candidate in political science working at the University of Torontorsquos Munk School of Global Affairs Innovation Policy Lab with Professor David Wolfe She received her masterrsquos degree in geography from the University of Toronto with a thesis on manufacturing in developed economies She is interested in studying the role of the state in economic policymaking Her current work focuses on the scope and effectiveness of advanced manufacturing policies in Canada
xiv Notes on Contributors
John HolmesProfessor EmeritusDepartment of GeographyQueenrsquos UniversityKingston Ontario Canada
John Holmes is a professor of geography at Queenrsquos University in Kingston Ontario Canada He received his BSc (honours) and MA (social science) degrees from the University of Sheffield and his PhD from Ohio State University He is also affiliated with the graduate industrial relations programme in the Queenrsquos School of Policy Studies His research focuses on geographical aspects of the political economy of contemporary economic and social change and in particular on the contemporary restructuring and reorganization of production and work in North America Empirical research and writing have focused primarily on the automobile industry For a list of selected publications see httpgeogqueensucafacultyholmesasp
Seunghwan KuFaculty of Business AdministrationKyoto Sangyo UniversityKyoto Japan
Seunghwan Ku is a professor of technology of management of the Faculty of Business Administration Kyoto Sangyo University He received his PhD (management of technology) from the University of Tokyo Japan His dissertation entitled lsquoThe Dynamism of Product Architecture Modularization Knowledge Integration Interfirm Linkagersquo was published by Mineruba Shobo a major publisher in Japan His recent publications include lsquoEconomic Analysis of ICT Innovationrsquo (2011) with M Fujiwara and lsquoShip Development and Shipbuilding Industry The Constraint of Large Artifact Development and the Uncertainty of Business Modelrsquo with H Kato in T Fujimoto ed lsquoCoping with Complex Artifactsrsquo (2013) His current research interests are (i) product development (ii) logistics and inter‐firm linkages (iii) prod-uct strategy and innovation and (iv) supplier system in Korean and Japanese industries the auto sector in particular
Maneesh KumarCentre for Automotive Industry ResearchCardiff Business School Cardiff UniversityCardiff Wales UK
Dr Maneesh Kumar is a senior lecturer at Cardiff Business School Cardiff University UK His research interests are primarily in the area of quality management Lean Six Sigma (LSS) and service recovery within manufacturing service and public sector organizations His recent research within Indian automotive industry focuses on understanding the best‐in‐class practices in diffusing LeanKaizen practice at supply network level and how automotive giants (OEMs) support and develop their suppliers (at Tier 1 and Tier 2 level) His research outputs include an edited book five edited conference proceedings three book chapters and over 80 peer‐reviewed
Notes on Contributors xv
journal publications and conference papers He has been involved in delivering LSS training up to black‐belt level and delivered several workshops on LSS application in several blue chip companies He is also a regular speaker at international conferences and seminars on LSS and process excellence
Xiao LinCentre for Automotive Industry ResearchLogistics and Operations Management SectionCardiff Business School Cardiff UniversityCardiff Wales UK
Xiao Lin is a PhD student in the logistics and operations management section at Cardiff Business School Cardiff University Her research interests include sustainability transition theory business models etc Her PhD research project is specifically focusing on the study of the future prospect for e‐bikes in sustainable mobility in China through various quantitative and qualitative analysis methods Xiao Lin is enthusiastic in contributing to the collaboration of the sustainable community She is a member of the organizing committee of the lsquoThe 2014 Global Research Forum Sustainable Production and Consumption Conferencersquo
Daniel NewmanElectric Vehicle Centre of Excellence and Sustainable Places Research InstituteCardiff UniversityCardiff Wales UK
Dr Daniel Newman is a research assistant at Cardiff Business School working within the Cardiff University Electric Vehicle Centre of Excellence His activities are primarily focused on the ENEVATE project conducting social research investigating the potential for increasing electric vehicle uptake in northwest Europe He was previously a research assistant at the University of Bristol Law School looking at environmental law and health and safety regulations Prior to this he completed an ESRC‐funded PhD in the University of Bristol Law School investigating the state of access to justice which was published as a book by Hart in 2012
Ben WallerSenior Researcher ICDPInternational Car Distribution Programme (ICDP)Cardiff Wales UK
Ben is a senior researcher at the International Car Distribution Programme (ICDP) and based in the United Kingdom ICDP is an international research‐based organization focused on auto-motive distribution including the supply and retailing of new and used vehicles aftersales network structures and operations Through research activities data services education events and consulting ICDP works with vehicle makers dealers suppliers and related orga-nizations to improve the quality and effectiveness of the distribution model Ben has presented to a range of international audiences from academic conferences to senior executives and also authors articles for business press and delivers executive teaching
xvi Notes on Contributors
Lorraine WhitmarshSchool of PsychologyCardiff UniversityCardiff Wales UK
Dr Lorraine Whitmarsh is an environmental psychologist specializing in perceptions and behaviour in relation to climate change energy and transport She is a senior lecturer in the School of Psychology at Cardiff University UK Lorraine is also a partner coordinator for the Tyndall Centre for Climate Change Research and a research associate of Cardiff Universityrsquos Centre for Business Relationships Accountability Sustainability and Society (BRASS) and the Sustainable Places Research Institute She sits on the Climate Change Commission for Wales advising Welsh government on transport and behaviour change
David A WolfeProfessor of Political Science andCo‐director Innovation Policy LabMunk School of Global Affairs University of TorontoToronto Ontario Canada
David A Wolfe is a professor of political science at UTM and a co‐director of the Innovation Policy Lab at the Munk School of Global Affairs in Toronto From 2009 to 2014 he was the Royal Bank Chair in Public and Economic Policy at the University of Toronto He is currently leading a major partnership grant on Creating Digital Opportunity Canadarsquos ICT Industry in Global Perspective funded by the Social Sciences and Humanities Research Council of Canada He is also participating in the project on manufacturing policy and the Canadian auto-motive sector based in the Automotive Policy Research Centre at McMaster University
Dimitrios XeniasSchool of PsychologyCardiff UniversityCardiff Wales UK
Dr Dimitrios Xenias is a social and environmental psychologist focusing on sustainable travel and associated behaviours such as mode choice on domestic energy‐related behaviours and on perceptions of climate change and its communication He is a research associate in the School of Psychology at Cardiff University UK Dimitrios is also an associate of the Tyndall Centre for Climate Change Research and a research associate of Cardiff Universityrsquos Centre for Business Relationships Accountability Sustainability and Society (BRASS) and the Sustainable Places Research Institute
Series Preface
The automotive industry is one of the largest manufacturing sectors in the global community Not only does it generate significant economic benefits to the worldrsquos economy but the auto-mobile is highly linked to a wide variety of international concerns such as energy consump-tion emissions trade and safety The primary objective of the Automotive Series is to publish practical and topical books for researchers and practitioners in the industry and postgraduatesadvanced undergraduates in automotive engineering
The series addresses new and emerging technologies in automotive engineering supporting the development of more fuel‐efficient safer and more environmentally friendly vehicles It covers a wide range of topics including design manufacture and operation and the intention is to provide a source of relevant information that will be of interest and benefit to people working in the field of automotive engineering
This book The Global Automotive Industry presents a broad spectrum view of the automo-tive sector from the technology industry and policy perspectives In the early chapters of the book an understanding of the industry from a social technical and economic perspective is presented This is followed by a discussion of the fabric of next‐generation vehicle systems as it is woven into a global society This discussion is expanded to include the economic impact of the automotive industrial sector on nationsrsquo economies from production operationsrevenue to job growth This text goes beyond regional thinking with respect to automotive production and discusses the historic expansion of automotive manufacturing giants in Korea and the new emerging markets in China and potentially India
The text finishes with an excellent overview of emerging technologies and economies that will be pivotal to the automotive sector These discussions are then presented in the light of new business models in a global marketplace and the impact of regulation on the automobile as well as its manufacture These topics are well integrated into the earlier topics presented in the book and make it a unique and valuable crosscutting source of information for the reader
The Global Automotive Industry integrates these topics in a unique and thought‐provoking manner that provides significant insight into global automotive production regulation and
xviii Series Preface
economic impact on society It is a forward‐thinking text that considers a wide variety of topics that will drive this major industry and the global economy for the foreseeable future It is written by highly recognized experts in the field and is a welcome addition to the Automotive Series
Thomas KurfessJuly 2015
Foreword
The global automotive industry is a complex and demanding topic for any book It is clear following my 30‐year career within the automotive industry that only a comparatively small number of individuals have a comprehensive understanding of a vehiclersquos full construction Even after decades of professional involvement it can be difficult for an individual to have a full appreciation of the subject and its international infrastructure and landscape
From pre‐production to the factory floor and the boardroom knowledge sharing is incred-ibly important to the future of the automotive engineering profession With future mobility solutions being vital to modern society and with the needs of each region differing depending on capabilities and production facilities communication amongst the worldrsquos engineers pro-vides a route to approaching and accommodating the global social political and economic considerations that the future will demand
FISITA has successfully coordinated global communications amongst its network of over 200 000 professional engineers from member societies in 37 countries for over 60 years This demonstrates the point through many generations that sharing of knowledge and ideas amongst an industry as large as automotive including engineers academics and executives is vital as it provides us all with the tools to contribute to a better future
As part of this journey global collaboration within the industry is also necessary in order to deliver a clear message to wider society that the automotive engineering profession is well placed to face the challenges of today and tomorrow
Paul Nieuwenhuis and Peter Wells have provided us with a very good starting point The authors are able to present the wide scope of the industry in a clear way whilst contributing a wealth of knowledge about the global automotive industry
Chris MasonCEO FISITA
The Global Automotive Industry First Edition Edited by Paul Nieuwenhuis and Peter Wells copy 2015 John Wiley amp Sons Ltd Published 2015 by John Wiley amp Sons Ltd
Introduction and OverviewPaul Nieuwenhuis1 and Peter Wells2
1 Centre for Automotive Industry Research and Electric Vehicle Centre of Excellence Cardiff Business School Cardiff University Cardiff Wales UK2 Centre for Automotive Industry Research Cardiff Business School Cardiff University Cardiff Wales UK
11 Introduction
It is an impossible task to do full justice in one book to the global automotive industry with the pervasive impact economic significance and cultural status that it brings As editors our task is as much one of selective omission as one of collation to create an account of the business of mak-ing selling and using cars that is both representative and yet respectful of the diversity we know to be a feature of the industry Moreover this is an industry in the midst of reinventing itself It had seemed to some both inside and outside the industry around the turn of the millennium that this was a lsquosunsetrsquo industry characterized by over‐capacity plant closures job losses declining profitability and a product that seemed unsuited to meeting the environmental and social chal-lenges arising from mass car ownership and use The combination of profound environmental pressures and endemic economic distress appeared to call into question the pre‐eminent position enjoyed by the car in providing for personal mobility and the viability of the industry behind this most contradictory of products These concerns came to a peak with the arrival of the global economic crisis around 2007ndash2008 which resulted in new car sales falling steeply in the established markets and investment freezing while the entire financial community held its collective breath to see whether the world would plunge into an economic abyss Those looking closely at urban developments and the changing cultural priorities of young people started to whisper about the concept of lsquopeak carrsquo in which the high tide of automobility had been reached in the saturated markets of the European Union North America Japan and Korea
Yet only a few years later the industry has reemerged burnished by the embrace of new technologies and with resurgent sales in the previously moribund West being more than matched by the frenetic growth of sales in China and elsewhere Regulatory interventions
1
2 The Global Automotive Industry
such as the European Union fleet average carbon emissions targets that were once seen as burdensome and punitive have arguably helped stimulate the technological renaissance of the industry alongside the realization that there might be other routes to profitability Later chap-ters in the book are more concerned with this recent period of transformation and the possible futures it portends Chapter 16 for example is about the impact of the electric vehicle while Chapter 18 links technology change with possible innovations in business models forced on the industry by such technological changes Chapter 19 is more speculative but offers up some signposts for the future of automobility and the automotive industry
This is not to say that the process of change has been without stress or consequence Restructuring of the industry has continued apace the merger of Chrysler and Fiat came as a consequence of several years of corporate turmoil while the rescue of PSA by the French government and by the Chinese company Dongfeng costs the Peugeot family their control over this long established business ndash the oldest in the industry The great expectations held for battery electric vehicles remain as yet largely unrealized despite the highly visible and expen-sive efforts of companies like Nissan Renault and BMW alongside the publicity‐garnering machine that is Tesla In the meantime high‐profile failures such as the battery swap business Better Place serve as stark reminders that attempts to reinvent this industry especially by new entrants are fraught with hazard At the same time markets in the European Union have not really recovered to pre‐crisis levels and perhaps never will
So despite an apparent lsquobusiness‐as‐usualrsquo attitude permeating the automotive industry at the moment in reality it is subject to potentially radical change Only a few years ago we saw two of the worldrsquos largest car manufacturers General Motors and Chrysler on the brink of collapse Having decided both were lsquotoo big to failrsquo they had to be bailed out by the American tax‐payer Ford managed without direct government support but it is nevertheless quite clear that the collapse of the supply base that would have resulted from a collapse of both their key domestic competitors GM and Chrysler would also have dragged down Ford in due course Within a matter of months the worldrsquos most prominent car industry and the oldest mass production car industry could have disappeared only intervention from the public sector saved this key compo-nent of the private sector underlining that apart from anything else the close synergies and intertwined relationships continue to exist between the private and public sectors in developed countries (Mazzucato 2013) This highlights not only the weaknesses inherent in the close links between the financial and car systems but also indicates that the current mass production system whether seen as Fordist or Buddist (see below) may well be due for a rethink in several respects
In Europe the apparent success of Germany more recently the UK automotive industry is easily misunderstood leading perhaps to overconfidence but do note that the secret of success in Europe is largely confined to the more upmarket segments with the Germans the primary beneficiaries and that this success is very reliant on demand from Asia particularly China it has therefore made Europe ndash and also the United States particularly GM ndash very dependent on that far from stable market as also outlined in more detail in Chapter 10 At the same time pressures to make the car more environmentally compatible as we see it have not only led to cars with much less harmful tailpipe emissions but the more recent pressure to reduce the carbon footprint of cars particularly focused on their emissions of the greenhouse gas carbon dioxide has the potential to radically reshape the industry and its products These regulatory pressures are reviewed in Chapter 14 although the potential impact of this agenda is not yet fully understood but it has already led to a new wave of alternative powertrain vehicles in the market ranging from early petrol‐electric hybrids ndash including the now iconic Toyota Prius ndash via
Introduction and Overview 3
so‐called range‐extended and plug‐in hybrids such as the GM Volt and Ampera to full battery‐electric vehicles such as the Nissan Leaf Renault Zoe and Tesla Model S Such developments as well as the introduction of the even more radical BMW i3 which not only introduces a full battery‐electric powertrain but also houses this within a radical departure from the tried and tested lsquoBuddistrsquo (see Chapter 5) all‐steel body in using a carbon fibre body on an aluminium chassis are clear signs that business‐as‐usual is steadily being undermined even from within the established industry
Despite the size of the industry car making is in reality a very precarious business In its present form it lacks resilience it is not sustainable This is true not just in terms of environmental sustainability where it clearly is not measuring up but even in terms of basic economic sustainability Yet this industry is still crucially important representing a significant part of the economy in many industrialized countries as well as many newly industrializing economies notably China In addition the car‐based transport system or lsquoregimersquo (Geels et al 2012) which extends well beyond the industry that makes cars to the way in which auto-mobility has become integrated in our societies and cultures has become so embedded that its removal would lead to widespread social and economic crisis
In some regards therefore this book may be a testimony to a dying era as much as a hymnal to a new one Thus far the automotive industry has managed to contain the pressures for change both economic and environmental within the broad ambit of the long‐standing business model of the mainstream vehicle manufacturers In parallel those purchasing and using cars in the traditional manner have remained by far the majority compared with more innovative solutions such as car clubs city car sharing schemes and other alternatives that might presage the end of established automobility cultures The question is whether the collective and cumulative impact of all the new developments sweeping through the industry will be sufficient to herald the arrival of a new lsquoautomotive ecosystemrsquo as some have termed it or lsquoregimersquo according to others and one in which the dominance of the established vehicle manufacturers and their entrenched supply chains is challenged by a new order of communi-cations and mobility providers Some caution on these issues is urged here The automotive industry is not immune to hype cycles or the fevered imaginations of those professional change‐mongers with a vested interest in fermenting and emphasizing the new over the continuous
12 Continuity and Change
The book as a whole therefore represents an attempt to capture continuity and change in the global automotive industry this theme is brought to the fore in the first main chapter of the book Chapter 2 as change is very much a feature of the current phase of the automotive system Change of course needs to be seen in historical perspective and as such many of the chapters offer up a historical narrative that builds a temporal dynamic into the account of the subject under consideration There is some need in seeking to understand the structures and practices of the present to delve into the past If nothing else path dependency theory tells us that many decisions are nonlinear irreversible steps that result in distinct historical outcomes bounded by time and place As we have sought to delineate elsewhere the cluster of innovations that created the template for the mass production automotive industry occurred largely in the United States in the early years of the twentieth century the Ford moving assembly line with standardized and inter‐changeable parts the Budd all‐steel body that could be stamped
4 The Global Automotive Industry
welded and painted and the Sloan multi‐brand company with marketing innovations such as consumer credit and annual model changes these developments are outlined in Chapter 5 Despite many years of incremental change the basic architecture of the industry remains in place That such durability is evident speaks volumes for the scope for productivity improve-ment within this basic architecture over many decades and the efficacy of the system as a whole in terms of matching the imperatives of production economics to the demands of the market For this reason key early chapters in the book for example Chapters 3 4 5 and 6 are about the production system and the market for cars There is no subscription here to the simple neoclassical economics assumption that lsquoconsumersrsquo demand and lsquoproducersrsquo provide Rather there is a continuing dynamic tension between supply and demand sides that is never entirely resolved
13 Overview
The chapters in this book are thus essentially an attempt to take stock of the industry in its present state of a well‐established industry on the verge of potentially radical change tracking some of its history ndash trying to answer the question of how did we get here ndash assessing key aspects of its current state while also plotting some possible futures for the industry and its products This book does not seek to present chapters that are held together by a common the-oretical thread Such works can be tremendously informative and insightful (see Geels et al 2012) but of course tend to place primary emphasis on the question of theoretical coherence Rather the approach here has been more agnostic in theoretical terms and has been to seek insights and individual views by those who are established experts in their fields and who are known for their knowledge of the automotive industry (or a specific aspect of it) alongside their particular theoretical or methodological frameworks Each chapter is thus a cameo able to stand alone as a concise insight into one dimension of this multi‐faceted industry but also serves as a piece in the jigsaw that describes and explains how this industry really works
There are some gaps of course It is not possible to give consideration to all the countries producing cars and the unique contexts within which they operate The salience of the lsquovari-eties of capitalismrsquo school of thought (see Section 23) is acknowledged here and some com-parative chapters are pertinent to this school notably those on labourndashmanagement relations in North America and Japan (Chapters 7 and 8 respectively) While the question of labour relations in Japan has remained largely immune to external influence (notwithstanding the substantial impact of Renault on operations at Nissan and the rather lesser impact of Ford on Mazda) the story in North America has a strong thread in which lsquoJapanizationrsquo has been highly significant Chapters 9 10 and 11 cover the broad sweep of the automotive industry in Asia highlighting South Korea China and India respectively ndash both Korea and India have become comparatively neglected in view of the immense attention directed at China Interestingly both these countries are more than passive recipients of automobility and can claim to be home to significant companies within the industry of the modern era while also representing unique markets
An apparent gap in the account includes a chapter that explicitly deals with the global supply chain of components and raw materials to the vehicle manufacturers ndash where typically up to 85 of the ex‐works value of a new car is accounted for by bought in components and materials The theme of supply chain management is an important facet of the industry but
Notes on Contributors
Editorsrsquo Profiles
Paul NieuwenhuisCentre for Automotive Industry Research and Electric Vehicle Centre of ExcellenceCardiff Business School Cardiff UniversityCardiff Wales UK
Dr Paul Nieuwenhuis is a senior lecturer at Cardiff University He joined the Centre for Automotive Industry Research (CAIR) at Cardiff University in 1991 and he became one of its two directors in 2006 He was a founder member of the ESRC Centre for Business Relationships Accountability Sustainability and Society (BRASS) and is an associate of the Sustainable Places Research Institute His main interests are historic and environmental and his publica-tions have been in these areas for example The Green Car Guide (1992) and Sustainable Automobility (2014) He also contributed to the Beaulieu Encyclopaedia of the Automobile (2000) which won a Cugnot Award from the Society of Automotive Historians Dr Nieuwenhuis has produced around 300 publications ranging from books and academic papers to conference papers for both academic and business audiences and journalistic pieces Dr Nieuwenhuis is a member of the Guild of Motoring Writers
Peter WellsCentre for Automotive Industry ResearchCardiff Business School Cardiff UniversityCardiff Wales UK
Peter Wells is a professor of sustainable business models at Cardiff Business School where his work has ranged across spatial industrial development economics organizational theory industrial ecology technological change transition theory business models and sustainability ndash all through an applied focus on the global automotive industry Professor Wells has over 550 publications reaching academia industry policy and stakeholder audiences through tradi-tional papers and books Internet publications and more recently webinars
xii Notes on Contributors
Contributorsrsquo Profiles
Katsuki AokiSchool of Business AdministrationMeiji UniversityTokyo Japan
Dr Katsuki Aoki is an associate professor in the School of Business at Meiji University in Japan He received his PhD in business administration from Meiji University in 1999 His main research interests include (i) international comparative studies on the implementation of kaizen activities (ii) the benefits and limitations of the keiretsu system (OEMndashsupplier rela-tionships) in the automotive industry and (iii) mass customization and order fulfilment systems in the automotive industry His paper entitled lsquoTransferring Japanese kaizen activities to over-seas plants in Chinarsquo was selected as one of the most prominent papers at the Emerald Literati Network Awards for Excellence 2009
Liana M CipciganElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Dr Liana M Cipcigan is a senior lecturer in the School of Engineering at Cardiff University leading the research of integration and control of EVs in electricity and transportation net-works She is a member of the Electric Vehicle Centre of Excellence (EVCE) Her current research activities are focused on smart grids distributed generation and EV integration and control She has significant research experience in EU projects FP6 More Microgrids FP7 Mobile Energy Resources in Grids of Electricity (MERGE) and ERDF ENEVATE She is the principal investigator (PI) of the EPSRC projects lsquoSmart Management of Electric Vehiclesrsquo and lsquoElectric Vehicle Value Chain ndash Bridging the Gapsrsquo She is participating in the UKERC project lsquoSmart Grids Scenarios for UKrsquo and TSB project lsquoAgent‐Based Controllers for Electric Vehicles and Micro‐generatorsrsquo She is a member of CEN‐CLC eMobility working group on Smart Charging and IEEE P20301 working group on standards for EVs and related infrastructure
Huw DaviesElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Dr Huw Davies is a lecturer in mechanical engineering at Cardiff University School of Engineering His background is in vehicle engineering and the development of vehicle safety standards He has advised the UK Department for Transport the European Commission and the Automotive Industry At Cardiff University he has developed the transport research theme Safety mobility and emissions are at its core The universal goals are zero collisions zero congestion and zero emissions Dr Davies leads Cardiff Universityrsquos Electric Vehicle Centre of Excellence
Notes on Contributors xiii
Ceri DonovanElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Ceri Donovan is a research assistant at Cardiff University School of Engineering and a member of Cardiff Universityrsquos Electric Vehicle Centre of Excellence She spent most of her time in recent years working on ENEVATE which aimed to accelerate the uptake of e‐mobility in northwest Europe This includes conducting research on all aspects of electric vehicles including market drivers and mobility concepts vehicle safety and regulations She previously worked in defence research primarily focusing on how to integrate new technology onto existing platforms from the procurement as well as the practical perspectives She has an MSc in biometry from the University of Reading
Patrick GalvinInnovation Policy LabMunk School of Global AffairsUniversity of TorontoToronto Ontario Canada
Patrick Galvin is a postdoctoral research fellow with the Innovation Policy Lab at the Munk School of Global Affairs where he is part of a research team investigating the dynamics of devel-oping a new automotive policy for the Canadian automotive industry for the twenty‐first century He is also working on the SSHRC‐funded Creating Digital Opportunity project Prior to his current appointment and after having obtained both his BA (honours) and MA degrees in political science Patrick spent several years working in the housing policy field with a number of consulting firms Patrick enrolled in the PhD programme in politics at the University of Exeter in England He completed his dissertation in November 2012 and he was formally awarded his PhD degree in July 2012 Patrickrsquos PhD dissertation built on his training in public policy and political economy by examining how local government in the city of Toronto develops its cluster‐related innovation policy It focuses on two empirical case studies to see how the city develops its cluster policy for two industrial sectors the aerospace sector and the fashion sector
Elena GoracinovaInnovation Policy LabMunk School of Global AffairsUniversity of TorontoToronto Ontario Canada
Elena Goracinova is a PhD candidate in political science working at the University of Torontorsquos Munk School of Global Affairs Innovation Policy Lab with Professor David Wolfe She received her masterrsquos degree in geography from the University of Toronto with a thesis on manufacturing in developed economies She is interested in studying the role of the state in economic policymaking Her current work focuses on the scope and effectiveness of advanced manufacturing policies in Canada
xiv Notes on Contributors
John HolmesProfessor EmeritusDepartment of GeographyQueenrsquos UniversityKingston Ontario Canada
John Holmes is a professor of geography at Queenrsquos University in Kingston Ontario Canada He received his BSc (honours) and MA (social science) degrees from the University of Sheffield and his PhD from Ohio State University He is also affiliated with the graduate industrial relations programme in the Queenrsquos School of Policy Studies His research focuses on geographical aspects of the political economy of contemporary economic and social change and in particular on the contemporary restructuring and reorganization of production and work in North America Empirical research and writing have focused primarily on the automobile industry For a list of selected publications see httpgeogqueensucafacultyholmesasp
Seunghwan KuFaculty of Business AdministrationKyoto Sangyo UniversityKyoto Japan
Seunghwan Ku is a professor of technology of management of the Faculty of Business Administration Kyoto Sangyo University He received his PhD (management of technology) from the University of Tokyo Japan His dissertation entitled lsquoThe Dynamism of Product Architecture Modularization Knowledge Integration Interfirm Linkagersquo was published by Mineruba Shobo a major publisher in Japan His recent publications include lsquoEconomic Analysis of ICT Innovationrsquo (2011) with M Fujiwara and lsquoShip Development and Shipbuilding Industry The Constraint of Large Artifact Development and the Uncertainty of Business Modelrsquo with H Kato in T Fujimoto ed lsquoCoping with Complex Artifactsrsquo (2013) His current research interests are (i) product development (ii) logistics and inter‐firm linkages (iii) prod-uct strategy and innovation and (iv) supplier system in Korean and Japanese industries the auto sector in particular
Maneesh KumarCentre for Automotive Industry ResearchCardiff Business School Cardiff UniversityCardiff Wales UK
Dr Maneesh Kumar is a senior lecturer at Cardiff Business School Cardiff University UK His research interests are primarily in the area of quality management Lean Six Sigma (LSS) and service recovery within manufacturing service and public sector organizations His recent research within Indian automotive industry focuses on understanding the best‐in‐class practices in diffusing LeanKaizen practice at supply network level and how automotive giants (OEMs) support and develop their suppliers (at Tier 1 and Tier 2 level) His research outputs include an edited book five edited conference proceedings three book chapters and over 80 peer‐reviewed
Notes on Contributors xv
journal publications and conference papers He has been involved in delivering LSS training up to black‐belt level and delivered several workshops on LSS application in several blue chip companies He is also a regular speaker at international conferences and seminars on LSS and process excellence
Xiao LinCentre for Automotive Industry ResearchLogistics and Operations Management SectionCardiff Business School Cardiff UniversityCardiff Wales UK
Xiao Lin is a PhD student in the logistics and operations management section at Cardiff Business School Cardiff University Her research interests include sustainability transition theory business models etc Her PhD research project is specifically focusing on the study of the future prospect for e‐bikes in sustainable mobility in China through various quantitative and qualitative analysis methods Xiao Lin is enthusiastic in contributing to the collaboration of the sustainable community She is a member of the organizing committee of the lsquoThe 2014 Global Research Forum Sustainable Production and Consumption Conferencersquo
Daniel NewmanElectric Vehicle Centre of Excellence and Sustainable Places Research InstituteCardiff UniversityCardiff Wales UK
Dr Daniel Newman is a research assistant at Cardiff Business School working within the Cardiff University Electric Vehicle Centre of Excellence His activities are primarily focused on the ENEVATE project conducting social research investigating the potential for increasing electric vehicle uptake in northwest Europe He was previously a research assistant at the University of Bristol Law School looking at environmental law and health and safety regulations Prior to this he completed an ESRC‐funded PhD in the University of Bristol Law School investigating the state of access to justice which was published as a book by Hart in 2012
Ben WallerSenior Researcher ICDPInternational Car Distribution Programme (ICDP)Cardiff Wales UK
Ben is a senior researcher at the International Car Distribution Programme (ICDP) and based in the United Kingdom ICDP is an international research‐based organization focused on auto-motive distribution including the supply and retailing of new and used vehicles aftersales network structures and operations Through research activities data services education events and consulting ICDP works with vehicle makers dealers suppliers and related orga-nizations to improve the quality and effectiveness of the distribution model Ben has presented to a range of international audiences from academic conferences to senior executives and also authors articles for business press and delivers executive teaching
xvi Notes on Contributors
Lorraine WhitmarshSchool of PsychologyCardiff UniversityCardiff Wales UK
Dr Lorraine Whitmarsh is an environmental psychologist specializing in perceptions and behaviour in relation to climate change energy and transport She is a senior lecturer in the School of Psychology at Cardiff University UK Lorraine is also a partner coordinator for the Tyndall Centre for Climate Change Research and a research associate of Cardiff Universityrsquos Centre for Business Relationships Accountability Sustainability and Society (BRASS) and the Sustainable Places Research Institute She sits on the Climate Change Commission for Wales advising Welsh government on transport and behaviour change
David A WolfeProfessor of Political Science andCo‐director Innovation Policy LabMunk School of Global Affairs University of TorontoToronto Ontario Canada
David A Wolfe is a professor of political science at UTM and a co‐director of the Innovation Policy Lab at the Munk School of Global Affairs in Toronto From 2009 to 2014 he was the Royal Bank Chair in Public and Economic Policy at the University of Toronto He is currently leading a major partnership grant on Creating Digital Opportunity Canadarsquos ICT Industry in Global Perspective funded by the Social Sciences and Humanities Research Council of Canada He is also participating in the project on manufacturing policy and the Canadian auto-motive sector based in the Automotive Policy Research Centre at McMaster University
Dimitrios XeniasSchool of PsychologyCardiff UniversityCardiff Wales UK
Dr Dimitrios Xenias is a social and environmental psychologist focusing on sustainable travel and associated behaviours such as mode choice on domestic energy‐related behaviours and on perceptions of climate change and its communication He is a research associate in the School of Psychology at Cardiff University UK Dimitrios is also an associate of the Tyndall Centre for Climate Change Research and a research associate of Cardiff Universityrsquos Centre for Business Relationships Accountability Sustainability and Society (BRASS) and the Sustainable Places Research Institute
Series Preface
The automotive industry is one of the largest manufacturing sectors in the global community Not only does it generate significant economic benefits to the worldrsquos economy but the auto-mobile is highly linked to a wide variety of international concerns such as energy consump-tion emissions trade and safety The primary objective of the Automotive Series is to publish practical and topical books for researchers and practitioners in the industry and postgraduatesadvanced undergraduates in automotive engineering
The series addresses new and emerging technologies in automotive engineering supporting the development of more fuel‐efficient safer and more environmentally friendly vehicles It covers a wide range of topics including design manufacture and operation and the intention is to provide a source of relevant information that will be of interest and benefit to people working in the field of automotive engineering
This book The Global Automotive Industry presents a broad spectrum view of the automo-tive sector from the technology industry and policy perspectives In the early chapters of the book an understanding of the industry from a social technical and economic perspective is presented This is followed by a discussion of the fabric of next‐generation vehicle systems as it is woven into a global society This discussion is expanded to include the economic impact of the automotive industrial sector on nationsrsquo economies from production operationsrevenue to job growth This text goes beyond regional thinking with respect to automotive production and discusses the historic expansion of automotive manufacturing giants in Korea and the new emerging markets in China and potentially India
The text finishes with an excellent overview of emerging technologies and economies that will be pivotal to the automotive sector These discussions are then presented in the light of new business models in a global marketplace and the impact of regulation on the automobile as well as its manufacture These topics are well integrated into the earlier topics presented in the book and make it a unique and valuable crosscutting source of information for the reader
The Global Automotive Industry integrates these topics in a unique and thought‐provoking manner that provides significant insight into global automotive production regulation and
xviii Series Preface
economic impact on society It is a forward‐thinking text that considers a wide variety of topics that will drive this major industry and the global economy for the foreseeable future It is written by highly recognized experts in the field and is a welcome addition to the Automotive Series
Thomas KurfessJuly 2015
Foreword
The global automotive industry is a complex and demanding topic for any book It is clear following my 30‐year career within the automotive industry that only a comparatively small number of individuals have a comprehensive understanding of a vehiclersquos full construction Even after decades of professional involvement it can be difficult for an individual to have a full appreciation of the subject and its international infrastructure and landscape
From pre‐production to the factory floor and the boardroom knowledge sharing is incred-ibly important to the future of the automotive engineering profession With future mobility solutions being vital to modern society and with the needs of each region differing depending on capabilities and production facilities communication amongst the worldrsquos engineers pro-vides a route to approaching and accommodating the global social political and economic considerations that the future will demand
FISITA has successfully coordinated global communications amongst its network of over 200 000 professional engineers from member societies in 37 countries for over 60 years This demonstrates the point through many generations that sharing of knowledge and ideas amongst an industry as large as automotive including engineers academics and executives is vital as it provides us all with the tools to contribute to a better future
As part of this journey global collaboration within the industry is also necessary in order to deliver a clear message to wider society that the automotive engineering profession is well placed to face the challenges of today and tomorrow
Paul Nieuwenhuis and Peter Wells have provided us with a very good starting point The authors are able to present the wide scope of the industry in a clear way whilst contributing a wealth of knowledge about the global automotive industry
Chris MasonCEO FISITA
The Global Automotive Industry First Edition Edited by Paul Nieuwenhuis and Peter Wells copy 2015 John Wiley amp Sons Ltd Published 2015 by John Wiley amp Sons Ltd
Introduction and OverviewPaul Nieuwenhuis1 and Peter Wells2
1 Centre for Automotive Industry Research and Electric Vehicle Centre of Excellence Cardiff Business School Cardiff University Cardiff Wales UK2 Centre for Automotive Industry Research Cardiff Business School Cardiff University Cardiff Wales UK
11 Introduction
It is an impossible task to do full justice in one book to the global automotive industry with the pervasive impact economic significance and cultural status that it brings As editors our task is as much one of selective omission as one of collation to create an account of the business of mak-ing selling and using cars that is both representative and yet respectful of the diversity we know to be a feature of the industry Moreover this is an industry in the midst of reinventing itself It had seemed to some both inside and outside the industry around the turn of the millennium that this was a lsquosunsetrsquo industry characterized by over‐capacity plant closures job losses declining profitability and a product that seemed unsuited to meeting the environmental and social chal-lenges arising from mass car ownership and use The combination of profound environmental pressures and endemic economic distress appeared to call into question the pre‐eminent position enjoyed by the car in providing for personal mobility and the viability of the industry behind this most contradictory of products These concerns came to a peak with the arrival of the global economic crisis around 2007ndash2008 which resulted in new car sales falling steeply in the established markets and investment freezing while the entire financial community held its collective breath to see whether the world would plunge into an economic abyss Those looking closely at urban developments and the changing cultural priorities of young people started to whisper about the concept of lsquopeak carrsquo in which the high tide of automobility had been reached in the saturated markets of the European Union North America Japan and Korea
Yet only a few years later the industry has reemerged burnished by the embrace of new technologies and with resurgent sales in the previously moribund West being more than matched by the frenetic growth of sales in China and elsewhere Regulatory interventions
1
2 The Global Automotive Industry
such as the European Union fleet average carbon emissions targets that were once seen as burdensome and punitive have arguably helped stimulate the technological renaissance of the industry alongside the realization that there might be other routes to profitability Later chap-ters in the book are more concerned with this recent period of transformation and the possible futures it portends Chapter 16 for example is about the impact of the electric vehicle while Chapter 18 links technology change with possible innovations in business models forced on the industry by such technological changes Chapter 19 is more speculative but offers up some signposts for the future of automobility and the automotive industry
This is not to say that the process of change has been without stress or consequence Restructuring of the industry has continued apace the merger of Chrysler and Fiat came as a consequence of several years of corporate turmoil while the rescue of PSA by the French government and by the Chinese company Dongfeng costs the Peugeot family their control over this long established business ndash the oldest in the industry The great expectations held for battery electric vehicles remain as yet largely unrealized despite the highly visible and expen-sive efforts of companies like Nissan Renault and BMW alongside the publicity‐garnering machine that is Tesla In the meantime high‐profile failures such as the battery swap business Better Place serve as stark reminders that attempts to reinvent this industry especially by new entrants are fraught with hazard At the same time markets in the European Union have not really recovered to pre‐crisis levels and perhaps never will
So despite an apparent lsquobusiness‐as‐usualrsquo attitude permeating the automotive industry at the moment in reality it is subject to potentially radical change Only a few years ago we saw two of the worldrsquos largest car manufacturers General Motors and Chrysler on the brink of collapse Having decided both were lsquotoo big to failrsquo they had to be bailed out by the American tax‐payer Ford managed without direct government support but it is nevertheless quite clear that the collapse of the supply base that would have resulted from a collapse of both their key domestic competitors GM and Chrysler would also have dragged down Ford in due course Within a matter of months the worldrsquos most prominent car industry and the oldest mass production car industry could have disappeared only intervention from the public sector saved this key compo-nent of the private sector underlining that apart from anything else the close synergies and intertwined relationships continue to exist between the private and public sectors in developed countries (Mazzucato 2013) This highlights not only the weaknesses inherent in the close links between the financial and car systems but also indicates that the current mass production system whether seen as Fordist or Buddist (see below) may well be due for a rethink in several respects
In Europe the apparent success of Germany more recently the UK automotive industry is easily misunderstood leading perhaps to overconfidence but do note that the secret of success in Europe is largely confined to the more upmarket segments with the Germans the primary beneficiaries and that this success is very reliant on demand from Asia particularly China it has therefore made Europe ndash and also the United States particularly GM ndash very dependent on that far from stable market as also outlined in more detail in Chapter 10 At the same time pressures to make the car more environmentally compatible as we see it have not only led to cars with much less harmful tailpipe emissions but the more recent pressure to reduce the carbon footprint of cars particularly focused on their emissions of the greenhouse gas carbon dioxide has the potential to radically reshape the industry and its products These regulatory pressures are reviewed in Chapter 14 although the potential impact of this agenda is not yet fully understood but it has already led to a new wave of alternative powertrain vehicles in the market ranging from early petrol‐electric hybrids ndash including the now iconic Toyota Prius ndash via
Introduction and Overview 3
so‐called range‐extended and plug‐in hybrids such as the GM Volt and Ampera to full battery‐electric vehicles such as the Nissan Leaf Renault Zoe and Tesla Model S Such developments as well as the introduction of the even more radical BMW i3 which not only introduces a full battery‐electric powertrain but also houses this within a radical departure from the tried and tested lsquoBuddistrsquo (see Chapter 5) all‐steel body in using a carbon fibre body on an aluminium chassis are clear signs that business‐as‐usual is steadily being undermined even from within the established industry
Despite the size of the industry car making is in reality a very precarious business In its present form it lacks resilience it is not sustainable This is true not just in terms of environmental sustainability where it clearly is not measuring up but even in terms of basic economic sustainability Yet this industry is still crucially important representing a significant part of the economy in many industrialized countries as well as many newly industrializing economies notably China In addition the car‐based transport system or lsquoregimersquo (Geels et al 2012) which extends well beyond the industry that makes cars to the way in which auto-mobility has become integrated in our societies and cultures has become so embedded that its removal would lead to widespread social and economic crisis
In some regards therefore this book may be a testimony to a dying era as much as a hymnal to a new one Thus far the automotive industry has managed to contain the pressures for change both economic and environmental within the broad ambit of the long‐standing business model of the mainstream vehicle manufacturers In parallel those purchasing and using cars in the traditional manner have remained by far the majority compared with more innovative solutions such as car clubs city car sharing schemes and other alternatives that might presage the end of established automobility cultures The question is whether the collective and cumulative impact of all the new developments sweeping through the industry will be sufficient to herald the arrival of a new lsquoautomotive ecosystemrsquo as some have termed it or lsquoregimersquo according to others and one in which the dominance of the established vehicle manufacturers and their entrenched supply chains is challenged by a new order of communi-cations and mobility providers Some caution on these issues is urged here The automotive industry is not immune to hype cycles or the fevered imaginations of those professional change‐mongers with a vested interest in fermenting and emphasizing the new over the continuous
12 Continuity and Change
The book as a whole therefore represents an attempt to capture continuity and change in the global automotive industry this theme is brought to the fore in the first main chapter of the book Chapter 2 as change is very much a feature of the current phase of the automotive system Change of course needs to be seen in historical perspective and as such many of the chapters offer up a historical narrative that builds a temporal dynamic into the account of the subject under consideration There is some need in seeking to understand the structures and practices of the present to delve into the past If nothing else path dependency theory tells us that many decisions are nonlinear irreversible steps that result in distinct historical outcomes bounded by time and place As we have sought to delineate elsewhere the cluster of innovations that created the template for the mass production automotive industry occurred largely in the United States in the early years of the twentieth century the Ford moving assembly line with standardized and inter‐changeable parts the Budd all‐steel body that could be stamped
4 The Global Automotive Industry
welded and painted and the Sloan multi‐brand company with marketing innovations such as consumer credit and annual model changes these developments are outlined in Chapter 5 Despite many years of incremental change the basic architecture of the industry remains in place That such durability is evident speaks volumes for the scope for productivity improve-ment within this basic architecture over many decades and the efficacy of the system as a whole in terms of matching the imperatives of production economics to the demands of the market For this reason key early chapters in the book for example Chapters 3 4 5 and 6 are about the production system and the market for cars There is no subscription here to the simple neoclassical economics assumption that lsquoconsumersrsquo demand and lsquoproducersrsquo provide Rather there is a continuing dynamic tension between supply and demand sides that is never entirely resolved
13 Overview
The chapters in this book are thus essentially an attempt to take stock of the industry in its present state of a well‐established industry on the verge of potentially radical change tracking some of its history ndash trying to answer the question of how did we get here ndash assessing key aspects of its current state while also plotting some possible futures for the industry and its products This book does not seek to present chapters that are held together by a common the-oretical thread Such works can be tremendously informative and insightful (see Geels et al 2012) but of course tend to place primary emphasis on the question of theoretical coherence Rather the approach here has been more agnostic in theoretical terms and has been to seek insights and individual views by those who are established experts in their fields and who are known for their knowledge of the automotive industry (or a specific aspect of it) alongside their particular theoretical or methodological frameworks Each chapter is thus a cameo able to stand alone as a concise insight into one dimension of this multi‐faceted industry but also serves as a piece in the jigsaw that describes and explains how this industry really works
There are some gaps of course It is not possible to give consideration to all the countries producing cars and the unique contexts within which they operate The salience of the lsquovari-eties of capitalismrsquo school of thought (see Section 23) is acknowledged here and some com-parative chapters are pertinent to this school notably those on labourndashmanagement relations in North America and Japan (Chapters 7 and 8 respectively) While the question of labour relations in Japan has remained largely immune to external influence (notwithstanding the substantial impact of Renault on operations at Nissan and the rather lesser impact of Ford on Mazda) the story in North America has a strong thread in which lsquoJapanizationrsquo has been highly significant Chapters 9 10 and 11 cover the broad sweep of the automotive industry in Asia highlighting South Korea China and India respectively ndash both Korea and India have become comparatively neglected in view of the immense attention directed at China Interestingly both these countries are more than passive recipients of automobility and can claim to be home to significant companies within the industry of the modern era while also representing unique markets
An apparent gap in the account includes a chapter that explicitly deals with the global supply chain of components and raw materials to the vehicle manufacturers ndash where typically up to 85 of the ex‐works value of a new car is accounted for by bought in components and materials The theme of supply chain management is an important facet of the industry but
xii Notes on Contributors
Contributorsrsquo Profiles
Katsuki AokiSchool of Business AdministrationMeiji UniversityTokyo Japan
Dr Katsuki Aoki is an associate professor in the School of Business at Meiji University in Japan He received his PhD in business administration from Meiji University in 1999 His main research interests include (i) international comparative studies on the implementation of kaizen activities (ii) the benefits and limitations of the keiretsu system (OEMndashsupplier rela-tionships) in the automotive industry and (iii) mass customization and order fulfilment systems in the automotive industry His paper entitled lsquoTransferring Japanese kaizen activities to over-seas plants in Chinarsquo was selected as one of the most prominent papers at the Emerald Literati Network Awards for Excellence 2009
Liana M CipciganElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Dr Liana M Cipcigan is a senior lecturer in the School of Engineering at Cardiff University leading the research of integration and control of EVs in electricity and transportation net-works She is a member of the Electric Vehicle Centre of Excellence (EVCE) Her current research activities are focused on smart grids distributed generation and EV integration and control She has significant research experience in EU projects FP6 More Microgrids FP7 Mobile Energy Resources in Grids of Electricity (MERGE) and ERDF ENEVATE She is the principal investigator (PI) of the EPSRC projects lsquoSmart Management of Electric Vehiclesrsquo and lsquoElectric Vehicle Value Chain ndash Bridging the Gapsrsquo She is participating in the UKERC project lsquoSmart Grids Scenarios for UKrsquo and TSB project lsquoAgent‐Based Controllers for Electric Vehicles and Micro‐generatorsrsquo She is a member of CEN‐CLC eMobility working group on Smart Charging and IEEE P20301 working group on standards for EVs and related infrastructure
Huw DaviesElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Dr Huw Davies is a lecturer in mechanical engineering at Cardiff University School of Engineering His background is in vehicle engineering and the development of vehicle safety standards He has advised the UK Department for Transport the European Commission and the Automotive Industry At Cardiff University he has developed the transport research theme Safety mobility and emissions are at its core The universal goals are zero collisions zero congestion and zero emissions Dr Davies leads Cardiff Universityrsquos Electric Vehicle Centre of Excellence
Notes on Contributors xiii
Ceri DonovanElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Ceri Donovan is a research assistant at Cardiff University School of Engineering and a member of Cardiff Universityrsquos Electric Vehicle Centre of Excellence She spent most of her time in recent years working on ENEVATE which aimed to accelerate the uptake of e‐mobility in northwest Europe This includes conducting research on all aspects of electric vehicles including market drivers and mobility concepts vehicle safety and regulations She previously worked in defence research primarily focusing on how to integrate new technology onto existing platforms from the procurement as well as the practical perspectives She has an MSc in biometry from the University of Reading
Patrick GalvinInnovation Policy LabMunk School of Global AffairsUniversity of TorontoToronto Ontario Canada
Patrick Galvin is a postdoctoral research fellow with the Innovation Policy Lab at the Munk School of Global Affairs where he is part of a research team investigating the dynamics of devel-oping a new automotive policy for the Canadian automotive industry for the twenty‐first century He is also working on the SSHRC‐funded Creating Digital Opportunity project Prior to his current appointment and after having obtained both his BA (honours) and MA degrees in political science Patrick spent several years working in the housing policy field with a number of consulting firms Patrick enrolled in the PhD programme in politics at the University of Exeter in England He completed his dissertation in November 2012 and he was formally awarded his PhD degree in July 2012 Patrickrsquos PhD dissertation built on his training in public policy and political economy by examining how local government in the city of Toronto develops its cluster‐related innovation policy It focuses on two empirical case studies to see how the city develops its cluster policy for two industrial sectors the aerospace sector and the fashion sector
Elena GoracinovaInnovation Policy LabMunk School of Global AffairsUniversity of TorontoToronto Ontario Canada
Elena Goracinova is a PhD candidate in political science working at the University of Torontorsquos Munk School of Global Affairs Innovation Policy Lab with Professor David Wolfe She received her masterrsquos degree in geography from the University of Toronto with a thesis on manufacturing in developed economies She is interested in studying the role of the state in economic policymaking Her current work focuses on the scope and effectiveness of advanced manufacturing policies in Canada
xiv Notes on Contributors
John HolmesProfessor EmeritusDepartment of GeographyQueenrsquos UniversityKingston Ontario Canada
John Holmes is a professor of geography at Queenrsquos University in Kingston Ontario Canada He received his BSc (honours) and MA (social science) degrees from the University of Sheffield and his PhD from Ohio State University He is also affiliated with the graduate industrial relations programme in the Queenrsquos School of Policy Studies His research focuses on geographical aspects of the political economy of contemporary economic and social change and in particular on the contemporary restructuring and reorganization of production and work in North America Empirical research and writing have focused primarily on the automobile industry For a list of selected publications see httpgeogqueensucafacultyholmesasp
Seunghwan KuFaculty of Business AdministrationKyoto Sangyo UniversityKyoto Japan
Seunghwan Ku is a professor of technology of management of the Faculty of Business Administration Kyoto Sangyo University He received his PhD (management of technology) from the University of Tokyo Japan His dissertation entitled lsquoThe Dynamism of Product Architecture Modularization Knowledge Integration Interfirm Linkagersquo was published by Mineruba Shobo a major publisher in Japan His recent publications include lsquoEconomic Analysis of ICT Innovationrsquo (2011) with M Fujiwara and lsquoShip Development and Shipbuilding Industry The Constraint of Large Artifact Development and the Uncertainty of Business Modelrsquo with H Kato in T Fujimoto ed lsquoCoping with Complex Artifactsrsquo (2013) His current research interests are (i) product development (ii) logistics and inter‐firm linkages (iii) prod-uct strategy and innovation and (iv) supplier system in Korean and Japanese industries the auto sector in particular
Maneesh KumarCentre for Automotive Industry ResearchCardiff Business School Cardiff UniversityCardiff Wales UK
Dr Maneesh Kumar is a senior lecturer at Cardiff Business School Cardiff University UK His research interests are primarily in the area of quality management Lean Six Sigma (LSS) and service recovery within manufacturing service and public sector organizations His recent research within Indian automotive industry focuses on understanding the best‐in‐class practices in diffusing LeanKaizen practice at supply network level and how automotive giants (OEMs) support and develop their suppliers (at Tier 1 and Tier 2 level) His research outputs include an edited book five edited conference proceedings three book chapters and over 80 peer‐reviewed
Notes on Contributors xv
journal publications and conference papers He has been involved in delivering LSS training up to black‐belt level and delivered several workshops on LSS application in several blue chip companies He is also a regular speaker at international conferences and seminars on LSS and process excellence
Xiao LinCentre for Automotive Industry ResearchLogistics and Operations Management SectionCardiff Business School Cardiff UniversityCardiff Wales UK
Xiao Lin is a PhD student in the logistics and operations management section at Cardiff Business School Cardiff University Her research interests include sustainability transition theory business models etc Her PhD research project is specifically focusing on the study of the future prospect for e‐bikes in sustainable mobility in China through various quantitative and qualitative analysis methods Xiao Lin is enthusiastic in contributing to the collaboration of the sustainable community She is a member of the organizing committee of the lsquoThe 2014 Global Research Forum Sustainable Production and Consumption Conferencersquo
Daniel NewmanElectric Vehicle Centre of Excellence and Sustainable Places Research InstituteCardiff UniversityCardiff Wales UK
Dr Daniel Newman is a research assistant at Cardiff Business School working within the Cardiff University Electric Vehicle Centre of Excellence His activities are primarily focused on the ENEVATE project conducting social research investigating the potential for increasing electric vehicle uptake in northwest Europe He was previously a research assistant at the University of Bristol Law School looking at environmental law and health and safety regulations Prior to this he completed an ESRC‐funded PhD in the University of Bristol Law School investigating the state of access to justice which was published as a book by Hart in 2012
Ben WallerSenior Researcher ICDPInternational Car Distribution Programme (ICDP)Cardiff Wales UK
Ben is a senior researcher at the International Car Distribution Programme (ICDP) and based in the United Kingdom ICDP is an international research‐based organization focused on auto-motive distribution including the supply and retailing of new and used vehicles aftersales network structures and operations Through research activities data services education events and consulting ICDP works with vehicle makers dealers suppliers and related orga-nizations to improve the quality and effectiveness of the distribution model Ben has presented to a range of international audiences from academic conferences to senior executives and also authors articles for business press and delivers executive teaching
xvi Notes on Contributors
Lorraine WhitmarshSchool of PsychologyCardiff UniversityCardiff Wales UK
Dr Lorraine Whitmarsh is an environmental psychologist specializing in perceptions and behaviour in relation to climate change energy and transport She is a senior lecturer in the School of Psychology at Cardiff University UK Lorraine is also a partner coordinator for the Tyndall Centre for Climate Change Research and a research associate of Cardiff Universityrsquos Centre for Business Relationships Accountability Sustainability and Society (BRASS) and the Sustainable Places Research Institute She sits on the Climate Change Commission for Wales advising Welsh government on transport and behaviour change
David A WolfeProfessor of Political Science andCo‐director Innovation Policy LabMunk School of Global Affairs University of TorontoToronto Ontario Canada
David A Wolfe is a professor of political science at UTM and a co‐director of the Innovation Policy Lab at the Munk School of Global Affairs in Toronto From 2009 to 2014 he was the Royal Bank Chair in Public and Economic Policy at the University of Toronto He is currently leading a major partnership grant on Creating Digital Opportunity Canadarsquos ICT Industry in Global Perspective funded by the Social Sciences and Humanities Research Council of Canada He is also participating in the project on manufacturing policy and the Canadian auto-motive sector based in the Automotive Policy Research Centre at McMaster University
Dimitrios XeniasSchool of PsychologyCardiff UniversityCardiff Wales UK
Dr Dimitrios Xenias is a social and environmental psychologist focusing on sustainable travel and associated behaviours such as mode choice on domestic energy‐related behaviours and on perceptions of climate change and its communication He is a research associate in the School of Psychology at Cardiff University UK Dimitrios is also an associate of the Tyndall Centre for Climate Change Research and a research associate of Cardiff Universityrsquos Centre for Business Relationships Accountability Sustainability and Society (BRASS) and the Sustainable Places Research Institute
Series Preface
The automotive industry is one of the largest manufacturing sectors in the global community Not only does it generate significant economic benefits to the worldrsquos economy but the auto-mobile is highly linked to a wide variety of international concerns such as energy consump-tion emissions trade and safety The primary objective of the Automotive Series is to publish practical and topical books for researchers and practitioners in the industry and postgraduatesadvanced undergraduates in automotive engineering
The series addresses new and emerging technologies in automotive engineering supporting the development of more fuel‐efficient safer and more environmentally friendly vehicles It covers a wide range of topics including design manufacture and operation and the intention is to provide a source of relevant information that will be of interest and benefit to people working in the field of automotive engineering
This book The Global Automotive Industry presents a broad spectrum view of the automo-tive sector from the technology industry and policy perspectives In the early chapters of the book an understanding of the industry from a social technical and economic perspective is presented This is followed by a discussion of the fabric of next‐generation vehicle systems as it is woven into a global society This discussion is expanded to include the economic impact of the automotive industrial sector on nationsrsquo economies from production operationsrevenue to job growth This text goes beyond regional thinking with respect to automotive production and discusses the historic expansion of automotive manufacturing giants in Korea and the new emerging markets in China and potentially India
The text finishes with an excellent overview of emerging technologies and economies that will be pivotal to the automotive sector These discussions are then presented in the light of new business models in a global marketplace and the impact of regulation on the automobile as well as its manufacture These topics are well integrated into the earlier topics presented in the book and make it a unique and valuable crosscutting source of information for the reader
The Global Automotive Industry integrates these topics in a unique and thought‐provoking manner that provides significant insight into global automotive production regulation and
xviii Series Preface
economic impact on society It is a forward‐thinking text that considers a wide variety of topics that will drive this major industry and the global economy for the foreseeable future It is written by highly recognized experts in the field and is a welcome addition to the Automotive Series
Thomas KurfessJuly 2015
Foreword
The global automotive industry is a complex and demanding topic for any book It is clear following my 30‐year career within the automotive industry that only a comparatively small number of individuals have a comprehensive understanding of a vehiclersquos full construction Even after decades of professional involvement it can be difficult for an individual to have a full appreciation of the subject and its international infrastructure and landscape
From pre‐production to the factory floor and the boardroom knowledge sharing is incred-ibly important to the future of the automotive engineering profession With future mobility solutions being vital to modern society and with the needs of each region differing depending on capabilities and production facilities communication amongst the worldrsquos engineers pro-vides a route to approaching and accommodating the global social political and economic considerations that the future will demand
FISITA has successfully coordinated global communications amongst its network of over 200 000 professional engineers from member societies in 37 countries for over 60 years This demonstrates the point through many generations that sharing of knowledge and ideas amongst an industry as large as automotive including engineers academics and executives is vital as it provides us all with the tools to contribute to a better future
As part of this journey global collaboration within the industry is also necessary in order to deliver a clear message to wider society that the automotive engineering profession is well placed to face the challenges of today and tomorrow
Paul Nieuwenhuis and Peter Wells have provided us with a very good starting point The authors are able to present the wide scope of the industry in a clear way whilst contributing a wealth of knowledge about the global automotive industry
Chris MasonCEO FISITA
The Global Automotive Industry First Edition Edited by Paul Nieuwenhuis and Peter Wells copy 2015 John Wiley amp Sons Ltd Published 2015 by John Wiley amp Sons Ltd
Introduction and OverviewPaul Nieuwenhuis1 and Peter Wells2
1 Centre for Automotive Industry Research and Electric Vehicle Centre of Excellence Cardiff Business School Cardiff University Cardiff Wales UK2 Centre for Automotive Industry Research Cardiff Business School Cardiff University Cardiff Wales UK
11 Introduction
It is an impossible task to do full justice in one book to the global automotive industry with the pervasive impact economic significance and cultural status that it brings As editors our task is as much one of selective omission as one of collation to create an account of the business of mak-ing selling and using cars that is both representative and yet respectful of the diversity we know to be a feature of the industry Moreover this is an industry in the midst of reinventing itself It had seemed to some both inside and outside the industry around the turn of the millennium that this was a lsquosunsetrsquo industry characterized by over‐capacity plant closures job losses declining profitability and a product that seemed unsuited to meeting the environmental and social chal-lenges arising from mass car ownership and use The combination of profound environmental pressures and endemic economic distress appeared to call into question the pre‐eminent position enjoyed by the car in providing for personal mobility and the viability of the industry behind this most contradictory of products These concerns came to a peak with the arrival of the global economic crisis around 2007ndash2008 which resulted in new car sales falling steeply in the established markets and investment freezing while the entire financial community held its collective breath to see whether the world would plunge into an economic abyss Those looking closely at urban developments and the changing cultural priorities of young people started to whisper about the concept of lsquopeak carrsquo in which the high tide of automobility had been reached in the saturated markets of the European Union North America Japan and Korea
Yet only a few years later the industry has reemerged burnished by the embrace of new technologies and with resurgent sales in the previously moribund West being more than matched by the frenetic growth of sales in China and elsewhere Regulatory interventions
1
2 The Global Automotive Industry
such as the European Union fleet average carbon emissions targets that were once seen as burdensome and punitive have arguably helped stimulate the technological renaissance of the industry alongside the realization that there might be other routes to profitability Later chap-ters in the book are more concerned with this recent period of transformation and the possible futures it portends Chapter 16 for example is about the impact of the electric vehicle while Chapter 18 links technology change with possible innovations in business models forced on the industry by such technological changes Chapter 19 is more speculative but offers up some signposts for the future of automobility and the automotive industry
This is not to say that the process of change has been without stress or consequence Restructuring of the industry has continued apace the merger of Chrysler and Fiat came as a consequence of several years of corporate turmoil while the rescue of PSA by the French government and by the Chinese company Dongfeng costs the Peugeot family their control over this long established business ndash the oldest in the industry The great expectations held for battery electric vehicles remain as yet largely unrealized despite the highly visible and expen-sive efforts of companies like Nissan Renault and BMW alongside the publicity‐garnering machine that is Tesla In the meantime high‐profile failures such as the battery swap business Better Place serve as stark reminders that attempts to reinvent this industry especially by new entrants are fraught with hazard At the same time markets in the European Union have not really recovered to pre‐crisis levels and perhaps never will
So despite an apparent lsquobusiness‐as‐usualrsquo attitude permeating the automotive industry at the moment in reality it is subject to potentially radical change Only a few years ago we saw two of the worldrsquos largest car manufacturers General Motors and Chrysler on the brink of collapse Having decided both were lsquotoo big to failrsquo they had to be bailed out by the American tax‐payer Ford managed without direct government support but it is nevertheless quite clear that the collapse of the supply base that would have resulted from a collapse of both their key domestic competitors GM and Chrysler would also have dragged down Ford in due course Within a matter of months the worldrsquos most prominent car industry and the oldest mass production car industry could have disappeared only intervention from the public sector saved this key compo-nent of the private sector underlining that apart from anything else the close synergies and intertwined relationships continue to exist between the private and public sectors in developed countries (Mazzucato 2013) This highlights not only the weaknesses inherent in the close links between the financial and car systems but also indicates that the current mass production system whether seen as Fordist or Buddist (see below) may well be due for a rethink in several respects
In Europe the apparent success of Germany more recently the UK automotive industry is easily misunderstood leading perhaps to overconfidence but do note that the secret of success in Europe is largely confined to the more upmarket segments with the Germans the primary beneficiaries and that this success is very reliant on demand from Asia particularly China it has therefore made Europe ndash and also the United States particularly GM ndash very dependent on that far from stable market as also outlined in more detail in Chapter 10 At the same time pressures to make the car more environmentally compatible as we see it have not only led to cars with much less harmful tailpipe emissions but the more recent pressure to reduce the carbon footprint of cars particularly focused on their emissions of the greenhouse gas carbon dioxide has the potential to radically reshape the industry and its products These regulatory pressures are reviewed in Chapter 14 although the potential impact of this agenda is not yet fully understood but it has already led to a new wave of alternative powertrain vehicles in the market ranging from early petrol‐electric hybrids ndash including the now iconic Toyota Prius ndash via
Introduction and Overview 3
so‐called range‐extended and plug‐in hybrids such as the GM Volt and Ampera to full battery‐electric vehicles such as the Nissan Leaf Renault Zoe and Tesla Model S Such developments as well as the introduction of the even more radical BMW i3 which not only introduces a full battery‐electric powertrain but also houses this within a radical departure from the tried and tested lsquoBuddistrsquo (see Chapter 5) all‐steel body in using a carbon fibre body on an aluminium chassis are clear signs that business‐as‐usual is steadily being undermined even from within the established industry
Despite the size of the industry car making is in reality a very precarious business In its present form it lacks resilience it is not sustainable This is true not just in terms of environmental sustainability where it clearly is not measuring up but even in terms of basic economic sustainability Yet this industry is still crucially important representing a significant part of the economy in many industrialized countries as well as many newly industrializing economies notably China In addition the car‐based transport system or lsquoregimersquo (Geels et al 2012) which extends well beyond the industry that makes cars to the way in which auto-mobility has become integrated in our societies and cultures has become so embedded that its removal would lead to widespread social and economic crisis
In some regards therefore this book may be a testimony to a dying era as much as a hymnal to a new one Thus far the automotive industry has managed to contain the pressures for change both economic and environmental within the broad ambit of the long‐standing business model of the mainstream vehicle manufacturers In parallel those purchasing and using cars in the traditional manner have remained by far the majority compared with more innovative solutions such as car clubs city car sharing schemes and other alternatives that might presage the end of established automobility cultures The question is whether the collective and cumulative impact of all the new developments sweeping through the industry will be sufficient to herald the arrival of a new lsquoautomotive ecosystemrsquo as some have termed it or lsquoregimersquo according to others and one in which the dominance of the established vehicle manufacturers and their entrenched supply chains is challenged by a new order of communi-cations and mobility providers Some caution on these issues is urged here The automotive industry is not immune to hype cycles or the fevered imaginations of those professional change‐mongers with a vested interest in fermenting and emphasizing the new over the continuous
12 Continuity and Change
The book as a whole therefore represents an attempt to capture continuity and change in the global automotive industry this theme is brought to the fore in the first main chapter of the book Chapter 2 as change is very much a feature of the current phase of the automotive system Change of course needs to be seen in historical perspective and as such many of the chapters offer up a historical narrative that builds a temporal dynamic into the account of the subject under consideration There is some need in seeking to understand the structures and practices of the present to delve into the past If nothing else path dependency theory tells us that many decisions are nonlinear irreversible steps that result in distinct historical outcomes bounded by time and place As we have sought to delineate elsewhere the cluster of innovations that created the template for the mass production automotive industry occurred largely in the United States in the early years of the twentieth century the Ford moving assembly line with standardized and inter‐changeable parts the Budd all‐steel body that could be stamped
4 The Global Automotive Industry
welded and painted and the Sloan multi‐brand company with marketing innovations such as consumer credit and annual model changes these developments are outlined in Chapter 5 Despite many years of incremental change the basic architecture of the industry remains in place That such durability is evident speaks volumes for the scope for productivity improve-ment within this basic architecture over many decades and the efficacy of the system as a whole in terms of matching the imperatives of production economics to the demands of the market For this reason key early chapters in the book for example Chapters 3 4 5 and 6 are about the production system and the market for cars There is no subscription here to the simple neoclassical economics assumption that lsquoconsumersrsquo demand and lsquoproducersrsquo provide Rather there is a continuing dynamic tension between supply and demand sides that is never entirely resolved
13 Overview
The chapters in this book are thus essentially an attempt to take stock of the industry in its present state of a well‐established industry on the verge of potentially radical change tracking some of its history ndash trying to answer the question of how did we get here ndash assessing key aspects of its current state while also plotting some possible futures for the industry and its products This book does not seek to present chapters that are held together by a common the-oretical thread Such works can be tremendously informative and insightful (see Geels et al 2012) but of course tend to place primary emphasis on the question of theoretical coherence Rather the approach here has been more agnostic in theoretical terms and has been to seek insights and individual views by those who are established experts in their fields and who are known for their knowledge of the automotive industry (or a specific aspect of it) alongside their particular theoretical or methodological frameworks Each chapter is thus a cameo able to stand alone as a concise insight into one dimension of this multi‐faceted industry but also serves as a piece in the jigsaw that describes and explains how this industry really works
There are some gaps of course It is not possible to give consideration to all the countries producing cars and the unique contexts within which they operate The salience of the lsquovari-eties of capitalismrsquo school of thought (see Section 23) is acknowledged here and some com-parative chapters are pertinent to this school notably those on labourndashmanagement relations in North America and Japan (Chapters 7 and 8 respectively) While the question of labour relations in Japan has remained largely immune to external influence (notwithstanding the substantial impact of Renault on operations at Nissan and the rather lesser impact of Ford on Mazda) the story in North America has a strong thread in which lsquoJapanizationrsquo has been highly significant Chapters 9 10 and 11 cover the broad sweep of the automotive industry in Asia highlighting South Korea China and India respectively ndash both Korea and India have become comparatively neglected in view of the immense attention directed at China Interestingly both these countries are more than passive recipients of automobility and can claim to be home to significant companies within the industry of the modern era while also representing unique markets
An apparent gap in the account includes a chapter that explicitly deals with the global supply chain of components and raw materials to the vehicle manufacturers ndash where typically up to 85 of the ex‐works value of a new car is accounted for by bought in components and materials The theme of supply chain management is an important facet of the industry but
Notes on Contributors xiii
Ceri DonovanElectric Vehicle Centre of ExcellenceSchool of EngineeringCardiff UniversityCardiff Wales UK
Ceri Donovan is a research assistant at Cardiff University School of Engineering and a member of Cardiff Universityrsquos Electric Vehicle Centre of Excellence She spent most of her time in recent years working on ENEVATE which aimed to accelerate the uptake of e‐mobility in northwest Europe This includes conducting research on all aspects of electric vehicles including market drivers and mobility concepts vehicle safety and regulations She previously worked in defence research primarily focusing on how to integrate new technology onto existing platforms from the procurement as well as the practical perspectives She has an MSc in biometry from the University of Reading
Patrick GalvinInnovation Policy LabMunk School of Global AffairsUniversity of TorontoToronto Ontario Canada
Patrick Galvin is a postdoctoral research fellow with the Innovation Policy Lab at the Munk School of Global Affairs where he is part of a research team investigating the dynamics of devel-oping a new automotive policy for the Canadian automotive industry for the twenty‐first century He is also working on the SSHRC‐funded Creating Digital Opportunity project Prior to his current appointment and after having obtained both his BA (honours) and MA degrees in political science Patrick spent several years working in the housing policy field with a number of consulting firms Patrick enrolled in the PhD programme in politics at the University of Exeter in England He completed his dissertation in November 2012 and he was formally awarded his PhD degree in July 2012 Patrickrsquos PhD dissertation built on his training in public policy and political economy by examining how local government in the city of Toronto develops its cluster‐related innovation policy It focuses on two empirical case studies to see how the city develops its cluster policy for two industrial sectors the aerospace sector and the fashion sector
Elena GoracinovaInnovation Policy LabMunk School of Global AffairsUniversity of TorontoToronto Ontario Canada
Elena Goracinova is a PhD candidate in political science working at the University of Torontorsquos Munk School of Global Affairs Innovation Policy Lab with Professor David Wolfe She received her masterrsquos degree in geography from the University of Toronto with a thesis on manufacturing in developed economies She is interested in studying the role of the state in economic policymaking Her current work focuses on the scope and effectiveness of advanced manufacturing policies in Canada
xiv Notes on Contributors
John HolmesProfessor EmeritusDepartment of GeographyQueenrsquos UniversityKingston Ontario Canada
John Holmes is a professor of geography at Queenrsquos University in Kingston Ontario Canada He received his BSc (honours) and MA (social science) degrees from the University of Sheffield and his PhD from Ohio State University He is also affiliated with the graduate industrial relations programme in the Queenrsquos School of Policy Studies His research focuses on geographical aspects of the political economy of contemporary economic and social change and in particular on the contemporary restructuring and reorganization of production and work in North America Empirical research and writing have focused primarily on the automobile industry For a list of selected publications see httpgeogqueensucafacultyholmesasp
Seunghwan KuFaculty of Business AdministrationKyoto Sangyo UniversityKyoto Japan
Seunghwan Ku is a professor of technology of management of the Faculty of Business Administration Kyoto Sangyo University He received his PhD (management of technology) from the University of Tokyo Japan His dissertation entitled lsquoThe Dynamism of Product Architecture Modularization Knowledge Integration Interfirm Linkagersquo was published by Mineruba Shobo a major publisher in Japan His recent publications include lsquoEconomic Analysis of ICT Innovationrsquo (2011) with M Fujiwara and lsquoShip Development and Shipbuilding Industry The Constraint of Large Artifact Development and the Uncertainty of Business Modelrsquo with H Kato in T Fujimoto ed lsquoCoping with Complex Artifactsrsquo (2013) His current research interests are (i) product development (ii) logistics and inter‐firm linkages (iii) prod-uct strategy and innovation and (iv) supplier system in Korean and Japanese industries the auto sector in particular
Maneesh KumarCentre for Automotive Industry ResearchCardiff Business School Cardiff UniversityCardiff Wales UK
Dr Maneesh Kumar is a senior lecturer at Cardiff Business School Cardiff University UK His research interests are primarily in the area of quality management Lean Six Sigma (LSS) and service recovery within manufacturing service and public sector organizations His recent research within Indian automotive industry focuses on understanding the best‐in‐class practices in diffusing LeanKaizen practice at supply network level and how automotive giants (OEMs) support and develop their suppliers (at Tier 1 and Tier 2 level) His research outputs include an edited book five edited conference proceedings three book chapters and over 80 peer‐reviewed
Notes on Contributors xv
journal publications and conference papers He has been involved in delivering LSS training up to black‐belt level and delivered several workshops on LSS application in several blue chip companies He is also a regular speaker at international conferences and seminars on LSS and process excellence
Xiao LinCentre for Automotive Industry ResearchLogistics and Operations Management SectionCardiff Business School Cardiff UniversityCardiff Wales UK
Xiao Lin is a PhD student in the logistics and operations management section at Cardiff Business School Cardiff University Her research interests include sustainability transition theory business models etc Her PhD research project is specifically focusing on the study of the future prospect for e‐bikes in sustainable mobility in China through various quantitative and qualitative analysis methods Xiao Lin is enthusiastic in contributing to the collaboration of the sustainable community She is a member of the organizing committee of the lsquoThe 2014 Global Research Forum Sustainable Production and Consumption Conferencersquo
Daniel NewmanElectric Vehicle Centre of Excellence and Sustainable Places Research InstituteCardiff UniversityCardiff Wales UK
Dr Daniel Newman is a research assistant at Cardiff Business School working within the Cardiff University Electric Vehicle Centre of Excellence His activities are primarily focused on the ENEVATE project conducting social research investigating the potential for increasing electric vehicle uptake in northwest Europe He was previously a research assistant at the University of Bristol Law School looking at environmental law and health and safety regulations Prior to this he completed an ESRC‐funded PhD in the University of Bristol Law School investigating the state of access to justice which was published as a book by Hart in 2012
Ben WallerSenior Researcher ICDPInternational Car Distribution Programme (ICDP)Cardiff Wales UK
Ben is a senior researcher at the International Car Distribution Programme (ICDP) and based in the United Kingdom ICDP is an international research‐based organization focused on auto-motive distribution including the supply and retailing of new and used vehicles aftersales network structures and operations Through research activities data services education events and consulting ICDP works with vehicle makers dealers suppliers and related orga-nizations to improve the quality and effectiveness of the distribution model Ben has presented to a range of international audiences from academic conferences to senior executives and also authors articles for business press and delivers executive teaching
xvi Notes on Contributors
Lorraine WhitmarshSchool of PsychologyCardiff UniversityCardiff Wales UK
Dr Lorraine Whitmarsh is an environmental psychologist specializing in perceptions and behaviour in relation to climate change energy and transport She is a senior lecturer in the School of Psychology at Cardiff University UK Lorraine is also a partner coordinator for the Tyndall Centre for Climate Change Research and a research associate of Cardiff Universityrsquos Centre for Business Relationships Accountability Sustainability and Society (BRASS) and the Sustainable Places Research Institute She sits on the Climate Change Commission for Wales advising Welsh government on transport and behaviour change
David A WolfeProfessor of Political Science andCo‐director Innovation Policy LabMunk School of Global Affairs University of TorontoToronto Ontario Canada
David A Wolfe is a professor of political science at UTM and a co‐director of the Innovation Policy Lab at the Munk School of Global Affairs in Toronto From 2009 to 2014 he was the Royal Bank Chair in Public and Economic Policy at the University of Toronto He is currently leading a major partnership grant on Creating Digital Opportunity Canadarsquos ICT Industry in Global Perspective funded by the Social Sciences and Humanities Research Council of Canada He is also participating in the project on manufacturing policy and the Canadian auto-motive sector based in the Automotive Policy Research Centre at McMaster University
Dimitrios XeniasSchool of PsychologyCardiff UniversityCardiff Wales UK
Dr Dimitrios Xenias is a social and environmental psychologist focusing on sustainable travel and associated behaviours such as mode choice on domestic energy‐related behaviours and on perceptions of climate change and its communication He is a research associate in the School of Psychology at Cardiff University UK Dimitrios is also an associate of the Tyndall Centre for Climate Change Research and a research associate of Cardiff Universityrsquos Centre for Business Relationships Accountability Sustainability and Society (BRASS) and the Sustainable Places Research Institute
Series Preface
The automotive industry is one of the largest manufacturing sectors in the global community Not only does it generate significant economic benefits to the worldrsquos economy but the auto-mobile is highly linked to a wide variety of international concerns such as energy consump-tion emissions trade and safety The primary objective of the Automotive Series is to publish practical and topical books for researchers and practitioners in the industry and postgraduatesadvanced undergraduates in automotive engineering
The series addresses new and emerging technologies in automotive engineering supporting the development of more fuel‐efficient safer and more environmentally friendly vehicles It covers a wide range of topics including design manufacture and operation and the intention is to provide a source of relevant information that will be of interest and benefit to people working in the field of automotive engineering
This book The Global Automotive Industry presents a broad spectrum view of the automo-tive sector from the technology industry and policy perspectives In the early chapters of the book an understanding of the industry from a social technical and economic perspective is presented This is followed by a discussion of the fabric of next‐generation vehicle systems as it is woven into a global society This discussion is expanded to include the economic impact of the automotive industrial sector on nationsrsquo economies from production operationsrevenue to job growth This text goes beyond regional thinking with respect to automotive production and discusses the historic expansion of automotive manufacturing giants in Korea and the new emerging markets in China and potentially India
The text finishes with an excellent overview of emerging technologies and economies that will be pivotal to the automotive sector These discussions are then presented in the light of new business models in a global marketplace and the impact of regulation on the automobile as well as its manufacture These topics are well integrated into the earlier topics presented in the book and make it a unique and valuable crosscutting source of information for the reader
The Global Automotive Industry integrates these topics in a unique and thought‐provoking manner that provides significant insight into global automotive production regulation and
xviii Series Preface
economic impact on society It is a forward‐thinking text that considers a wide variety of topics that will drive this major industry and the global economy for the foreseeable future It is written by highly recognized experts in the field and is a welcome addition to the Automotive Series
Thomas KurfessJuly 2015
Foreword
The global automotive industry is a complex and demanding topic for any book It is clear following my 30‐year career within the automotive industry that only a comparatively small number of individuals have a comprehensive understanding of a vehiclersquos full construction Even after decades of professional involvement it can be difficult for an individual to have a full appreciation of the subject and its international infrastructure and landscape
From pre‐production to the factory floor and the boardroom knowledge sharing is incred-ibly important to the future of the automotive engineering profession With future mobility solutions being vital to modern society and with the needs of each region differing depending on capabilities and production facilities communication amongst the worldrsquos engineers pro-vides a route to approaching and accommodating the global social political and economic considerations that the future will demand
FISITA has successfully coordinated global communications amongst its network of over 200 000 professional engineers from member societies in 37 countries for over 60 years This demonstrates the point through many generations that sharing of knowledge and ideas amongst an industry as large as automotive including engineers academics and executives is vital as it provides us all with the tools to contribute to a better future
As part of this journey global collaboration within the industry is also necessary in order to deliver a clear message to wider society that the automotive engineering profession is well placed to face the challenges of today and tomorrow
Paul Nieuwenhuis and Peter Wells have provided us with a very good starting point The authors are able to present the wide scope of the industry in a clear way whilst contributing a wealth of knowledge about the global automotive industry
Chris MasonCEO FISITA
The Global Automotive Industry First Edition Edited by Paul Nieuwenhuis and Peter Wells copy 2015 John Wiley amp Sons Ltd Published 2015 by John Wiley amp Sons Ltd
Introduction and OverviewPaul Nieuwenhuis1 and Peter Wells2
1 Centre for Automotive Industry Research and Electric Vehicle Centre of Excellence Cardiff Business School Cardiff University Cardiff Wales UK2 Centre for Automotive Industry Research Cardiff Business School Cardiff University Cardiff Wales UK
11 Introduction
It is an impossible task to do full justice in one book to the global automotive industry with the pervasive impact economic significance and cultural status that it brings As editors our task is as much one of selective omission as one of collation to create an account of the business of mak-ing selling and using cars that is both representative and yet respectful of the diversity we know to be a feature of the industry Moreover this is an industry in the midst of reinventing itself It had seemed to some both inside and outside the industry around the turn of the millennium that this was a lsquosunsetrsquo industry characterized by over‐capacity plant closures job losses declining profitability and a product that seemed unsuited to meeting the environmental and social chal-lenges arising from mass car ownership and use The combination of profound environmental pressures and endemic economic distress appeared to call into question the pre‐eminent position enjoyed by the car in providing for personal mobility and the viability of the industry behind this most contradictory of products These concerns came to a peak with the arrival of the global economic crisis around 2007ndash2008 which resulted in new car sales falling steeply in the established markets and investment freezing while the entire financial community held its collective breath to see whether the world would plunge into an economic abyss Those looking closely at urban developments and the changing cultural priorities of young people started to whisper about the concept of lsquopeak carrsquo in which the high tide of automobility had been reached in the saturated markets of the European Union North America Japan and Korea
Yet only a few years later the industry has reemerged burnished by the embrace of new technologies and with resurgent sales in the previously moribund West being more than matched by the frenetic growth of sales in China and elsewhere Regulatory interventions
1
2 The Global Automotive Industry
such as the European Union fleet average carbon emissions targets that were once seen as burdensome and punitive have arguably helped stimulate the technological renaissance of the industry alongside the realization that there might be other routes to profitability Later chap-ters in the book are more concerned with this recent period of transformation and the possible futures it portends Chapter 16 for example is about the impact of the electric vehicle while Chapter 18 links technology change with possible innovations in business models forced on the industry by such technological changes Chapter 19 is more speculative but offers up some signposts for the future of automobility and the automotive industry
This is not to say that the process of change has been without stress or consequence Restructuring of the industry has continued apace the merger of Chrysler and Fiat came as a consequence of several years of corporate turmoil while the rescue of PSA by the French government and by the Chinese company Dongfeng costs the Peugeot family their control over this long established business ndash the oldest in the industry The great expectations held for battery electric vehicles remain as yet largely unrealized despite the highly visible and expen-sive efforts of companies like Nissan Renault and BMW alongside the publicity‐garnering machine that is Tesla In the meantime high‐profile failures such as the battery swap business Better Place serve as stark reminders that attempts to reinvent this industry especially by new entrants are fraught with hazard At the same time markets in the European Union have not really recovered to pre‐crisis levels and perhaps never will
So despite an apparent lsquobusiness‐as‐usualrsquo attitude permeating the automotive industry at the moment in reality it is subject to potentially radical change Only a few years ago we saw two of the worldrsquos largest car manufacturers General Motors and Chrysler on the brink of collapse Having decided both were lsquotoo big to failrsquo they had to be bailed out by the American tax‐payer Ford managed without direct government support but it is nevertheless quite clear that the collapse of the supply base that would have resulted from a collapse of both their key domestic competitors GM and Chrysler would also have dragged down Ford in due course Within a matter of months the worldrsquos most prominent car industry and the oldest mass production car industry could have disappeared only intervention from the public sector saved this key compo-nent of the private sector underlining that apart from anything else the close synergies and intertwined relationships continue to exist between the private and public sectors in developed countries (Mazzucato 2013) This highlights not only the weaknesses inherent in the close links between the financial and car systems but also indicates that the current mass production system whether seen as Fordist or Buddist (see below) may well be due for a rethink in several respects
In Europe the apparent success of Germany more recently the UK automotive industry is easily misunderstood leading perhaps to overconfidence but do note that the secret of success in Europe is largely confined to the more upmarket segments with the Germans the primary beneficiaries and that this success is very reliant on demand from Asia particularly China it has therefore made Europe ndash and also the United States particularly GM ndash very dependent on that far from stable market as also outlined in more detail in Chapter 10 At the same time pressures to make the car more environmentally compatible as we see it have not only led to cars with much less harmful tailpipe emissions but the more recent pressure to reduce the carbon footprint of cars particularly focused on their emissions of the greenhouse gas carbon dioxide has the potential to radically reshape the industry and its products These regulatory pressures are reviewed in Chapter 14 although the potential impact of this agenda is not yet fully understood but it has already led to a new wave of alternative powertrain vehicles in the market ranging from early petrol‐electric hybrids ndash including the now iconic Toyota Prius ndash via
Introduction and Overview 3
so‐called range‐extended and plug‐in hybrids such as the GM Volt and Ampera to full battery‐electric vehicles such as the Nissan Leaf Renault Zoe and Tesla Model S Such developments as well as the introduction of the even more radical BMW i3 which not only introduces a full battery‐electric powertrain but also houses this within a radical departure from the tried and tested lsquoBuddistrsquo (see Chapter 5) all‐steel body in using a carbon fibre body on an aluminium chassis are clear signs that business‐as‐usual is steadily being undermined even from within the established industry
Despite the size of the industry car making is in reality a very precarious business In its present form it lacks resilience it is not sustainable This is true not just in terms of environmental sustainability where it clearly is not measuring up but even in terms of basic economic sustainability Yet this industry is still crucially important representing a significant part of the economy in many industrialized countries as well as many newly industrializing economies notably China In addition the car‐based transport system or lsquoregimersquo (Geels et al 2012) which extends well beyond the industry that makes cars to the way in which auto-mobility has become integrated in our societies and cultures has become so embedded that its removal would lead to widespread social and economic crisis
In some regards therefore this book may be a testimony to a dying era as much as a hymnal to a new one Thus far the automotive industry has managed to contain the pressures for change both economic and environmental within the broad ambit of the long‐standing business model of the mainstream vehicle manufacturers In parallel those purchasing and using cars in the traditional manner have remained by far the majority compared with more innovative solutions such as car clubs city car sharing schemes and other alternatives that might presage the end of established automobility cultures The question is whether the collective and cumulative impact of all the new developments sweeping through the industry will be sufficient to herald the arrival of a new lsquoautomotive ecosystemrsquo as some have termed it or lsquoregimersquo according to others and one in which the dominance of the established vehicle manufacturers and their entrenched supply chains is challenged by a new order of communi-cations and mobility providers Some caution on these issues is urged here The automotive industry is not immune to hype cycles or the fevered imaginations of those professional change‐mongers with a vested interest in fermenting and emphasizing the new over the continuous
12 Continuity and Change
The book as a whole therefore represents an attempt to capture continuity and change in the global automotive industry this theme is brought to the fore in the first main chapter of the book Chapter 2 as change is very much a feature of the current phase of the automotive system Change of course needs to be seen in historical perspective and as such many of the chapters offer up a historical narrative that builds a temporal dynamic into the account of the subject under consideration There is some need in seeking to understand the structures and practices of the present to delve into the past If nothing else path dependency theory tells us that many decisions are nonlinear irreversible steps that result in distinct historical outcomes bounded by time and place As we have sought to delineate elsewhere the cluster of innovations that created the template for the mass production automotive industry occurred largely in the United States in the early years of the twentieth century the Ford moving assembly line with standardized and inter‐changeable parts the Budd all‐steel body that could be stamped
4 The Global Automotive Industry
welded and painted and the Sloan multi‐brand company with marketing innovations such as consumer credit and annual model changes these developments are outlined in Chapter 5 Despite many years of incremental change the basic architecture of the industry remains in place That such durability is evident speaks volumes for the scope for productivity improve-ment within this basic architecture over many decades and the efficacy of the system as a whole in terms of matching the imperatives of production economics to the demands of the market For this reason key early chapters in the book for example Chapters 3 4 5 and 6 are about the production system and the market for cars There is no subscription here to the simple neoclassical economics assumption that lsquoconsumersrsquo demand and lsquoproducersrsquo provide Rather there is a continuing dynamic tension between supply and demand sides that is never entirely resolved
13 Overview
The chapters in this book are thus essentially an attempt to take stock of the industry in its present state of a well‐established industry on the verge of potentially radical change tracking some of its history ndash trying to answer the question of how did we get here ndash assessing key aspects of its current state while also plotting some possible futures for the industry and its products This book does not seek to present chapters that are held together by a common the-oretical thread Such works can be tremendously informative and insightful (see Geels et al 2012) but of course tend to place primary emphasis on the question of theoretical coherence Rather the approach here has been more agnostic in theoretical terms and has been to seek insights and individual views by those who are established experts in their fields and who are known for their knowledge of the automotive industry (or a specific aspect of it) alongside their particular theoretical or methodological frameworks Each chapter is thus a cameo able to stand alone as a concise insight into one dimension of this multi‐faceted industry but also serves as a piece in the jigsaw that describes and explains how this industry really works
There are some gaps of course It is not possible to give consideration to all the countries producing cars and the unique contexts within which they operate The salience of the lsquovari-eties of capitalismrsquo school of thought (see Section 23) is acknowledged here and some com-parative chapters are pertinent to this school notably those on labourndashmanagement relations in North America and Japan (Chapters 7 and 8 respectively) While the question of labour relations in Japan has remained largely immune to external influence (notwithstanding the substantial impact of Renault on operations at Nissan and the rather lesser impact of Ford on Mazda) the story in North America has a strong thread in which lsquoJapanizationrsquo has been highly significant Chapters 9 10 and 11 cover the broad sweep of the automotive industry in Asia highlighting South Korea China and India respectively ndash both Korea and India have become comparatively neglected in view of the immense attention directed at China Interestingly both these countries are more than passive recipients of automobility and can claim to be home to significant companies within the industry of the modern era while also representing unique markets
An apparent gap in the account includes a chapter that explicitly deals with the global supply chain of components and raw materials to the vehicle manufacturers ndash where typically up to 85 of the ex‐works value of a new car is accounted for by bought in components and materials The theme of supply chain management is an important facet of the industry but
xiv Notes on Contributors
John HolmesProfessor EmeritusDepartment of GeographyQueenrsquos UniversityKingston Ontario Canada
John Holmes is a professor of geography at Queenrsquos University in Kingston Ontario Canada He received his BSc (honours) and MA (social science) degrees from the University of Sheffield and his PhD from Ohio State University He is also affiliated with the graduate industrial relations programme in the Queenrsquos School of Policy Studies His research focuses on geographical aspects of the political economy of contemporary economic and social change and in particular on the contemporary restructuring and reorganization of production and work in North America Empirical research and writing have focused primarily on the automobile industry For a list of selected publications see httpgeogqueensucafacultyholmesasp
Seunghwan KuFaculty of Business AdministrationKyoto Sangyo UniversityKyoto Japan
Seunghwan Ku is a professor of technology of management of the Faculty of Business Administration Kyoto Sangyo University He received his PhD (management of technology) from the University of Tokyo Japan His dissertation entitled lsquoThe Dynamism of Product Architecture Modularization Knowledge Integration Interfirm Linkagersquo was published by Mineruba Shobo a major publisher in Japan His recent publications include lsquoEconomic Analysis of ICT Innovationrsquo (2011) with M Fujiwara and lsquoShip Development and Shipbuilding Industry The Constraint of Large Artifact Development and the Uncertainty of Business Modelrsquo with H Kato in T Fujimoto ed lsquoCoping with Complex Artifactsrsquo (2013) His current research interests are (i) product development (ii) logistics and inter‐firm linkages (iii) prod-uct strategy and innovation and (iv) supplier system in Korean and Japanese industries the auto sector in particular
Maneesh KumarCentre for Automotive Industry ResearchCardiff Business School Cardiff UniversityCardiff Wales UK
Dr Maneesh Kumar is a senior lecturer at Cardiff Business School Cardiff University UK His research interests are primarily in the area of quality management Lean Six Sigma (LSS) and service recovery within manufacturing service and public sector organizations His recent research within Indian automotive industry focuses on understanding the best‐in‐class practices in diffusing LeanKaizen practice at supply network level and how automotive giants (OEMs) support and develop their suppliers (at Tier 1 and Tier 2 level) His research outputs include an edited book five edited conference proceedings three book chapters and over 80 peer‐reviewed
Notes on Contributors xv
journal publications and conference papers He has been involved in delivering LSS training up to black‐belt level and delivered several workshops on LSS application in several blue chip companies He is also a regular speaker at international conferences and seminars on LSS and process excellence
Xiao LinCentre for Automotive Industry ResearchLogistics and Operations Management SectionCardiff Business School Cardiff UniversityCardiff Wales UK
Xiao Lin is a PhD student in the logistics and operations management section at Cardiff Business School Cardiff University Her research interests include sustainability transition theory business models etc Her PhD research project is specifically focusing on the study of the future prospect for e‐bikes in sustainable mobility in China through various quantitative and qualitative analysis methods Xiao Lin is enthusiastic in contributing to the collaboration of the sustainable community She is a member of the organizing committee of the lsquoThe 2014 Global Research Forum Sustainable Production and Consumption Conferencersquo
Daniel NewmanElectric Vehicle Centre of Excellence and Sustainable Places Research InstituteCardiff UniversityCardiff Wales UK
Dr Daniel Newman is a research assistant at Cardiff Business School working within the Cardiff University Electric Vehicle Centre of Excellence His activities are primarily focused on the ENEVATE project conducting social research investigating the potential for increasing electric vehicle uptake in northwest Europe He was previously a research assistant at the University of Bristol Law School looking at environmental law and health and safety regulations Prior to this he completed an ESRC‐funded PhD in the University of Bristol Law School investigating the state of access to justice which was published as a book by Hart in 2012
Ben WallerSenior Researcher ICDPInternational Car Distribution Programme (ICDP)Cardiff Wales UK
Ben is a senior researcher at the International Car Distribution Programme (ICDP) and based in the United Kingdom ICDP is an international research‐based organization focused on auto-motive distribution including the supply and retailing of new and used vehicles aftersales network structures and operations Through research activities data services education events and consulting ICDP works with vehicle makers dealers suppliers and related orga-nizations to improve the quality and effectiveness of the distribution model Ben has presented to a range of international audiences from academic conferences to senior executives and also authors articles for business press and delivers executive teaching
xvi Notes on Contributors
Lorraine WhitmarshSchool of PsychologyCardiff UniversityCardiff Wales UK
Dr Lorraine Whitmarsh is an environmental psychologist specializing in perceptions and behaviour in relation to climate change energy and transport She is a senior lecturer in the School of Psychology at Cardiff University UK Lorraine is also a partner coordinator for the Tyndall Centre for Climate Change Research and a research associate of Cardiff Universityrsquos Centre for Business Relationships Accountability Sustainability and Society (BRASS) and the Sustainable Places Research Institute She sits on the Climate Change Commission for Wales advising Welsh government on transport and behaviour change
David A WolfeProfessor of Political Science andCo‐director Innovation Policy LabMunk School of Global Affairs University of TorontoToronto Ontario Canada
David A Wolfe is a professor of political science at UTM and a co‐director of the Innovation Policy Lab at the Munk School of Global Affairs in Toronto From 2009 to 2014 he was the Royal Bank Chair in Public and Economic Policy at the University of Toronto He is currently leading a major partnership grant on Creating Digital Opportunity Canadarsquos ICT Industry in Global Perspective funded by the Social Sciences and Humanities Research Council of Canada He is also participating in the project on manufacturing policy and the Canadian auto-motive sector based in the Automotive Policy Research Centre at McMaster University
Dimitrios XeniasSchool of PsychologyCardiff UniversityCardiff Wales UK
Dr Dimitrios Xenias is a social and environmental psychologist focusing on sustainable travel and associated behaviours such as mode choice on domestic energy‐related behaviours and on perceptions of climate change and its communication He is a research associate in the School of Psychology at Cardiff University UK Dimitrios is also an associate of the Tyndall Centre for Climate Change Research and a research associate of Cardiff Universityrsquos Centre for Business Relationships Accountability Sustainability and Society (BRASS) and the Sustainable Places Research Institute
Series Preface
The automotive industry is one of the largest manufacturing sectors in the global community Not only does it generate significant economic benefits to the worldrsquos economy but the auto-mobile is highly linked to a wide variety of international concerns such as energy consump-tion emissions trade and safety The primary objective of the Automotive Series is to publish practical and topical books for researchers and practitioners in the industry and postgraduatesadvanced undergraduates in automotive engineering
The series addresses new and emerging technologies in automotive engineering supporting the development of more fuel‐efficient safer and more environmentally friendly vehicles It covers a wide range of topics including design manufacture and operation and the intention is to provide a source of relevant information that will be of interest and benefit to people working in the field of automotive engineering
This book The Global Automotive Industry presents a broad spectrum view of the automo-tive sector from the technology industry and policy perspectives In the early chapters of the book an understanding of the industry from a social technical and economic perspective is presented This is followed by a discussion of the fabric of next‐generation vehicle systems as it is woven into a global society This discussion is expanded to include the economic impact of the automotive industrial sector on nationsrsquo economies from production operationsrevenue to job growth This text goes beyond regional thinking with respect to automotive production and discusses the historic expansion of automotive manufacturing giants in Korea and the new emerging markets in China and potentially India
The text finishes with an excellent overview of emerging technologies and economies that will be pivotal to the automotive sector These discussions are then presented in the light of new business models in a global marketplace and the impact of regulation on the automobile as well as its manufacture These topics are well integrated into the earlier topics presented in the book and make it a unique and valuable crosscutting source of information for the reader
The Global Automotive Industry integrates these topics in a unique and thought‐provoking manner that provides significant insight into global automotive production regulation and
xviii Series Preface
economic impact on society It is a forward‐thinking text that considers a wide variety of topics that will drive this major industry and the global economy for the foreseeable future It is written by highly recognized experts in the field and is a welcome addition to the Automotive Series
Thomas KurfessJuly 2015
Foreword
The global automotive industry is a complex and demanding topic for any book It is clear following my 30‐year career within the automotive industry that only a comparatively small number of individuals have a comprehensive understanding of a vehiclersquos full construction Even after decades of professional involvement it can be difficult for an individual to have a full appreciation of the subject and its international infrastructure and landscape
From pre‐production to the factory floor and the boardroom knowledge sharing is incred-ibly important to the future of the automotive engineering profession With future mobility solutions being vital to modern society and with the needs of each region differing depending on capabilities and production facilities communication amongst the worldrsquos engineers pro-vides a route to approaching and accommodating the global social political and economic considerations that the future will demand
FISITA has successfully coordinated global communications amongst its network of over 200 000 professional engineers from member societies in 37 countries for over 60 years This demonstrates the point through many generations that sharing of knowledge and ideas amongst an industry as large as automotive including engineers academics and executives is vital as it provides us all with the tools to contribute to a better future
As part of this journey global collaboration within the industry is also necessary in order to deliver a clear message to wider society that the automotive engineering profession is well placed to face the challenges of today and tomorrow
Paul Nieuwenhuis and Peter Wells have provided us with a very good starting point The authors are able to present the wide scope of the industry in a clear way whilst contributing a wealth of knowledge about the global automotive industry
Chris MasonCEO FISITA
The Global Automotive Industry First Edition Edited by Paul Nieuwenhuis and Peter Wells copy 2015 John Wiley amp Sons Ltd Published 2015 by John Wiley amp Sons Ltd
Introduction and OverviewPaul Nieuwenhuis1 and Peter Wells2
1 Centre for Automotive Industry Research and Electric Vehicle Centre of Excellence Cardiff Business School Cardiff University Cardiff Wales UK2 Centre for Automotive Industry Research Cardiff Business School Cardiff University Cardiff Wales UK
11 Introduction
It is an impossible task to do full justice in one book to the global automotive industry with the pervasive impact economic significance and cultural status that it brings As editors our task is as much one of selective omission as one of collation to create an account of the business of mak-ing selling and using cars that is both representative and yet respectful of the diversity we know to be a feature of the industry Moreover this is an industry in the midst of reinventing itself It had seemed to some both inside and outside the industry around the turn of the millennium that this was a lsquosunsetrsquo industry characterized by over‐capacity plant closures job losses declining profitability and a product that seemed unsuited to meeting the environmental and social chal-lenges arising from mass car ownership and use The combination of profound environmental pressures and endemic economic distress appeared to call into question the pre‐eminent position enjoyed by the car in providing for personal mobility and the viability of the industry behind this most contradictory of products These concerns came to a peak with the arrival of the global economic crisis around 2007ndash2008 which resulted in new car sales falling steeply in the established markets and investment freezing while the entire financial community held its collective breath to see whether the world would plunge into an economic abyss Those looking closely at urban developments and the changing cultural priorities of young people started to whisper about the concept of lsquopeak carrsquo in which the high tide of automobility had been reached in the saturated markets of the European Union North America Japan and Korea
Yet only a few years later the industry has reemerged burnished by the embrace of new technologies and with resurgent sales in the previously moribund West being more than matched by the frenetic growth of sales in China and elsewhere Regulatory interventions
1
2 The Global Automotive Industry
such as the European Union fleet average carbon emissions targets that were once seen as burdensome and punitive have arguably helped stimulate the technological renaissance of the industry alongside the realization that there might be other routes to profitability Later chap-ters in the book are more concerned with this recent period of transformation and the possible futures it portends Chapter 16 for example is about the impact of the electric vehicle while Chapter 18 links technology change with possible innovations in business models forced on the industry by such technological changes Chapter 19 is more speculative but offers up some signposts for the future of automobility and the automotive industry
This is not to say that the process of change has been without stress or consequence Restructuring of the industry has continued apace the merger of Chrysler and Fiat came as a consequence of several years of corporate turmoil while the rescue of PSA by the French government and by the Chinese company Dongfeng costs the Peugeot family their control over this long established business ndash the oldest in the industry The great expectations held for battery electric vehicles remain as yet largely unrealized despite the highly visible and expen-sive efforts of companies like Nissan Renault and BMW alongside the publicity‐garnering machine that is Tesla In the meantime high‐profile failures such as the battery swap business Better Place serve as stark reminders that attempts to reinvent this industry especially by new entrants are fraught with hazard At the same time markets in the European Union have not really recovered to pre‐crisis levels and perhaps never will
So despite an apparent lsquobusiness‐as‐usualrsquo attitude permeating the automotive industry at the moment in reality it is subject to potentially radical change Only a few years ago we saw two of the worldrsquos largest car manufacturers General Motors and Chrysler on the brink of collapse Having decided both were lsquotoo big to failrsquo they had to be bailed out by the American tax‐payer Ford managed without direct government support but it is nevertheless quite clear that the collapse of the supply base that would have resulted from a collapse of both their key domestic competitors GM and Chrysler would also have dragged down Ford in due course Within a matter of months the worldrsquos most prominent car industry and the oldest mass production car industry could have disappeared only intervention from the public sector saved this key compo-nent of the private sector underlining that apart from anything else the close synergies and intertwined relationships continue to exist between the private and public sectors in developed countries (Mazzucato 2013) This highlights not only the weaknesses inherent in the close links between the financial and car systems but also indicates that the current mass production system whether seen as Fordist or Buddist (see below) may well be due for a rethink in several respects
In Europe the apparent success of Germany more recently the UK automotive industry is easily misunderstood leading perhaps to overconfidence but do note that the secret of success in Europe is largely confined to the more upmarket segments with the Germans the primary beneficiaries and that this success is very reliant on demand from Asia particularly China it has therefore made Europe ndash and also the United States particularly GM ndash very dependent on that far from stable market as also outlined in more detail in Chapter 10 At the same time pressures to make the car more environmentally compatible as we see it have not only led to cars with much less harmful tailpipe emissions but the more recent pressure to reduce the carbon footprint of cars particularly focused on their emissions of the greenhouse gas carbon dioxide has the potential to radically reshape the industry and its products These regulatory pressures are reviewed in Chapter 14 although the potential impact of this agenda is not yet fully understood but it has already led to a new wave of alternative powertrain vehicles in the market ranging from early petrol‐electric hybrids ndash including the now iconic Toyota Prius ndash via
Introduction and Overview 3
so‐called range‐extended and plug‐in hybrids such as the GM Volt and Ampera to full battery‐electric vehicles such as the Nissan Leaf Renault Zoe and Tesla Model S Such developments as well as the introduction of the even more radical BMW i3 which not only introduces a full battery‐electric powertrain but also houses this within a radical departure from the tried and tested lsquoBuddistrsquo (see Chapter 5) all‐steel body in using a carbon fibre body on an aluminium chassis are clear signs that business‐as‐usual is steadily being undermined even from within the established industry
Despite the size of the industry car making is in reality a very precarious business In its present form it lacks resilience it is not sustainable This is true not just in terms of environmental sustainability where it clearly is not measuring up but even in terms of basic economic sustainability Yet this industry is still crucially important representing a significant part of the economy in many industrialized countries as well as many newly industrializing economies notably China In addition the car‐based transport system or lsquoregimersquo (Geels et al 2012) which extends well beyond the industry that makes cars to the way in which auto-mobility has become integrated in our societies and cultures has become so embedded that its removal would lead to widespread social and economic crisis
In some regards therefore this book may be a testimony to a dying era as much as a hymnal to a new one Thus far the automotive industry has managed to contain the pressures for change both economic and environmental within the broad ambit of the long‐standing business model of the mainstream vehicle manufacturers In parallel those purchasing and using cars in the traditional manner have remained by far the majority compared with more innovative solutions such as car clubs city car sharing schemes and other alternatives that might presage the end of established automobility cultures The question is whether the collective and cumulative impact of all the new developments sweeping through the industry will be sufficient to herald the arrival of a new lsquoautomotive ecosystemrsquo as some have termed it or lsquoregimersquo according to others and one in which the dominance of the established vehicle manufacturers and their entrenched supply chains is challenged by a new order of communi-cations and mobility providers Some caution on these issues is urged here The automotive industry is not immune to hype cycles or the fevered imaginations of those professional change‐mongers with a vested interest in fermenting and emphasizing the new over the continuous
12 Continuity and Change
The book as a whole therefore represents an attempt to capture continuity and change in the global automotive industry this theme is brought to the fore in the first main chapter of the book Chapter 2 as change is very much a feature of the current phase of the automotive system Change of course needs to be seen in historical perspective and as such many of the chapters offer up a historical narrative that builds a temporal dynamic into the account of the subject under consideration There is some need in seeking to understand the structures and practices of the present to delve into the past If nothing else path dependency theory tells us that many decisions are nonlinear irreversible steps that result in distinct historical outcomes bounded by time and place As we have sought to delineate elsewhere the cluster of innovations that created the template for the mass production automotive industry occurred largely in the United States in the early years of the twentieth century the Ford moving assembly line with standardized and inter‐changeable parts the Budd all‐steel body that could be stamped
4 The Global Automotive Industry
welded and painted and the Sloan multi‐brand company with marketing innovations such as consumer credit and annual model changes these developments are outlined in Chapter 5 Despite many years of incremental change the basic architecture of the industry remains in place That such durability is evident speaks volumes for the scope for productivity improve-ment within this basic architecture over many decades and the efficacy of the system as a whole in terms of matching the imperatives of production economics to the demands of the market For this reason key early chapters in the book for example Chapters 3 4 5 and 6 are about the production system and the market for cars There is no subscription here to the simple neoclassical economics assumption that lsquoconsumersrsquo demand and lsquoproducersrsquo provide Rather there is a continuing dynamic tension between supply and demand sides that is never entirely resolved
13 Overview
The chapters in this book are thus essentially an attempt to take stock of the industry in its present state of a well‐established industry on the verge of potentially radical change tracking some of its history ndash trying to answer the question of how did we get here ndash assessing key aspects of its current state while also plotting some possible futures for the industry and its products This book does not seek to present chapters that are held together by a common the-oretical thread Such works can be tremendously informative and insightful (see Geels et al 2012) but of course tend to place primary emphasis on the question of theoretical coherence Rather the approach here has been more agnostic in theoretical terms and has been to seek insights and individual views by those who are established experts in their fields and who are known for their knowledge of the automotive industry (or a specific aspect of it) alongside their particular theoretical or methodological frameworks Each chapter is thus a cameo able to stand alone as a concise insight into one dimension of this multi‐faceted industry but also serves as a piece in the jigsaw that describes and explains how this industry really works
There are some gaps of course It is not possible to give consideration to all the countries producing cars and the unique contexts within which they operate The salience of the lsquovari-eties of capitalismrsquo school of thought (see Section 23) is acknowledged here and some com-parative chapters are pertinent to this school notably those on labourndashmanagement relations in North America and Japan (Chapters 7 and 8 respectively) While the question of labour relations in Japan has remained largely immune to external influence (notwithstanding the substantial impact of Renault on operations at Nissan and the rather lesser impact of Ford on Mazda) the story in North America has a strong thread in which lsquoJapanizationrsquo has been highly significant Chapters 9 10 and 11 cover the broad sweep of the automotive industry in Asia highlighting South Korea China and India respectively ndash both Korea and India have become comparatively neglected in view of the immense attention directed at China Interestingly both these countries are more than passive recipients of automobility and can claim to be home to significant companies within the industry of the modern era while also representing unique markets
An apparent gap in the account includes a chapter that explicitly deals with the global supply chain of components and raw materials to the vehicle manufacturers ndash where typically up to 85 of the ex‐works value of a new car is accounted for by bought in components and materials The theme of supply chain management is an important facet of the industry but
Notes on Contributors xv
journal publications and conference papers He has been involved in delivering LSS training up to black‐belt level and delivered several workshops on LSS application in several blue chip companies He is also a regular speaker at international conferences and seminars on LSS and process excellence
Xiao LinCentre for Automotive Industry ResearchLogistics and Operations Management SectionCardiff Business School Cardiff UniversityCardiff Wales UK
Xiao Lin is a PhD student in the logistics and operations management section at Cardiff Business School Cardiff University Her research interests include sustainability transition theory business models etc Her PhD research project is specifically focusing on the study of the future prospect for e‐bikes in sustainable mobility in China through various quantitative and qualitative analysis methods Xiao Lin is enthusiastic in contributing to the collaboration of the sustainable community She is a member of the organizing committee of the lsquoThe 2014 Global Research Forum Sustainable Production and Consumption Conferencersquo
Daniel NewmanElectric Vehicle Centre of Excellence and Sustainable Places Research InstituteCardiff UniversityCardiff Wales UK
Dr Daniel Newman is a research assistant at Cardiff Business School working within the Cardiff University Electric Vehicle Centre of Excellence His activities are primarily focused on the ENEVATE project conducting social research investigating the potential for increasing electric vehicle uptake in northwest Europe He was previously a research assistant at the University of Bristol Law School looking at environmental law and health and safety regulations Prior to this he completed an ESRC‐funded PhD in the University of Bristol Law School investigating the state of access to justice which was published as a book by Hart in 2012
Ben WallerSenior Researcher ICDPInternational Car Distribution Programme (ICDP)Cardiff Wales UK
Ben is a senior researcher at the International Car Distribution Programme (ICDP) and based in the United Kingdom ICDP is an international research‐based organization focused on auto-motive distribution including the supply and retailing of new and used vehicles aftersales network structures and operations Through research activities data services education events and consulting ICDP works with vehicle makers dealers suppliers and related orga-nizations to improve the quality and effectiveness of the distribution model Ben has presented to a range of international audiences from academic conferences to senior executives and also authors articles for business press and delivers executive teaching
xvi Notes on Contributors
Lorraine WhitmarshSchool of PsychologyCardiff UniversityCardiff Wales UK
Dr Lorraine Whitmarsh is an environmental psychologist specializing in perceptions and behaviour in relation to climate change energy and transport She is a senior lecturer in the School of Psychology at Cardiff University UK Lorraine is also a partner coordinator for the Tyndall Centre for Climate Change Research and a research associate of Cardiff Universityrsquos Centre for Business Relationships Accountability Sustainability and Society (BRASS) and the Sustainable Places Research Institute She sits on the Climate Change Commission for Wales advising Welsh government on transport and behaviour change
David A WolfeProfessor of Political Science andCo‐director Innovation Policy LabMunk School of Global Affairs University of TorontoToronto Ontario Canada
David A Wolfe is a professor of political science at UTM and a co‐director of the Innovation Policy Lab at the Munk School of Global Affairs in Toronto From 2009 to 2014 he was the Royal Bank Chair in Public and Economic Policy at the University of Toronto He is currently leading a major partnership grant on Creating Digital Opportunity Canadarsquos ICT Industry in Global Perspective funded by the Social Sciences and Humanities Research Council of Canada He is also participating in the project on manufacturing policy and the Canadian auto-motive sector based in the Automotive Policy Research Centre at McMaster University
Dimitrios XeniasSchool of PsychologyCardiff UniversityCardiff Wales UK
Dr Dimitrios Xenias is a social and environmental psychologist focusing on sustainable travel and associated behaviours such as mode choice on domestic energy‐related behaviours and on perceptions of climate change and its communication He is a research associate in the School of Psychology at Cardiff University UK Dimitrios is also an associate of the Tyndall Centre for Climate Change Research and a research associate of Cardiff Universityrsquos Centre for Business Relationships Accountability Sustainability and Society (BRASS) and the Sustainable Places Research Institute
Series Preface
The automotive industry is one of the largest manufacturing sectors in the global community Not only does it generate significant economic benefits to the worldrsquos economy but the auto-mobile is highly linked to a wide variety of international concerns such as energy consump-tion emissions trade and safety The primary objective of the Automotive Series is to publish practical and topical books for researchers and practitioners in the industry and postgraduatesadvanced undergraduates in automotive engineering
The series addresses new and emerging technologies in automotive engineering supporting the development of more fuel‐efficient safer and more environmentally friendly vehicles It covers a wide range of topics including design manufacture and operation and the intention is to provide a source of relevant information that will be of interest and benefit to people working in the field of automotive engineering
This book The Global Automotive Industry presents a broad spectrum view of the automo-tive sector from the technology industry and policy perspectives In the early chapters of the book an understanding of the industry from a social technical and economic perspective is presented This is followed by a discussion of the fabric of next‐generation vehicle systems as it is woven into a global society This discussion is expanded to include the economic impact of the automotive industrial sector on nationsrsquo economies from production operationsrevenue to job growth This text goes beyond regional thinking with respect to automotive production and discusses the historic expansion of automotive manufacturing giants in Korea and the new emerging markets in China and potentially India
The text finishes with an excellent overview of emerging technologies and economies that will be pivotal to the automotive sector These discussions are then presented in the light of new business models in a global marketplace and the impact of regulation on the automobile as well as its manufacture These topics are well integrated into the earlier topics presented in the book and make it a unique and valuable crosscutting source of information for the reader
The Global Automotive Industry integrates these topics in a unique and thought‐provoking manner that provides significant insight into global automotive production regulation and
xviii Series Preface
economic impact on society It is a forward‐thinking text that considers a wide variety of topics that will drive this major industry and the global economy for the foreseeable future It is written by highly recognized experts in the field and is a welcome addition to the Automotive Series
Thomas KurfessJuly 2015
Foreword
The global automotive industry is a complex and demanding topic for any book It is clear following my 30‐year career within the automotive industry that only a comparatively small number of individuals have a comprehensive understanding of a vehiclersquos full construction Even after decades of professional involvement it can be difficult for an individual to have a full appreciation of the subject and its international infrastructure and landscape
From pre‐production to the factory floor and the boardroom knowledge sharing is incred-ibly important to the future of the automotive engineering profession With future mobility solutions being vital to modern society and with the needs of each region differing depending on capabilities and production facilities communication amongst the worldrsquos engineers pro-vides a route to approaching and accommodating the global social political and economic considerations that the future will demand
FISITA has successfully coordinated global communications amongst its network of over 200 000 professional engineers from member societies in 37 countries for over 60 years This demonstrates the point through many generations that sharing of knowledge and ideas amongst an industry as large as automotive including engineers academics and executives is vital as it provides us all with the tools to contribute to a better future
As part of this journey global collaboration within the industry is also necessary in order to deliver a clear message to wider society that the automotive engineering profession is well placed to face the challenges of today and tomorrow
Paul Nieuwenhuis and Peter Wells have provided us with a very good starting point The authors are able to present the wide scope of the industry in a clear way whilst contributing a wealth of knowledge about the global automotive industry
Chris MasonCEO FISITA
The Global Automotive Industry First Edition Edited by Paul Nieuwenhuis and Peter Wells copy 2015 John Wiley amp Sons Ltd Published 2015 by John Wiley amp Sons Ltd
Introduction and OverviewPaul Nieuwenhuis1 and Peter Wells2
1 Centre for Automotive Industry Research and Electric Vehicle Centre of Excellence Cardiff Business School Cardiff University Cardiff Wales UK2 Centre for Automotive Industry Research Cardiff Business School Cardiff University Cardiff Wales UK
11 Introduction
It is an impossible task to do full justice in one book to the global automotive industry with the pervasive impact economic significance and cultural status that it brings As editors our task is as much one of selective omission as one of collation to create an account of the business of mak-ing selling and using cars that is both representative and yet respectful of the diversity we know to be a feature of the industry Moreover this is an industry in the midst of reinventing itself It had seemed to some both inside and outside the industry around the turn of the millennium that this was a lsquosunsetrsquo industry characterized by over‐capacity plant closures job losses declining profitability and a product that seemed unsuited to meeting the environmental and social chal-lenges arising from mass car ownership and use The combination of profound environmental pressures and endemic economic distress appeared to call into question the pre‐eminent position enjoyed by the car in providing for personal mobility and the viability of the industry behind this most contradictory of products These concerns came to a peak with the arrival of the global economic crisis around 2007ndash2008 which resulted in new car sales falling steeply in the established markets and investment freezing while the entire financial community held its collective breath to see whether the world would plunge into an economic abyss Those looking closely at urban developments and the changing cultural priorities of young people started to whisper about the concept of lsquopeak carrsquo in which the high tide of automobility had been reached in the saturated markets of the European Union North America Japan and Korea
Yet only a few years later the industry has reemerged burnished by the embrace of new technologies and with resurgent sales in the previously moribund West being more than matched by the frenetic growth of sales in China and elsewhere Regulatory interventions
1
2 The Global Automotive Industry
such as the European Union fleet average carbon emissions targets that were once seen as burdensome and punitive have arguably helped stimulate the technological renaissance of the industry alongside the realization that there might be other routes to profitability Later chap-ters in the book are more concerned with this recent period of transformation and the possible futures it portends Chapter 16 for example is about the impact of the electric vehicle while Chapter 18 links technology change with possible innovations in business models forced on the industry by such technological changes Chapter 19 is more speculative but offers up some signposts for the future of automobility and the automotive industry
This is not to say that the process of change has been without stress or consequence Restructuring of the industry has continued apace the merger of Chrysler and Fiat came as a consequence of several years of corporate turmoil while the rescue of PSA by the French government and by the Chinese company Dongfeng costs the Peugeot family their control over this long established business ndash the oldest in the industry The great expectations held for battery electric vehicles remain as yet largely unrealized despite the highly visible and expen-sive efforts of companies like Nissan Renault and BMW alongside the publicity‐garnering machine that is Tesla In the meantime high‐profile failures such as the battery swap business Better Place serve as stark reminders that attempts to reinvent this industry especially by new entrants are fraught with hazard At the same time markets in the European Union have not really recovered to pre‐crisis levels and perhaps never will
So despite an apparent lsquobusiness‐as‐usualrsquo attitude permeating the automotive industry at the moment in reality it is subject to potentially radical change Only a few years ago we saw two of the worldrsquos largest car manufacturers General Motors and Chrysler on the brink of collapse Having decided both were lsquotoo big to failrsquo they had to be bailed out by the American tax‐payer Ford managed without direct government support but it is nevertheless quite clear that the collapse of the supply base that would have resulted from a collapse of both their key domestic competitors GM and Chrysler would also have dragged down Ford in due course Within a matter of months the worldrsquos most prominent car industry and the oldest mass production car industry could have disappeared only intervention from the public sector saved this key compo-nent of the private sector underlining that apart from anything else the close synergies and intertwined relationships continue to exist between the private and public sectors in developed countries (Mazzucato 2013) This highlights not only the weaknesses inherent in the close links between the financial and car systems but also indicates that the current mass production system whether seen as Fordist or Buddist (see below) may well be due for a rethink in several respects
In Europe the apparent success of Germany more recently the UK automotive industry is easily misunderstood leading perhaps to overconfidence but do note that the secret of success in Europe is largely confined to the more upmarket segments with the Germans the primary beneficiaries and that this success is very reliant on demand from Asia particularly China it has therefore made Europe ndash and also the United States particularly GM ndash very dependent on that far from stable market as also outlined in more detail in Chapter 10 At the same time pressures to make the car more environmentally compatible as we see it have not only led to cars with much less harmful tailpipe emissions but the more recent pressure to reduce the carbon footprint of cars particularly focused on their emissions of the greenhouse gas carbon dioxide has the potential to radically reshape the industry and its products These regulatory pressures are reviewed in Chapter 14 although the potential impact of this agenda is not yet fully understood but it has already led to a new wave of alternative powertrain vehicles in the market ranging from early petrol‐electric hybrids ndash including the now iconic Toyota Prius ndash via
Introduction and Overview 3
so‐called range‐extended and plug‐in hybrids such as the GM Volt and Ampera to full battery‐electric vehicles such as the Nissan Leaf Renault Zoe and Tesla Model S Such developments as well as the introduction of the even more radical BMW i3 which not only introduces a full battery‐electric powertrain but also houses this within a radical departure from the tried and tested lsquoBuddistrsquo (see Chapter 5) all‐steel body in using a carbon fibre body on an aluminium chassis are clear signs that business‐as‐usual is steadily being undermined even from within the established industry
Despite the size of the industry car making is in reality a very precarious business In its present form it lacks resilience it is not sustainable This is true not just in terms of environmental sustainability where it clearly is not measuring up but even in terms of basic economic sustainability Yet this industry is still crucially important representing a significant part of the economy in many industrialized countries as well as many newly industrializing economies notably China In addition the car‐based transport system or lsquoregimersquo (Geels et al 2012) which extends well beyond the industry that makes cars to the way in which auto-mobility has become integrated in our societies and cultures has become so embedded that its removal would lead to widespread social and economic crisis
In some regards therefore this book may be a testimony to a dying era as much as a hymnal to a new one Thus far the automotive industry has managed to contain the pressures for change both economic and environmental within the broad ambit of the long‐standing business model of the mainstream vehicle manufacturers In parallel those purchasing and using cars in the traditional manner have remained by far the majority compared with more innovative solutions such as car clubs city car sharing schemes and other alternatives that might presage the end of established automobility cultures The question is whether the collective and cumulative impact of all the new developments sweeping through the industry will be sufficient to herald the arrival of a new lsquoautomotive ecosystemrsquo as some have termed it or lsquoregimersquo according to others and one in which the dominance of the established vehicle manufacturers and their entrenched supply chains is challenged by a new order of communi-cations and mobility providers Some caution on these issues is urged here The automotive industry is not immune to hype cycles or the fevered imaginations of those professional change‐mongers with a vested interest in fermenting and emphasizing the new over the continuous
12 Continuity and Change
The book as a whole therefore represents an attempt to capture continuity and change in the global automotive industry this theme is brought to the fore in the first main chapter of the book Chapter 2 as change is very much a feature of the current phase of the automotive system Change of course needs to be seen in historical perspective and as such many of the chapters offer up a historical narrative that builds a temporal dynamic into the account of the subject under consideration There is some need in seeking to understand the structures and practices of the present to delve into the past If nothing else path dependency theory tells us that many decisions are nonlinear irreversible steps that result in distinct historical outcomes bounded by time and place As we have sought to delineate elsewhere the cluster of innovations that created the template for the mass production automotive industry occurred largely in the United States in the early years of the twentieth century the Ford moving assembly line with standardized and inter‐changeable parts the Budd all‐steel body that could be stamped
4 The Global Automotive Industry
welded and painted and the Sloan multi‐brand company with marketing innovations such as consumer credit and annual model changes these developments are outlined in Chapter 5 Despite many years of incremental change the basic architecture of the industry remains in place That such durability is evident speaks volumes for the scope for productivity improve-ment within this basic architecture over many decades and the efficacy of the system as a whole in terms of matching the imperatives of production economics to the demands of the market For this reason key early chapters in the book for example Chapters 3 4 5 and 6 are about the production system and the market for cars There is no subscription here to the simple neoclassical economics assumption that lsquoconsumersrsquo demand and lsquoproducersrsquo provide Rather there is a continuing dynamic tension between supply and demand sides that is never entirely resolved
13 Overview
The chapters in this book are thus essentially an attempt to take stock of the industry in its present state of a well‐established industry on the verge of potentially radical change tracking some of its history ndash trying to answer the question of how did we get here ndash assessing key aspects of its current state while also plotting some possible futures for the industry and its products This book does not seek to present chapters that are held together by a common the-oretical thread Such works can be tremendously informative and insightful (see Geels et al 2012) but of course tend to place primary emphasis on the question of theoretical coherence Rather the approach here has been more agnostic in theoretical terms and has been to seek insights and individual views by those who are established experts in their fields and who are known for their knowledge of the automotive industry (or a specific aspect of it) alongside their particular theoretical or methodological frameworks Each chapter is thus a cameo able to stand alone as a concise insight into one dimension of this multi‐faceted industry but also serves as a piece in the jigsaw that describes and explains how this industry really works
There are some gaps of course It is not possible to give consideration to all the countries producing cars and the unique contexts within which they operate The salience of the lsquovari-eties of capitalismrsquo school of thought (see Section 23) is acknowledged here and some com-parative chapters are pertinent to this school notably those on labourndashmanagement relations in North America and Japan (Chapters 7 and 8 respectively) While the question of labour relations in Japan has remained largely immune to external influence (notwithstanding the substantial impact of Renault on operations at Nissan and the rather lesser impact of Ford on Mazda) the story in North America has a strong thread in which lsquoJapanizationrsquo has been highly significant Chapters 9 10 and 11 cover the broad sweep of the automotive industry in Asia highlighting South Korea China and India respectively ndash both Korea and India have become comparatively neglected in view of the immense attention directed at China Interestingly both these countries are more than passive recipients of automobility and can claim to be home to significant companies within the industry of the modern era while also representing unique markets
An apparent gap in the account includes a chapter that explicitly deals with the global supply chain of components and raw materials to the vehicle manufacturers ndash where typically up to 85 of the ex‐works value of a new car is accounted for by bought in components and materials The theme of supply chain management is an important facet of the industry but
xvi Notes on Contributors
Lorraine WhitmarshSchool of PsychologyCardiff UniversityCardiff Wales UK
Dr Lorraine Whitmarsh is an environmental psychologist specializing in perceptions and behaviour in relation to climate change energy and transport She is a senior lecturer in the School of Psychology at Cardiff University UK Lorraine is also a partner coordinator for the Tyndall Centre for Climate Change Research and a research associate of Cardiff Universityrsquos Centre for Business Relationships Accountability Sustainability and Society (BRASS) and the Sustainable Places Research Institute She sits on the Climate Change Commission for Wales advising Welsh government on transport and behaviour change
David A WolfeProfessor of Political Science andCo‐director Innovation Policy LabMunk School of Global Affairs University of TorontoToronto Ontario Canada
David A Wolfe is a professor of political science at UTM and a co‐director of the Innovation Policy Lab at the Munk School of Global Affairs in Toronto From 2009 to 2014 he was the Royal Bank Chair in Public and Economic Policy at the University of Toronto He is currently leading a major partnership grant on Creating Digital Opportunity Canadarsquos ICT Industry in Global Perspective funded by the Social Sciences and Humanities Research Council of Canada He is also participating in the project on manufacturing policy and the Canadian auto-motive sector based in the Automotive Policy Research Centre at McMaster University
Dimitrios XeniasSchool of PsychologyCardiff UniversityCardiff Wales UK
Dr Dimitrios Xenias is a social and environmental psychologist focusing on sustainable travel and associated behaviours such as mode choice on domestic energy‐related behaviours and on perceptions of climate change and its communication He is a research associate in the School of Psychology at Cardiff University UK Dimitrios is also an associate of the Tyndall Centre for Climate Change Research and a research associate of Cardiff Universityrsquos Centre for Business Relationships Accountability Sustainability and Society (BRASS) and the Sustainable Places Research Institute
Series Preface
The automotive industry is one of the largest manufacturing sectors in the global community Not only does it generate significant economic benefits to the worldrsquos economy but the auto-mobile is highly linked to a wide variety of international concerns such as energy consump-tion emissions trade and safety The primary objective of the Automotive Series is to publish practical and topical books for researchers and practitioners in the industry and postgraduatesadvanced undergraduates in automotive engineering
The series addresses new and emerging technologies in automotive engineering supporting the development of more fuel‐efficient safer and more environmentally friendly vehicles It covers a wide range of topics including design manufacture and operation and the intention is to provide a source of relevant information that will be of interest and benefit to people working in the field of automotive engineering
This book The Global Automotive Industry presents a broad spectrum view of the automo-tive sector from the technology industry and policy perspectives In the early chapters of the book an understanding of the industry from a social technical and economic perspective is presented This is followed by a discussion of the fabric of next‐generation vehicle systems as it is woven into a global society This discussion is expanded to include the economic impact of the automotive industrial sector on nationsrsquo economies from production operationsrevenue to job growth This text goes beyond regional thinking with respect to automotive production and discusses the historic expansion of automotive manufacturing giants in Korea and the new emerging markets in China and potentially India
The text finishes with an excellent overview of emerging technologies and economies that will be pivotal to the automotive sector These discussions are then presented in the light of new business models in a global marketplace and the impact of regulation on the automobile as well as its manufacture These topics are well integrated into the earlier topics presented in the book and make it a unique and valuable crosscutting source of information for the reader
The Global Automotive Industry integrates these topics in a unique and thought‐provoking manner that provides significant insight into global automotive production regulation and
xviii Series Preface
economic impact on society It is a forward‐thinking text that considers a wide variety of topics that will drive this major industry and the global economy for the foreseeable future It is written by highly recognized experts in the field and is a welcome addition to the Automotive Series
Thomas KurfessJuly 2015
Foreword
The global automotive industry is a complex and demanding topic for any book It is clear following my 30‐year career within the automotive industry that only a comparatively small number of individuals have a comprehensive understanding of a vehiclersquos full construction Even after decades of professional involvement it can be difficult for an individual to have a full appreciation of the subject and its international infrastructure and landscape
From pre‐production to the factory floor and the boardroom knowledge sharing is incred-ibly important to the future of the automotive engineering profession With future mobility solutions being vital to modern society and with the needs of each region differing depending on capabilities and production facilities communication amongst the worldrsquos engineers pro-vides a route to approaching and accommodating the global social political and economic considerations that the future will demand
FISITA has successfully coordinated global communications amongst its network of over 200 000 professional engineers from member societies in 37 countries for over 60 years This demonstrates the point through many generations that sharing of knowledge and ideas amongst an industry as large as automotive including engineers academics and executives is vital as it provides us all with the tools to contribute to a better future
As part of this journey global collaboration within the industry is also necessary in order to deliver a clear message to wider society that the automotive engineering profession is well placed to face the challenges of today and tomorrow
Paul Nieuwenhuis and Peter Wells have provided us with a very good starting point The authors are able to present the wide scope of the industry in a clear way whilst contributing a wealth of knowledge about the global automotive industry
Chris MasonCEO FISITA
The Global Automotive Industry First Edition Edited by Paul Nieuwenhuis and Peter Wells copy 2015 John Wiley amp Sons Ltd Published 2015 by John Wiley amp Sons Ltd
Introduction and OverviewPaul Nieuwenhuis1 and Peter Wells2
1 Centre for Automotive Industry Research and Electric Vehicle Centre of Excellence Cardiff Business School Cardiff University Cardiff Wales UK2 Centre for Automotive Industry Research Cardiff Business School Cardiff University Cardiff Wales UK
11 Introduction
It is an impossible task to do full justice in one book to the global automotive industry with the pervasive impact economic significance and cultural status that it brings As editors our task is as much one of selective omission as one of collation to create an account of the business of mak-ing selling and using cars that is both representative and yet respectful of the diversity we know to be a feature of the industry Moreover this is an industry in the midst of reinventing itself It had seemed to some both inside and outside the industry around the turn of the millennium that this was a lsquosunsetrsquo industry characterized by over‐capacity plant closures job losses declining profitability and a product that seemed unsuited to meeting the environmental and social chal-lenges arising from mass car ownership and use The combination of profound environmental pressures and endemic economic distress appeared to call into question the pre‐eminent position enjoyed by the car in providing for personal mobility and the viability of the industry behind this most contradictory of products These concerns came to a peak with the arrival of the global economic crisis around 2007ndash2008 which resulted in new car sales falling steeply in the established markets and investment freezing while the entire financial community held its collective breath to see whether the world would plunge into an economic abyss Those looking closely at urban developments and the changing cultural priorities of young people started to whisper about the concept of lsquopeak carrsquo in which the high tide of automobility had been reached in the saturated markets of the European Union North America Japan and Korea
Yet only a few years later the industry has reemerged burnished by the embrace of new technologies and with resurgent sales in the previously moribund West being more than matched by the frenetic growth of sales in China and elsewhere Regulatory interventions
1
2 The Global Automotive Industry
such as the European Union fleet average carbon emissions targets that were once seen as burdensome and punitive have arguably helped stimulate the technological renaissance of the industry alongside the realization that there might be other routes to profitability Later chap-ters in the book are more concerned with this recent period of transformation and the possible futures it portends Chapter 16 for example is about the impact of the electric vehicle while Chapter 18 links technology change with possible innovations in business models forced on the industry by such technological changes Chapter 19 is more speculative but offers up some signposts for the future of automobility and the automotive industry
This is not to say that the process of change has been without stress or consequence Restructuring of the industry has continued apace the merger of Chrysler and Fiat came as a consequence of several years of corporate turmoil while the rescue of PSA by the French government and by the Chinese company Dongfeng costs the Peugeot family their control over this long established business ndash the oldest in the industry The great expectations held for battery electric vehicles remain as yet largely unrealized despite the highly visible and expen-sive efforts of companies like Nissan Renault and BMW alongside the publicity‐garnering machine that is Tesla In the meantime high‐profile failures such as the battery swap business Better Place serve as stark reminders that attempts to reinvent this industry especially by new entrants are fraught with hazard At the same time markets in the European Union have not really recovered to pre‐crisis levels and perhaps never will
So despite an apparent lsquobusiness‐as‐usualrsquo attitude permeating the automotive industry at the moment in reality it is subject to potentially radical change Only a few years ago we saw two of the worldrsquos largest car manufacturers General Motors and Chrysler on the brink of collapse Having decided both were lsquotoo big to failrsquo they had to be bailed out by the American tax‐payer Ford managed without direct government support but it is nevertheless quite clear that the collapse of the supply base that would have resulted from a collapse of both their key domestic competitors GM and Chrysler would also have dragged down Ford in due course Within a matter of months the worldrsquos most prominent car industry and the oldest mass production car industry could have disappeared only intervention from the public sector saved this key compo-nent of the private sector underlining that apart from anything else the close synergies and intertwined relationships continue to exist between the private and public sectors in developed countries (Mazzucato 2013) This highlights not only the weaknesses inherent in the close links between the financial and car systems but also indicates that the current mass production system whether seen as Fordist or Buddist (see below) may well be due for a rethink in several respects
In Europe the apparent success of Germany more recently the UK automotive industry is easily misunderstood leading perhaps to overconfidence but do note that the secret of success in Europe is largely confined to the more upmarket segments with the Germans the primary beneficiaries and that this success is very reliant on demand from Asia particularly China it has therefore made Europe ndash and also the United States particularly GM ndash very dependent on that far from stable market as also outlined in more detail in Chapter 10 At the same time pressures to make the car more environmentally compatible as we see it have not only led to cars with much less harmful tailpipe emissions but the more recent pressure to reduce the carbon footprint of cars particularly focused on their emissions of the greenhouse gas carbon dioxide has the potential to radically reshape the industry and its products These regulatory pressures are reviewed in Chapter 14 although the potential impact of this agenda is not yet fully understood but it has already led to a new wave of alternative powertrain vehicles in the market ranging from early petrol‐electric hybrids ndash including the now iconic Toyota Prius ndash via
Introduction and Overview 3
so‐called range‐extended and plug‐in hybrids such as the GM Volt and Ampera to full battery‐electric vehicles such as the Nissan Leaf Renault Zoe and Tesla Model S Such developments as well as the introduction of the even more radical BMW i3 which not only introduces a full battery‐electric powertrain but also houses this within a radical departure from the tried and tested lsquoBuddistrsquo (see Chapter 5) all‐steel body in using a carbon fibre body on an aluminium chassis are clear signs that business‐as‐usual is steadily being undermined even from within the established industry
Despite the size of the industry car making is in reality a very precarious business In its present form it lacks resilience it is not sustainable This is true not just in terms of environmental sustainability where it clearly is not measuring up but even in terms of basic economic sustainability Yet this industry is still crucially important representing a significant part of the economy in many industrialized countries as well as many newly industrializing economies notably China In addition the car‐based transport system or lsquoregimersquo (Geels et al 2012) which extends well beyond the industry that makes cars to the way in which auto-mobility has become integrated in our societies and cultures has become so embedded that its removal would lead to widespread social and economic crisis
In some regards therefore this book may be a testimony to a dying era as much as a hymnal to a new one Thus far the automotive industry has managed to contain the pressures for change both economic and environmental within the broad ambit of the long‐standing business model of the mainstream vehicle manufacturers In parallel those purchasing and using cars in the traditional manner have remained by far the majority compared with more innovative solutions such as car clubs city car sharing schemes and other alternatives that might presage the end of established automobility cultures The question is whether the collective and cumulative impact of all the new developments sweeping through the industry will be sufficient to herald the arrival of a new lsquoautomotive ecosystemrsquo as some have termed it or lsquoregimersquo according to others and one in which the dominance of the established vehicle manufacturers and their entrenched supply chains is challenged by a new order of communi-cations and mobility providers Some caution on these issues is urged here The automotive industry is not immune to hype cycles or the fevered imaginations of those professional change‐mongers with a vested interest in fermenting and emphasizing the new over the continuous
12 Continuity and Change
The book as a whole therefore represents an attempt to capture continuity and change in the global automotive industry this theme is brought to the fore in the first main chapter of the book Chapter 2 as change is very much a feature of the current phase of the automotive system Change of course needs to be seen in historical perspective and as such many of the chapters offer up a historical narrative that builds a temporal dynamic into the account of the subject under consideration There is some need in seeking to understand the structures and practices of the present to delve into the past If nothing else path dependency theory tells us that many decisions are nonlinear irreversible steps that result in distinct historical outcomes bounded by time and place As we have sought to delineate elsewhere the cluster of innovations that created the template for the mass production automotive industry occurred largely in the United States in the early years of the twentieth century the Ford moving assembly line with standardized and inter‐changeable parts the Budd all‐steel body that could be stamped
4 The Global Automotive Industry
welded and painted and the Sloan multi‐brand company with marketing innovations such as consumer credit and annual model changes these developments are outlined in Chapter 5 Despite many years of incremental change the basic architecture of the industry remains in place That such durability is evident speaks volumes for the scope for productivity improve-ment within this basic architecture over many decades and the efficacy of the system as a whole in terms of matching the imperatives of production economics to the demands of the market For this reason key early chapters in the book for example Chapters 3 4 5 and 6 are about the production system and the market for cars There is no subscription here to the simple neoclassical economics assumption that lsquoconsumersrsquo demand and lsquoproducersrsquo provide Rather there is a continuing dynamic tension between supply and demand sides that is never entirely resolved
13 Overview
The chapters in this book are thus essentially an attempt to take stock of the industry in its present state of a well‐established industry on the verge of potentially radical change tracking some of its history ndash trying to answer the question of how did we get here ndash assessing key aspects of its current state while also plotting some possible futures for the industry and its products This book does not seek to present chapters that are held together by a common the-oretical thread Such works can be tremendously informative and insightful (see Geels et al 2012) but of course tend to place primary emphasis on the question of theoretical coherence Rather the approach here has been more agnostic in theoretical terms and has been to seek insights and individual views by those who are established experts in their fields and who are known for their knowledge of the automotive industry (or a specific aspect of it) alongside their particular theoretical or methodological frameworks Each chapter is thus a cameo able to stand alone as a concise insight into one dimension of this multi‐faceted industry but also serves as a piece in the jigsaw that describes and explains how this industry really works
There are some gaps of course It is not possible to give consideration to all the countries producing cars and the unique contexts within which they operate The salience of the lsquovari-eties of capitalismrsquo school of thought (see Section 23) is acknowledged here and some com-parative chapters are pertinent to this school notably those on labourndashmanagement relations in North America and Japan (Chapters 7 and 8 respectively) While the question of labour relations in Japan has remained largely immune to external influence (notwithstanding the substantial impact of Renault on operations at Nissan and the rather lesser impact of Ford on Mazda) the story in North America has a strong thread in which lsquoJapanizationrsquo has been highly significant Chapters 9 10 and 11 cover the broad sweep of the automotive industry in Asia highlighting South Korea China and India respectively ndash both Korea and India have become comparatively neglected in view of the immense attention directed at China Interestingly both these countries are more than passive recipients of automobility and can claim to be home to significant companies within the industry of the modern era while also representing unique markets
An apparent gap in the account includes a chapter that explicitly deals with the global supply chain of components and raw materials to the vehicle manufacturers ndash where typically up to 85 of the ex‐works value of a new car is accounted for by bought in components and materials The theme of supply chain management is an important facet of the industry but
Series Preface
The automotive industry is one of the largest manufacturing sectors in the global community Not only does it generate significant economic benefits to the worldrsquos economy but the auto-mobile is highly linked to a wide variety of international concerns such as energy consump-tion emissions trade and safety The primary objective of the Automotive Series is to publish practical and topical books for researchers and practitioners in the industry and postgraduatesadvanced undergraduates in automotive engineering
The series addresses new and emerging technologies in automotive engineering supporting the development of more fuel‐efficient safer and more environmentally friendly vehicles It covers a wide range of topics including design manufacture and operation and the intention is to provide a source of relevant information that will be of interest and benefit to people working in the field of automotive engineering
This book The Global Automotive Industry presents a broad spectrum view of the automo-tive sector from the technology industry and policy perspectives In the early chapters of the book an understanding of the industry from a social technical and economic perspective is presented This is followed by a discussion of the fabric of next‐generation vehicle systems as it is woven into a global society This discussion is expanded to include the economic impact of the automotive industrial sector on nationsrsquo economies from production operationsrevenue to job growth This text goes beyond regional thinking with respect to automotive production and discusses the historic expansion of automotive manufacturing giants in Korea and the new emerging markets in China and potentially India
The text finishes with an excellent overview of emerging technologies and economies that will be pivotal to the automotive sector These discussions are then presented in the light of new business models in a global marketplace and the impact of regulation on the automobile as well as its manufacture These topics are well integrated into the earlier topics presented in the book and make it a unique and valuable crosscutting source of information for the reader
The Global Automotive Industry integrates these topics in a unique and thought‐provoking manner that provides significant insight into global automotive production regulation and
xviii Series Preface
economic impact on society It is a forward‐thinking text that considers a wide variety of topics that will drive this major industry and the global economy for the foreseeable future It is written by highly recognized experts in the field and is a welcome addition to the Automotive Series
Thomas KurfessJuly 2015
Foreword
The global automotive industry is a complex and demanding topic for any book It is clear following my 30‐year career within the automotive industry that only a comparatively small number of individuals have a comprehensive understanding of a vehiclersquos full construction Even after decades of professional involvement it can be difficult for an individual to have a full appreciation of the subject and its international infrastructure and landscape
From pre‐production to the factory floor and the boardroom knowledge sharing is incred-ibly important to the future of the automotive engineering profession With future mobility solutions being vital to modern society and with the needs of each region differing depending on capabilities and production facilities communication amongst the worldrsquos engineers pro-vides a route to approaching and accommodating the global social political and economic considerations that the future will demand
FISITA has successfully coordinated global communications amongst its network of over 200 000 professional engineers from member societies in 37 countries for over 60 years This demonstrates the point through many generations that sharing of knowledge and ideas amongst an industry as large as automotive including engineers academics and executives is vital as it provides us all with the tools to contribute to a better future
As part of this journey global collaboration within the industry is also necessary in order to deliver a clear message to wider society that the automotive engineering profession is well placed to face the challenges of today and tomorrow
Paul Nieuwenhuis and Peter Wells have provided us with a very good starting point The authors are able to present the wide scope of the industry in a clear way whilst contributing a wealth of knowledge about the global automotive industry
Chris MasonCEO FISITA
The Global Automotive Industry First Edition Edited by Paul Nieuwenhuis and Peter Wells copy 2015 John Wiley amp Sons Ltd Published 2015 by John Wiley amp Sons Ltd
Introduction and OverviewPaul Nieuwenhuis1 and Peter Wells2
1 Centre for Automotive Industry Research and Electric Vehicle Centre of Excellence Cardiff Business School Cardiff University Cardiff Wales UK2 Centre for Automotive Industry Research Cardiff Business School Cardiff University Cardiff Wales UK
11 Introduction
It is an impossible task to do full justice in one book to the global automotive industry with the pervasive impact economic significance and cultural status that it brings As editors our task is as much one of selective omission as one of collation to create an account of the business of mak-ing selling and using cars that is both representative and yet respectful of the diversity we know to be a feature of the industry Moreover this is an industry in the midst of reinventing itself It had seemed to some both inside and outside the industry around the turn of the millennium that this was a lsquosunsetrsquo industry characterized by over‐capacity plant closures job losses declining profitability and a product that seemed unsuited to meeting the environmental and social chal-lenges arising from mass car ownership and use The combination of profound environmental pressures and endemic economic distress appeared to call into question the pre‐eminent position enjoyed by the car in providing for personal mobility and the viability of the industry behind this most contradictory of products These concerns came to a peak with the arrival of the global economic crisis around 2007ndash2008 which resulted in new car sales falling steeply in the established markets and investment freezing while the entire financial community held its collective breath to see whether the world would plunge into an economic abyss Those looking closely at urban developments and the changing cultural priorities of young people started to whisper about the concept of lsquopeak carrsquo in which the high tide of automobility had been reached in the saturated markets of the European Union North America Japan and Korea
Yet only a few years later the industry has reemerged burnished by the embrace of new technologies and with resurgent sales in the previously moribund West being more than matched by the frenetic growth of sales in China and elsewhere Regulatory interventions
1
2 The Global Automotive Industry
such as the European Union fleet average carbon emissions targets that were once seen as burdensome and punitive have arguably helped stimulate the technological renaissance of the industry alongside the realization that there might be other routes to profitability Later chap-ters in the book are more concerned with this recent period of transformation and the possible futures it portends Chapter 16 for example is about the impact of the electric vehicle while Chapter 18 links technology change with possible innovations in business models forced on the industry by such technological changes Chapter 19 is more speculative but offers up some signposts for the future of automobility and the automotive industry
This is not to say that the process of change has been without stress or consequence Restructuring of the industry has continued apace the merger of Chrysler and Fiat came as a consequence of several years of corporate turmoil while the rescue of PSA by the French government and by the Chinese company Dongfeng costs the Peugeot family their control over this long established business ndash the oldest in the industry The great expectations held for battery electric vehicles remain as yet largely unrealized despite the highly visible and expen-sive efforts of companies like Nissan Renault and BMW alongside the publicity‐garnering machine that is Tesla In the meantime high‐profile failures such as the battery swap business Better Place serve as stark reminders that attempts to reinvent this industry especially by new entrants are fraught with hazard At the same time markets in the European Union have not really recovered to pre‐crisis levels and perhaps never will
So despite an apparent lsquobusiness‐as‐usualrsquo attitude permeating the automotive industry at the moment in reality it is subject to potentially radical change Only a few years ago we saw two of the worldrsquos largest car manufacturers General Motors and Chrysler on the brink of collapse Having decided both were lsquotoo big to failrsquo they had to be bailed out by the American tax‐payer Ford managed without direct government support but it is nevertheless quite clear that the collapse of the supply base that would have resulted from a collapse of both their key domestic competitors GM and Chrysler would also have dragged down Ford in due course Within a matter of months the worldrsquos most prominent car industry and the oldest mass production car industry could have disappeared only intervention from the public sector saved this key compo-nent of the private sector underlining that apart from anything else the close synergies and intertwined relationships continue to exist between the private and public sectors in developed countries (Mazzucato 2013) This highlights not only the weaknesses inherent in the close links between the financial and car systems but also indicates that the current mass production system whether seen as Fordist or Buddist (see below) may well be due for a rethink in several respects
In Europe the apparent success of Germany more recently the UK automotive industry is easily misunderstood leading perhaps to overconfidence but do note that the secret of success in Europe is largely confined to the more upmarket segments with the Germans the primary beneficiaries and that this success is very reliant on demand from Asia particularly China it has therefore made Europe ndash and also the United States particularly GM ndash very dependent on that far from stable market as also outlined in more detail in Chapter 10 At the same time pressures to make the car more environmentally compatible as we see it have not only led to cars with much less harmful tailpipe emissions but the more recent pressure to reduce the carbon footprint of cars particularly focused on their emissions of the greenhouse gas carbon dioxide has the potential to radically reshape the industry and its products These regulatory pressures are reviewed in Chapter 14 although the potential impact of this agenda is not yet fully understood but it has already led to a new wave of alternative powertrain vehicles in the market ranging from early petrol‐electric hybrids ndash including the now iconic Toyota Prius ndash via
Introduction and Overview 3
so‐called range‐extended and plug‐in hybrids such as the GM Volt and Ampera to full battery‐electric vehicles such as the Nissan Leaf Renault Zoe and Tesla Model S Such developments as well as the introduction of the even more radical BMW i3 which not only introduces a full battery‐electric powertrain but also houses this within a radical departure from the tried and tested lsquoBuddistrsquo (see Chapter 5) all‐steel body in using a carbon fibre body on an aluminium chassis are clear signs that business‐as‐usual is steadily being undermined even from within the established industry
Despite the size of the industry car making is in reality a very precarious business In its present form it lacks resilience it is not sustainable This is true not just in terms of environmental sustainability where it clearly is not measuring up but even in terms of basic economic sustainability Yet this industry is still crucially important representing a significant part of the economy in many industrialized countries as well as many newly industrializing economies notably China In addition the car‐based transport system or lsquoregimersquo (Geels et al 2012) which extends well beyond the industry that makes cars to the way in which auto-mobility has become integrated in our societies and cultures has become so embedded that its removal would lead to widespread social and economic crisis
In some regards therefore this book may be a testimony to a dying era as much as a hymnal to a new one Thus far the automotive industry has managed to contain the pressures for change both economic and environmental within the broad ambit of the long‐standing business model of the mainstream vehicle manufacturers In parallel those purchasing and using cars in the traditional manner have remained by far the majority compared with more innovative solutions such as car clubs city car sharing schemes and other alternatives that might presage the end of established automobility cultures The question is whether the collective and cumulative impact of all the new developments sweeping through the industry will be sufficient to herald the arrival of a new lsquoautomotive ecosystemrsquo as some have termed it or lsquoregimersquo according to others and one in which the dominance of the established vehicle manufacturers and their entrenched supply chains is challenged by a new order of communi-cations and mobility providers Some caution on these issues is urged here The automotive industry is not immune to hype cycles or the fevered imaginations of those professional change‐mongers with a vested interest in fermenting and emphasizing the new over the continuous
12 Continuity and Change
The book as a whole therefore represents an attempt to capture continuity and change in the global automotive industry this theme is brought to the fore in the first main chapter of the book Chapter 2 as change is very much a feature of the current phase of the automotive system Change of course needs to be seen in historical perspective and as such many of the chapters offer up a historical narrative that builds a temporal dynamic into the account of the subject under consideration There is some need in seeking to understand the structures and practices of the present to delve into the past If nothing else path dependency theory tells us that many decisions are nonlinear irreversible steps that result in distinct historical outcomes bounded by time and place As we have sought to delineate elsewhere the cluster of innovations that created the template for the mass production automotive industry occurred largely in the United States in the early years of the twentieth century the Ford moving assembly line with standardized and inter‐changeable parts the Budd all‐steel body that could be stamped
4 The Global Automotive Industry
welded and painted and the Sloan multi‐brand company with marketing innovations such as consumer credit and annual model changes these developments are outlined in Chapter 5 Despite many years of incremental change the basic architecture of the industry remains in place That such durability is evident speaks volumes for the scope for productivity improve-ment within this basic architecture over many decades and the efficacy of the system as a whole in terms of matching the imperatives of production economics to the demands of the market For this reason key early chapters in the book for example Chapters 3 4 5 and 6 are about the production system and the market for cars There is no subscription here to the simple neoclassical economics assumption that lsquoconsumersrsquo demand and lsquoproducersrsquo provide Rather there is a continuing dynamic tension between supply and demand sides that is never entirely resolved
13 Overview
The chapters in this book are thus essentially an attempt to take stock of the industry in its present state of a well‐established industry on the verge of potentially radical change tracking some of its history ndash trying to answer the question of how did we get here ndash assessing key aspects of its current state while also plotting some possible futures for the industry and its products This book does not seek to present chapters that are held together by a common the-oretical thread Such works can be tremendously informative and insightful (see Geels et al 2012) but of course tend to place primary emphasis on the question of theoretical coherence Rather the approach here has been more agnostic in theoretical terms and has been to seek insights and individual views by those who are established experts in their fields and who are known for their knowledge of the automotive industry (or a specific aspect of it) alongside their particular theoretical or methodological frameworks Each chapter is thus a cameo able to stand alone as a concise insight into one dimension of this multi‐faceted industry but also serves as a piece in the jigsaw that describes and explains how this industry really works
There are some gaps of course It is not possible to give consideration to all the countries producing cars and the unique contexts within which they operate The salience of the lsquovari-eties of capitalismrsquo school of thought (see Section 23) is acknowledged here and some com-parative chapters are pertinent to this school notably those on labourndashmanagement relations in North America and Japan (Chapters 7 and 8 respectively) While the question of labour relations in Japan has remained largely immune to external influence (notwithstanding the substantial impact of Renault on operations at Nissan and the rather lesser impact of Ford on Mazda) the story in North America has a strong thread in which lsquoJapanizationrsquo has been highly significant Chapters 9 10 and 11 cover the broad sweep of the automotive industry in Asia highlighting South Korea China and India respectively ndash both Korea and India have become comparatively neglected in view of the immense attention directed at China Interestingly both these countries are more than passive recipients of automobility and can claim to be home to significant companies within the industry of the modern era while also representing unique markets
An apparent gap in the account includes a chapter that explicitly deals with the global supply chain of components and raw materials to the vehicle manufacturers ndash where typically up to 85 of the ex‐works value of a new car is accounted for by bought in components and materials The theme of supply chain management is an important facet of the industry but
xviii Series Preface
economic impact on society It is a forward‐thinking text that considers a wide variety of topics that will drive this major industry and the global economy for the foreseeable future It is written by highly recognized experts in the field and is a welcome addition to the Automotive Series
Thomas KurfessJuly 2015
Foreword
The global automotive industry is a complex and demanding topic for any book It is clear following my 30‐year career within the automotive industry that only a comparatively small number of individuals have a comprehensive understanding of a vehiclersquos full construction Even after decades of professional involvement it can be difficult for an individual to have a full appreciation of the subject and its international infrastructure and landscape
From pre‐production to the factory floor and the boardroom knowledge sharing is incred-ibly important to the future of the automotive engineering profession With future mobility solutions being vital to modern society and with the needs of each region differing depending on capabilities and production facilities communication amongst the worldrsquos engineers pro-vides a route to approaching and accommodating the global social political and economic considerations that the future will demand
FISITA has successfully coordinated global communications amongst its network of over 200 000 professional engineers from member societies in 37 countries for over 60 years This demonstrates the point through many generations that sharing of knowledge and ideas amongst an industry as large as automotive including engineers academics and executives is vital as it provides us all with the tools to contribute to a better future
As part of this journey global collaboration within the industry is also necessary in order to deliver a clear message to wider society that the automotive engineering profession is well placed to face the challenges of today and tomorrow
Paul Nieuwenhuis and Peter Wells have provided us with a very good starting point The authors are able to present the wide scope of the industry in a clear way whilst contributing a wealth of knowledge about the global automotive industry
Chris MasonCEO FISITA
The Global Automotive Industry First Edition Edited by Paul Nieuwenhuis and Peter Wells copy 2015 John Wiley amp Sons Ltd Published 2015 by John Wiley amp Sons Ltd
Introduction and OverviewPaul Nieuwenhuis1 and Peter Wells2
1 Centre for Automotive Industry Research and Electric Vehicle Centre of Excellence Cardiff Business School Cardiff University Cardiff Wales UK2 Centre for Automotive Industry Research Cardiff Business School Cardiff University Cardiff Wales UK
11 Introduction
It is an impossible task to do full justice in one book to the global automotive industry with the pervasive impact economic significance and cultural status that it brings As editors our task is as much one of selective omission as one of collation to create an account of the business of mak-ing selling and using cars that is both representative and yet respectful of the diversity we know to be a feature of the industry Moreover this is an industry in the midst of reinventing itself It had seemed to some both inside and outside the industry around the turn of the millennium that this was a lsquosunsetrsquo industry characterized by over‐capacity plant closures job losses declining profitability and a product that seemed unsuited to meeting the environmental and social chal-lenges arising from mass car ownership and use The combination of profound environmental pressures and endemic economic distress appeared to call into question the pre‐eminent position enjoyed by the car in providing for personal mobility and the viability of the industry behind this most contradictory of products These concerns came to a peak with the arrival of the global economic crisis around 2007ndash2008 which resulted in new car sales falling steeply in the established markets and investment freezing while the entire financial community held its collective breath to see whether the world would plunge into an economic abyss Those looking closely at urban developments and the changing cultural priorities of young people started to whisper about the concept of lsquopeak carrsquo in which the high tide of automobility had been reached in the saturated markets of the European Union North America Japan and Korea
Yet only a few years later the industry has reemerged burnished by the embrace of new technologies and with resurgent sales in the previously moribund West being more than matched by the frenetic growth of sales in China and elsewhere Regulatory interventions
1
2 The Global Automotive Industry
such as the European Union fleet average carbon emissions targets that were once seen as burdensome and punitive have arguably helped stimulate the technological renaissance of the industry alongside the realization that there might be other routes to profitability Later chap-ters in the book are more concerned with this recent period of transformation and the possible futures it portends Chapter 16 for example is about the impact of the electric vehicle while Chapter 18 links technology change with possible innovations in business models forced on the industry by such technological changes Chapter 19 is more speculative but offers up some signposts for the future of automobility and the automotive industry
This is not to say that the process of change has been without stress or consequence Restructuring of the industry has continued apace the merger of Chrysler and Fiat came as a consequence of several years of corporate turmoil while the rescue of PSA by the French government and by the Chinese company Dongfeng costs the Peugeot family their control over this long established business ndash the oldest in the industry The great expectations held for battery electric vehicles remain as yet largely unrealized despite the highly visible and expen-sive efforts of companies like Nissan Renault and BMW alongside the publicity‐garnering machine that is Tesla In the meantime high‐profile failures such as the battery swap business Better Place serve as stark reminders that attempts to reinvent this industry especially by new entrants are fraught with hazard At the same time markets in the European Union have not really recovered to pre‐crisis levels and perhaps never will
So despite an apparent lsquobusiness‐as‐usualrsquo attitude permeating the automotive industry at the moment in reality it is subject to potentially radical change Only a few years ago we saw two of the worldrsquos largest car manufacturers General Motors and Chrysler on the brink of collapse Having decided both were lsquotoo big to failrsquo they had to be bailed out by the American tax‐payer Ford managed without direct government support but it is nevertheless quite clear that the collapse of the supply base that would have resulted from a collapse of both their key domestic competitors GM and Chrysler would also have dragged down Ford in due course Within a matter of months the worldrsquos most prominent car industry and the oldest mass production car industry could have disappeared only intervention from the public sector saved this key compo-nent of the private sector underlining that apart from anything else the close synergies and intertwined relationships continue to exist between the private and public sectors in developed countries (Mazzucato 2013) This highlights not only the weaknesses inherent in the close links between the financial and car systems but also indicates that the current mass production system whether seen as Fordist or Buddist (see below) may well be due for a rethink in several respects
In Europe the apparent success of Germany more recently the UK automotive industry is easily misunderstood leading perhaps to overconfidence but do note that the secret of success in Europe is largely confined to the more upmarket segments with the Germans the primary beneficiaries and that this success is very reliant on demand from Asia particularly China it has therefore made Europe ndash and also the United States particularly GM ndash very dependent on that far from stable market as also outlined in more detail in Chapter 10 At the same time pressures to make the car more environmentally compatible as we see it have not only led to cars with much less harmful tailpipe emissions but the more recent pressure to reduce the carbon footprint of cars particularly focused on their emissions of the greenhouse gas carbon dioxide has the potential to radically reshape the industry and its products These regulatory pressures are reviewed in Chapter 14 although the potential impact of this agenda is not yet fully understood but it has already led to a new wave of alternative powertrain vehicles in the market ranging from early petrol‐electric hybrids ndash including the now iconic Toyota Prius ndash via
Introduction and Overview 3
so‐called range‐extended and plug‐in hybrids such as the GM Volt and Ampera to full battery‐electric vehicles such as the Nissan Leaf Renault Zoe and Tesla Model S Such developments as well as the introduction of the even more radical BMW i3 which not only introduces a full battery‐electric powertrain but also houses this within a radical departure from the tried and tested lsquoBuddistrsquo (see Chapter 5) all‐steel body in using a carbon fibre body on an aluminium chassis are clear signs that business‐as‐usual is steadily being undermined even from within the established industry
Despite the size of the industry car making is in reality a very precarious business In its present form it lacks resilience it is not sustainable This is true not just in terms of environmental sustainability where it clearly is not measuring up but even in terms of basic economic sustainability Yet this industry is still crucially important representing a significant part of the economy in many industrialized countries as well as many newly industrializing economies notably China In addition the car‐based transport system or lsquoregimersquo (Geels et al 2012) which extends well beyond the industry that makes cars to the way in which auto-mobility has become integrated in our societies and cultures has become so embedded that its removal would lead to widespread social and economic crisis
In some regards therefore this book may be a testimony to a dying era as much as a hymnal to a new one Thus far the automotive industry has managed to contain the pressures for change both economic and environmental within the broad ambit of the long‐standing business model of the mainstream vehicle manufacturers In parallel those purchasing and using cars in the traditional manner have remained by far the majority compared with more innovative solutions such as car clubs city car sharing schemes and other alternatives that might presage the end of established automobility cultures The question is whether the collective and cumulative impact of all the new developments sweeping through the industry will be sufficient to herald the arrival of a new lsquoautomotive ecosystemrsquo as some have termed it or lsquoregimersquo according to others and one in which the dominance of the established vehicle manufacturers and their entrenched supply chains is challenged by a new order of communi-cations and mobility providers Some caution on these issues is urged here The automotive industry is not immune to hype cycles or the fevered imaginations of those professional change‐mongers with a vested interest in fermenting and emphasizing the new over the continuous
12 Continuity and Change
The book as a whole therefore represents an attempt to capture continuity and change in the global automotive industry this theme is brought to the fore in the first main chapter of the book Chapter 2 as change is very much a feature of the current phase of the automotive system Change of course needs to be seen in historical perspective and as such many of the chapters offer up a historical narrative that builds a temporal dynamic into the account of the subject under consideration There is some need in seeking to understand the structures and practices of the present to delve into the past If nothing else path dependency theory tells us that many decisions are nonlinear irreversible steps that result in distinct historical outcomes bounded by time and place As we have sought to delineate elsewhere the cluster of innovations that created the template for the mass production automotive industry occurred largely in the United States in the early years of the twentieth century the Ford moving assembly line with standardized and inter‐changeable parts the Budd all‐steel body that could be stamped
4 The Global Automotive Industry
welded and painted and the Sloan multi‐brand company with marketing innovations such as consumer credit and annual model changes these developments are outlined in Chapter 5 Despite many years of incremental change the basic architecture of the industry remains in place That such durability is evident speaks volumes for the scope for productivity improve-ment within this basic architecture over many decades and the efficacy of the system as a whole in terms of matching the imperatives of production economics to the demands of the market For this reason key early chapters in the book for example Chapters 3 4 5 and 6 are about the production system and the market for cars There is no subscription here to the simple neoclassical economics assumption that lsquoconsumersrsquo demand and lsquoproducersrsquo provide Rather there is a continuing dynamic tension between supply and demand sides that is never entirely resolved
13 Overview
The chapters in this book are thus essentially an attempt to take stock of the industry in its present state of a well‐established industry on the verge of potentially radical change tracking some of its history ndash trying to answer the question of how did we get here ndash assessing key aspects of its current state while also plotting some possible futures for the industry and its products This book does not seek to present chapters that are held together by a common the-oretical thread Such works can be tremendously informative and insightful (see Geels et al 2012) but of course tend to place primary emphasis on the question of theoretical coherence Rather the approach here has been more agnostic in theoretical terms and has been to seek insights and individual views by those who are established experts in their fields and who are known for their knowledge of the automotive industry (or a specific aspect of it) alongside their particular theoretical or methodological frameworks Each chapter is thus a cameo able to stand alone as a concise insight into one dimension of this multi‐faceted industry but also serves as a piece in the jigsaw that describes and explains how this industry really works
There are some gaps of course It is not possible to give consideration to all the countries producing cars and the unique contexts within which they operate The salience of the lsquovari-eties of capitalismrsquo school of thought (see Section 23) is acknowledged here and some com-parative chapters are pertinent to this school notably those on labourndashmanagement relations in North America and Japan (Chapters 7 and 8 respectively) While the question of labour relations in Japan has remained largely immune to external influence (notwithstanding the substantial impact of Renault on operations at Nissan and the rather lesser impact of Ford on Mazda) the story in North America has a strong thread in which lsquoJapanizationrsquo has been highly significant Chapters 9 10 and 11 cover the broad sweep of the automotive industry in Asia highlighting South Korea China and India respectively ndash both Korea and India have become comparatively neglected in view of the immense attention directed at China Interestingly both these countries are more than passive recipients of automobility and can claim to be home to significant companies within the industry of the modern era while also representing unique markets
An apparent gap in the account includes a chapter that explicitly deals with the global supply chain of components and raw materials to the vehicle manufacturers ndash where typically up to 85 of the ex‐works value of a new car is accounted for by bought in components and materials The theme of supply chain management is an important facet of the industry but
Foreword
The global automotive industry is a complex and demanding topic for any book It is clear following my 30‐year career within the automotive industry that only a comparatively small number of individuals have a comprehensive understanding of a vehiclersquos full construction Even after decades of professional involvement it can be difficult for an individual to have a full appreciation of the subject and its international infrastructure and landscape
From pre‐production to the factory floor and the boardroom knowledge sharing is incred-ibly important to the future of the automotive engineering profession With future mobility solutions being vital to modern society and with the needs of each region differing depending on capabilities and production facilities communication amongst the worldrsquos engineers pro-vides a route to approaching and accommodating the global social political and economic considerations that the future will demand
FISITA has successfully coordinated global communications amongst its network of over 200 000 professional engineers from member societies in 37 countries for over 60 years This demonstrates the point through many generations that sharing of knowledge and ideas amongst an industry as large as automotive including engineers academics and executives is vital as it provides us all with the tools to contribute to a better future
As part of this journey global collaboration within the industry is also necessary in order to deliver a clear message to wider society that the automotive engineering profession is well placed to face the challenges of today and tomorrow
Paul Nieuwenhuis and Peter Wells have provided us with a very good starting point The authors are able to present the wide scope of the industry in a clear way whilst contributing a wealth of knowledge about the global automotive industry
Chris MasonCEO FISITA
The Global Automotive Industry First Edition Edited by Paul Nieuwenhuis and Peter Wells copy 2015 John Wiley amp Sons Ltd Published 2015 by John Wiley amp Sons Ltd
Introduction and OverviewPaul Nieuwenhuis1 and Peter Wells2
1 Centre for Automotive Industry Research and Electric Vehicle Centre of Excellence Cardiff Business School Cardiff University Cardiff Wales UK2 Centre for Automotive Industry Research Cardiff Business School Cardiff University Cardiff Wales UK
11 Introduction
It is an impossible task to do full justice in one book to the global automotive industry with the pervasive impact economic significance and cultural status that it brings As editors our task is as much one of selective omission as one of collation to create an account of the business of mak-ing selling and using cars that is both representative and yet respectful of the diversity we know to be a feature of the industry Moreover this is an industry in the midst of reinventing itself It had seemed to some both inside and outside the industry around the turn of the millennium that this was a lsquosunsetrsquo industry characterized by over‐capacity plant closures job losses declining profitability and a product that seemed unsuited to meeting the environmental and social chal-lenges arising from mass car ownership and use The combination of profound environmental pressures and endemic economic distress appeared to call into question the pre‐eminent position enjoyed by the car in providing for personal mobility and the viability of the industry behind this most contradictory of products These concerns came to a peak with the arrival of the global economic crisis around 2007ndash2008 which resulted in new car sales falling steeply in the established markets and investment freezing while the entire financial community held its collective breath to see whether the world would plunge into an economic abyss Those looking closely at urban developments and the changing cultural priorities of young people started to whisper about the concept of lsquopeak carrsquo in which the high tide of automobility had been reached in the saturated markets of the European Union North America Japan and Korea
Yet only a few years later the industry has reemerged burnished by the embrace of new technologies and with resurgent sales in the previously moribund West being more than matched by the frenetic growth of sales in China and elsewhere Regulatory interventions
1
2 The Global Automotive Industry
such as the European Union fleet average carbon emissions targets that were once seen as burdensome and punitive have arguably helped stimulate the technological renaissance of the industry alongside the realization that there might be other routes to profitability Later chap-ters in the book are more concerned with this recent period of transformation and the possible futures it portends Chapter 16 for example is about the impact of the electric vehicle while Chapter 18 links technology change with possible innovations in business models forced on the industry by such technological changes Chapter 19 is more speculative but offers up some signposts for the future of automobility and the automotive industry
This is not to say that the process of change has been without stress or consequence Restructuring of the industry has continued apace the merger of Chrysler and Fiat came as a consequence of several years of corporate turmoil while the rescue of PSA by the French government and by the Chinese company Dongfeng costs the Peugeot family their control over this long established business ndash the oldest in the industry The great expectations held for battery electric vehicles remain as yet largely unrealized despite the highly visible and expen-sive efforts of companies like Nissan Renault and BMW alongside the publicity‐garnering machine that is Tesla In the meantime high‐profile failures such as the battery swap business Better Place serve as stark reminders that attempts to reinvent this industry especially by new entrants are fraught with hazard At the same time markets in the European Union have not really recovered to pre‐crisis levels and perhaps never will
So despite an apparent lsquobusiness‐as‐usualrsquo attitude permeating the automotive industry at the moment in reality it is subject to potentially radical change Only a few years ago we saw two of the worldrsquos largest car manufacturers General Motors and Chrysler on the brink of collapse Having decided both were lsquotoo big to failrsquo they had to be bailed out by the American tax‐payer Ford managed without direct government support but it is nevertheless quite clear that the collapse of the supply base that would have resulted from a collapse of both their key domestic competitors GM and Chrysler would also have dragged down Ford in due course Within a matter of months the worldrsquos most prominent car industry and the oldest mass production car industry could have disappeared only intervention from the public sector saved this key compo-nent of the private sector underlining that apart from anything else the close synergies and intertwined relationships continue to exist between the private and public sectors in developed countries (Mazzucato 2013) This highlights not only the weaknesses inherent in the close links between the financial and car systems but also indicates that the current mass production system whether seen as Fordist or Buddist (see below) may well be due for a rethink in several respects
In Europe the apparent success of Germany more recently the UK automotive industry is easily misunderstood leading perhaps to overconfidence but do note that the secret of success in Europe is largely confined to the more upmarket segments with the Germans the primary beneficiaries and that this success is very reliant on demand from Asia particularly China it has therefore made Europe ndash and also the United States particularly GM ndash very dependent on that far from stable market as also outlined in more detail in Chapter 10 At the same time pressures to make the car more environmentally compatible as we see it have not only led to cars with much less harmful tailpipe emissions but the more recent pressure to reduce the carbon footprint of cars particularly focused on their emissions of the greenhouse gas carbon dioxide has the potential to radically reshape the industry and its products These regulatory pressures are reviewed in Chapter 14 although the potential impact of this agenda is not yet fully understood but it has already led to a new wave of alternative powertrain vehicles in the market ranging from early petrol‐electric hybrids ndash including the now iconic Toyota Prius ndash via
Introduction and Overview 3
so‐called range‐extended and plug‐in hybrids such as the GM Volt and Ampera to full battery‐electric vehicles such as the Nissan Leaf Renault Zoe and Tesla Model S Such developments as well as the introduction of the even more radical BMW i3 which not only introduces a full battery‐electric powertrain but also houses this within a radical departure from the tried and tested lsquoBuddistrsquo (see Chapter 5) all‐steel body in using a carbon fibre body on an aluminium chassis are clear signs that business‐as‐usual is steadily being undermined even from within the established industry
Despite the size of the industry car making is in reality a very precarious business In its present form it lacks resilience it is not sustainable This is true not just in terms of environmental sustainability where it clearly is not measuring up but even in terms of basic economic sustainability Yet this industry is still crucially important representing a significant part of the economy in many industrialized countries as well as many newly industrializing economies notably China In addition the car‐based transport system or lsquoregimersquo (Geels et al 2012) which extends well beyond the industry that makes cars to the way in which auto-mobility has become integrated in our societies and cultures has become so embedded that its removal would lead to widespread social and economic crisis
In some regards therefore this book may be a testimony to a dying era as much as a hymnal to a new one Thus far the automotive industry has managed to contain the pressures for change both economic and environmental within the broad ambit of the long‐standing business model of the mainstream vehicle manufacturers In parallel those purchasing and using cars in the traditional manner have remained by far the majority compared with more innovative solutions such as car clubs city car sharing schemes and other alternatives that might presage the end of established automobility cultures The question is whether the collective and cumulative impact of all the new developments sweeping through the industry will be sufficient to herald the arrival of a new lsquoautomotive ecosystemrsquo as some have termed it or lsquoregimersquo according to others and one in which the dominance of the established vehicle manufacturers and their entrenched supply chains is challenged by a new order of communi-cations and mobility providers Some caution on these issues is urged here The automotive industry is not immune to hype cycles or the fevered imaginations of those professional change‐mongers with a vested interest in fermenting and emphasizing the new over the continuous
12 Continuity and Change
The book as a whole therefore represents an attempt to capture continuity and change in the global automotive industry this theme is brought to the fore in the first main chapter of the book Chapter 2 as change is very much a feature of the current phase of the automotive system Change of course needs to be seen in historical perspective and as such many of the chapters offer up a historical narrative that builds a temporal dynamic into the account of the subject under consideration There is some need in seeking to understand the structures and practices of the present to delve into the past If nothing else path dependency theory tells us that many decisions are nonlinear irreversible steps that result in distinct historical outcomes bounded by time and place As we have sought to delineate elsewhere the cluster of innovations that created the template for the mass production automotive industry occurred largely in the United States in the early years of the twentieth century the Ford moving assembly line with standardized and inter‐changeable parts the Budd all‐steel body that could be stamped
4 The Global Automotive Industry
welded and painted and the Sloan multi‐brand company with marketing innovations such as consumer credit and annual model changes these developments are outlined in Chapter 5 Despite many years of incremental change the basic architecture of the industry remains in place That such durability is evident speaks volumes for the scope for productivity improve-ment within this basic architecture over many decades and the efficacy of the system as a whole in terms of matching the imperatives of production economics to the demands of the market For this reason key early chapters in the book for example Chapters 3 4 5 and 6 are about the production system and the market for cars There is no subscription here to the simple neoclassical economics assumption that lsquoconsumersrsquo demand and lsquoproducersrsquo provide Rather there is a continuing dynamic tension between supply and demand sides that is never entirely resolved
13 Overview
The chapters in this book are thus essentially an attempt to take stock of the industry in its present state of a well‐established industry on the verge of potentially radical change tracking some of its history ndash trying to answer the question of how did we get here ndash assessing key aspects of its current state while also plotting some possible futures for the industry and its products This book does not seek to present chapters that are held together by a common the-oretical thread Such works can be tremendously informative and insightful (see Geels et al 2012) but of course tend to place primary emphasis on the question of theoretical coherence Rather the approach here has been more agnostic in theoretical terms and has been to seek insights and individual views by those who are established experts in their fields and who are known for their knowledge of the automotive industry (or a specific aspect of it) alongside their particular theoretical or methodological frameworks Each chapter is thus a cameo able to stand alone as a concise insight into one dimension of this multi‐faceted industry but also serves as a piece in the jigsaw that describes and explains how this industry really works
There are some gaps of course It is not possible to give consideration to all the countries producing cars and the unique contexts within which they operate The salience of the lsquovari-eties of capitalismrsquo school of thought (see Section 23) is acknowledged here and some com-parative chapters are pertinent to this school notably those on labourndashmanagement relations in North America and Japan (Chapters 7 and 8 respectively) While the question of labour relations in Japan has remained largely immune to external influence (notwithstanding the substantial impact of Renault on operations at Nissan and the rather lesser impact of Ford on Mazda) the story in North America has a strong thread in which lsquoJapanizationrsquo has been highly significant Chapters 9 10 and 11 cover the broad sweep of the automotive industry in Asia highlighting South Korea China and India respectively ndash both Korea and India have become comparatively neglected in view of the immense attention directed at China Interestingly both these countries are more than passive recipients of automobility and can claim to be home to significant companies within the industry of the modern era while also representing unique markets
An apparent gap in the account includes a chapter that explicitly deals with the global supply chain of components and raw materials to the vehicle manufacturers ndash where typically up to 85 of the ex‐works value of a new car is accounted for by bought in components and materials The theme of supply chain management is an important facet of the industry but
The Global Automotive Industry First Edition Edited by Paul Nieuwenhuis and Peter Wells copy 2015 John Wiley amp Sons Ltd Published 2015 by John Wiley amp Sons Ltd
Introduction and OverviewPaul Nieuwenhuis1 and Peter Wells2
1 Centre for Automotive Industry Research and Electric Vehicle Centre of Excellence Cardiff Business School Cardiff University Cardiff Wales UK2 Centre for Automotive Industry Research Cardiff Business School Cardiff University Cardiff Wales UK
11 Introduction
It is an impossible task to do full justice in one book to the global automotive industry with the pervasive impact economic significance and cultural status that it brings As editors our task is as much one of selective omission as one of collation to create an account of the business of mak-ing selling and using cars that is both representative and yet respectful of the diversity we know to be a feature of the industry Moreover this is an industry in the midst of reinventing itself It had seemed to some both inside and outside the industry around the turn of the millennium that this was a lsquosunsetrsquo industry characterized by over‐capacity plant closures job losses declining profitability and a product that seemed unsuited to meeting the environmental and social chal-lenges arising from mass car ownership and use The combination of profound environmental pressures and endemic economic distress appeared to call into question the pre‐eminent position enjoyed by the car in providing for personal mobility and the viability of the industry behind this most contradictory of products These concerns came to a peak with the arrival of the global economic crisis around 2007ndash2008 which resulted in new car sales falling steeply in the established markets and investment freezing while the entire financial community held its collective breath to see whether the world would plunge into an economic abyss Those looking closely at urban developments and the changing cultural priorities of young people started to whisper about the concept of lsquopeak carrsquo in which the high tide of automobility had been reached in the saturated markets of the European Union North America Japan and Korea
Yet only a few years later the industry has reemerged burnished by the embrace of new technologies and with resurgent sales in the previously moribund West being more than matched by the frenetic growth of sales in China and elsewhere Regulatory interventions
1
2 The Global Automotive Industry
such as the European Union fleet average carbon emissions targets that were once seen as burdensome and punitive have arguably helped stimulate the technological renaissance of the industry alongside the realization that there might be other routes to profitability Later chap-ters in the book are more concerned with this recent period of transformation and the possible futures it portends Chapter 16 for example is about the impact of the electric vehicle while Chapter 18 links technology change with possible innovations in business models forced on the industry by such technological changes Chapter 19 is more speculative but offers up some signposts for the future of automobility and the automotive industry
This is not to say that the process of change has been without stress or consequence Restructuring of the industry has continued apace the merger of Chrysler and Fiat came as a consequence of several years of corporate turmoil while the rescue of PSA by the French government and by the Chinese company Dongfeng costs the Peugeot family their control over this long established business ndash the oldest in the industry The great expectations held for battery electric vehicles remain as yet largely unrealized despite the highly visible and expen-sive efforts of companies like Nissan Renault and BMW alongside the publicity‐garnering machine that is Tesla In the meantime high‐profile failures such as the battery swap business Better Place serve as stark reminders that attempts to reinvent this industry especially by new entrants are fraught with hazard At the same time markets in the European Union have not really recovered to pre‐crisis levels and perhaps never will
So despite an apparent lsquobusiness‐as‐usualrsquo attitude permeating the automotive industry at the moment in reality it is subject to potentially radical change Only a few years ago we saw two of the worldrsquos largest car manufacturers General Motors and Chrysler on the brink of collapse Having decided both were lsquotoo big to failrsquo they had to be bailed out by the American tax‐payer Ford managed without direct government support but it is nevertheless quite clear that the collapse of the supply base that would have resulted from a collapse of both their key domestic competitors GM and Chrysler would also have dragged down Ford in due course Within a matter of months the worldrsquos most prominent car industry and the oldest mass production car industry could have disappeared only intervention from the public sector saved this key compo-nent of the private sector underlining that apart from anything else the close synergies and intertwined relationships continue to exist between the private and public sectors in developed countries (Mazzucato 2013) This highlights not only the weaknesses inherent in the close links between the financial and car systems but also indicates that the current mass production system whether seen as Fordist or Buddist (see below) may well be due for a rethink in several respects
In Europe the apparent success of Germany more recently the UK automotive industry is easily misunderstood leading perhaps to overconfidence but do note that the secret of success in Europe is largely confined to the more upmarket segments with the Germans the primary beneficiaries and that this success is very reliant on demand from Asia particularly China it has therefore made Europe ndash and also the United States particularly GM ndash very dependent on that far from stable market as also outlined in more detail in Chapter 10 At the same time pressures to make the car more environmentally compatible as we see it have not only led to cars with much less harmful tailpipe emissions but the more recent pressure to reduce the carbon footprint of cars particularly focused on their emissions of the greenhouse gas carbon dioxide has the potential to radically reshape the industry and its products These regulatory pressures are reviewed in Chapter 14 although the potential impact of this agenda is not yet fully understood but it has already led to a new wave of alternative powertrain vehicles in the market ranging from early petrol‐electric hybrids ndash including the now iconic Toyota Prius ndash via
Introduction and Overview 3
so‐called range‐extended and plug‐in hybrids such as the GM Volt and Ampera to full battery‐electric vehicles such as the Nissan Leaf Renault Zoe and Tesla Model S Such developments as well as the introduction of the even more radical BMW i3 which not only introduces a full battery‐electric powertrain but also houses this within a radical departure from the tried and tested lsquoBuddistrsquo (see Chapter 5) all‐steel body in using a carbon fibre body on an aluminium chassis are clear signs that business‐as‐usual is steadily being undermined even from within the established industry
Despite the size of the industry car making is in reality a very precarious business In its present form it lacks resilience it is not sustainable This is true not just in terms of environmental sustainability where it clearly is not measuring up but even in terms of basic economic sustainability Yet this industry is still crucially important representing a significant part of the economy in many industrialized countries as well as many newly industrializing economies notably China In addition the car‐based transport system or lsquoregimersquo (Geels et al 2012) which extends well beyond the industry that makes cars to the way in which auto-mobility has become integrated in our societies and cultures has become so embedded that its removal would lead to widespread social and economic crisis
In some regards therefore this book may be a testimony to a dying era as much as a hymnal to a new one Thus far the automotive industry has managed to contain the pressures for change both economic and environmental within the broad ambit of the long‐standing business model of the mainstream vehicle manufacturers In parallel those purchasing and using cars in the traditional manner have remained by far the majority compared with more innovative solutions such as car clubs city car sharing schemes and other alternatives that might presage the end of established automobility cultures The question is whether the collective and cumulative impact of all the new developments sweeping through the industry will be sufficient to herald the arrival of a new lsquoautomotive ecosystemrsquo as some have termed it or lsquoregimersquo according to others and one in which the dominance of the established vehicle manufacturers and their entrenched supply chains is challenged by a new order of communi-cations and mobility providers Some caution on these issues is urged here The automotive industry is not immune to hype cycles or the fevered imaginations of those professional change‐mongers with a vested interest in fermenting and emphasizing the new over the continuous
12 Continuity and Change
The book as a whole therefore represents an attempt to capture continuity and change in the global automotive industry this theme is brought to the fore in the first main chapter of the book Chapter 2 as change is very much a feature of the current phase of the automotive system Change of course needs to be seen in historical perspective and as such many of the chapters offer up a historical narrative that builds a temporal dynamic into the account of the subject under consideration There is some need in seeking to understand the structures and practices of the present to delve into the past If nothing else path dependency theory tells us that many decisions are nonlinear irreversible steps that result in distinct historical outcomes bounded by time and place As we have sought to delineate elsewhere the cluster of innovations that created the template for the mass production automotive industry occurred largely in the United States in the early years of the twentieth century the Ford moving assembly line with standardized and inter‐changeable parts the Budd all‐steel body that could be stamped
4 The Global Automotive Industry
welded and painted and the Sloan multi‐brand company with marketing innovations such as consumer credit and annual model changes these developments are outlined in Chapter 5 Despite many years of incremental change the basic architecture of the industry remains in place That such durability is evident speaks volumes for the scope for productivity improve-ment within this basic architecture over many decades and the efficacy of the system as a whole in terms of matching the imperatives of production economics to the demands of the market For this reason key early chapters in the book for example Chapters 3 4 5 and 6 are about the production system and the market for cars There is no subscription here to the simple neoclassical economics assumption that lsquoconsumersrsquo demand and lsquoproducersrsquo provide Rather there is a continuing dynamic tension between supply and demand sides that is never entirely resolved
13 Overview
The chapters in this book are thus essentially an attempt to take stock of the industry in its present state of a well‐established industry on the verge of potentially radical change tracking some of its history ndash trying to answer the question of how did we get here ndash assessing key aspects of its current state while also plotting some possible futures for the industry and its products This book does not seek to present chapters that are held together by a common the-oretical thread Such works can be tremendously informative and insightful (see Geels et al 2012) but of course tend to place primary emphasis on the question of theoretical coherence Rather the approach here has been more agnostic in theoretical terms and has been to seek insights and individual views by those who are established experts in their fields and who are known for their knowledge of the automotive industry (or a specific aspect of it) alongside their particular theoretical or methodological frameworks Each chapter is thus a cameo able to stand alone as a concise insight into one dimension of this multi‐faceted industry but also serves as a piece in the jigsaw that describes and explains how this industry really works
There are some gaps of course It is not possible to give consideration to all the countries producing cars and the unique contexts within which they operate The salience of the lsquovari-eties of capitalismrsquo school of thought (see Section 23) is acknowledged here and some com-parative chapters are pertinent to this school notably those on labourndashmanagement relations in North America and Japan (Chapters 7 and 8 respectively) While the question of labour relations in Japan has remained largely immune to external influence (notwithstanding the substantial impact of Renault on operations at Nissan and the rather lesser impact of Ford on Mazda) the story in North America has a strong thread in which lsquoJapanizationrsquo has been highly significant Chapters 9 10 and 11 cover the broad sweep of the automotive industry in Asia highlighting South Korea China and India respectively ndash both Korea and India have become comparatively neglected in view of the immense attention directed at China Interestingly both these countries are more than passive recipients of automobility and can claim to be home to significant companies within the industry of the modern era while also representing unique markets
An apparent gap in the account includes a chapter that explicitly deals with the global supply chain of components and raw materials to the vehicle manufacturers ndash where typically up to 85 of the ex‐works value of a new car is accounted for by bought in components and materials The theme of supply chain management is an important facet of the industry but
2 The Global Automotive Industry
such as the European Union fleet average carbon emissions targets that were once seen as burdensome and punitive have arguably helped stimulate the technological renaissance of the industry alongside the realization that there might be other routes to profitability Later chap-ters in the book are more concerned with this recent period of transformation and the possible futures it portends Chapter 16 for example is about the impact of the electric vehicle while Chapter 18 links technology change with possible innovations in business models forced on the industry by such technological changes Chapter 19 is more speculative but offers up some signposts for the future of automobility and the automotive industry
This is not to say that the process of change has been without stress or consequence Restructuring of the industry has continued apace the merger of Chrysler and Fiat came as a consequence of several years of corporate turmoil while the rescue of PSA by the French government and by the Chinese company Dongfeng costs the Peugeot family their control over this long established business ndash the oldest in the industry The great expectations held for battery electric vehicles remain as yet largely unrealized despite the highly visible and expen-sive efforts of companies like Nissan Renault and BMW alongside the publicity‐garnering machine that is Tesla In the meantime high‐profile failures such as the battery swap business Better Place serve as stark reminders that attempts to reinvent this industry especially by new entrants are fraught with hazard At the same time markets in the European Union have not really recovered to pre‐crisis levels and perhaps never will
So despite an apparent lsquobusiness‐as‐usualrsquo attitude permeating the automotive industry at the moment in reality it is subject to potentially radical change Only a few years ago we saw two of the worldrsquos largest car manufacturers General Motors and Chrysler on the brink of collapse Having decided both were lsquotoo big to failrsquo they had to be bailed out by the American tax‐payer Ford managed without direct government support but it is nevertheless quite clear that the collapse of the supply base that would have resulted from a collapse of both their key domestic competitors GM and Chrysler would also have dragged down Ford in due course Within a matter of months the worldrsquos most prominent car industry and the oldest mass production car industry could have disappeared only intervention from the public sector saved this key compo-nent of the private sector underlining that apart from anything else the close synergies and intertwined relationships continue to exist between the private and public sectors in developed countries (Mazzucato 2013) This highlights not only the weaknesses inherent in the close links between the financial and car systems but also indicates that the current mass production system whether seen as Fordist or Buddist (see below) may well be due for a rethink in several respects
In Europe the apparent success of Germany more recently the UK automotive industry is easily misunderstood leading perhaps to overconfidence but do note that the secret of success in Europe is largely confined to the more upmarket segments with the Germans the primary beneficiaries and that this success is very reliant on demand from Asia particularly China it has therefore made Europe ndash and also the United States particularly GM ndash very dependent on that far from stable market as also outlined in more detail in Chapter 10 At the same time pressures to make the car more environmentally compatible as we see it have not only led to cars with much less harmful tailpipe emissions but the more recent pressure to reduce the carbon footprint of cars particularly focused on their emissions of the greenhouse gas carbon dioxide has the potential to radically reshape the industry and its products These regulatory pressures are reviewed in Chapter 14 although the potential impact of this agenda is not yet fully understood but it has already led to a new wave of alternative powertrain vehicles in the market ranging from early petrol‐electric hybrids ndash including the now iconic Toyota Prius ndash via
Introduction and Overview 3
so‐called range‐extended and plug‐in hybrids such as the GM Volt and Ampera to full battery‐electric vehicles such as the Nissan Leaf Renault Zoe and Tesla Model S Such developments as well as the introduction of the even more radical BMW i3 which not only introduces a full battery‐electric powertrain but also houses this within a radical departure from the tried and tested lsquoBuddistrsquo (see Chapter 5) all‐steel body in using a carbon fibre body on an aluminium chassis are clear signs that business‐as‐usual is steadily being undermined even from within the established industry
Despite the size of the industry car making is in reality a very precarious business In its present form it lacks resilience it is not sustainable This is true not just in terms of environmental sustainability where it clearly is not measuring up but even in terms of basic economic sustainability Yet this industry is still crucially important representing a significant part of the economy in many industrialized countries as well as many newly industrializing economies notably China In addition the car‐based transport system or lsquoregimersquo (Geels et al 2012) which extends well beyond the industry that makes cars to the way in which auto-mobility has become integrated in our societies and cultures has become so embedded that its removal would lead to widespread social and economic crisis
In some regards therefore this book may be a testimony to a dying era as much as a hymnal to a new one Thus far the automotive industry has managed to contain the pressures for change both economic and environmental within the broad ambit of the long‐standing business model of the mainstream vehicle manufacturers In parallel those purchasing and using cars in the traditional manner have remained by far the majority compared with more innovative solutions such as car clubs city car sharing schemes and other alternatives that might presage the end of established automobility cultures The question is whether the collective and cumulative impact of all the new developments sweeping through the industry will be sufficient to herald the arrival of a new lsquoautomotive ecosystemrsquo as some have termed it or lsquoregimersquo according to others and one in which the dominance of the established vehicle manufacturers and their entrenched supply chains is challenged by a new order of communi-cations and mobility providers Some caution on these issues is urged here The automotive industry is not immune to hype cycles or the fevered imaginations of those professional change‐mongers with a vested interest in fermenting and emphasizing the new over the continuous
12 Continuity and Change
The book as a whole therefore represents an attempt to capture continuity and change in the global automotive industry this theme is brought to the fore in the first main chapter of the book Chapter 2 as change is very much a feature of the current phase of the automotive system Change of course needs to be seen in historical perspective and as such many of the chapters offer up a historical narrative that builds a temporal dynamic into the account of the subject under consideration There is some need in seeking to understand the structures and practices of the present to delve into the past If nothing else path dependency theory tells us that many decisions are nonlinear irreversible steps that result in distinct historical outcomes bounded by time and place As we have sought to delineate elsewhere the cluster of innovations that created the template for the mass production automotive industry occurred largely in the United States in the early years of the twentieth century the Ford moving assembly line with standardized and inter‐changeable parts the Budd all‐steel body that could be stamped
4 The Global Automotive Industry
welded and painted and the Sloan multi‐brand company with marketing innovations such as consumer credit and annual model changes these developments are outlined in Chapter 5 Despite many years of incremental change the basic architecture of the industry remains in place That such durability is evident speaks volumes for the scope for productivity improve-ment within this basic architecture over many decades and the efficacy of the system as a whole in terms of matching the imperatives of production economics to the demands of the market For this reason key early chapters in the book for example Chapters 3 4 5 and 6 are about the production system and the market for cars There is no subscription here to the simple neoclassical economics assumption that lsquoconsumersrsquo demand and lsquoproducersrsquo provide Rather there is a continuing dynamic tension between supply and demand sides that is never entirely resolved
13 Overview
The chapters in this book are thus essentially an attempt to take stock of the industry in its present state of a well‐established industry on the verge of potentially radical change tracking some of its history ndash trying to answer the question of how did we get here ndash assessing key aspects of its current state while also plotting some possible futures for the industry and its products This book does not seek to present chapters that are held together by a common the-oretical thread Such works can be tremendously informative and insightful (see Geels et al 2012) but of course tend to place primary emphasis on the question of theoretical coherence Rather the approach here has been more agnostic in theoretical terms and has been to seek insights and individual views by those who are established experts in their fields and who are known for their knowledge of the automotive industry (or a specific aspect of it) alongside their particular theoretical or methodological frameworks Each chapter is thus a cameo able to stand alone as a concise insight into one dimension of this multi‐faceted industry but also serves as a piece in the jigsaw that describes and explains how this industry really works
There are some gaps of course It is not possible to give consideration to all the countries producing cars and the unique contexts within which they operate The salience of the lsquovari-eties of capitalismrsquo school of thought (see Section 23) is acknowledged here and some com-parative chapters are pertinent to this school notably those on labourndashmanagement relations in North America and Japan (Chapters 7 and 8 respectively) While the question of labour relations in Japan has remained largely immune to external influence (notwithstanding the substantial impact of Renault on operations at Nissan and the rather lesser impact of Ford on Mazda) the story in North America has a strong thread in which lsquoJapanizationrsquo has been highly significant Chapters 9 10 and 11 cover the broad sweep of the automotive industry in Asia highlighting South Korea China and India respectively ndash both Korea and India have become comparatively neglected in view of the immense attention directed at China Interestingly both these countries are more than passive recipients of automobility and can claim to be home to significant companies within the industry of the modern era while also representing unique markets
An apparent gap in the account includes a chapter that explicitly deals with the global supply chain of components and raw materials to the vehicle manufacturers ndash where typically up to 85 of the ex‐works value of a new car is accounted for by bought in components and materials The theme of supply chain management is an important facet of the industry but
Introduction and Overview 3
so‐called range‐extended and plug‐in hybrids such as the GM Volt and Ampera to full battery‐electric vehicles such as the Nissan Leaf Renault Zoe and Tesla Model S Such developments as well as the introduction of the even more radical BMW i3 which not only introduces a full battery‐electric powertrain but also houses this within a radical departure from the tried and tested lsquoBuddistrsquo (see Chapter 5) all‐steel body in using a carbon fibre body on an aluminium chassis are clear signs that business‐as‐usual is steadily being undermined even from within the established industry
Despite the size of the industry car making is in reality a very precarious business In its present form it lacks resilience it is not sustainable This is true not just in terms of environmental sustainability where it clearly is not measuring up but even in terms of basic economic sustainability Yet this industry is still crucially important representing a significant part of the economy in many industrialized countries as well as many newly industrializing economies notably China In addition the car‐based transport system or lsquoregimersquo (Geels et al 2012) which extends well beyond the industry that makes cars to the way in which auto-mobility has become integrated in our societies and cultures has become so embedded that its removal would lead to widespread social and economic crisis
In some regards therefore this book may be a testimony to a dying era as much as a hymnal to a new one Thus far the automotive industry has managed to contain the pressures for change both economic and environmental within the broad ambit of the long‐standing business model of the mainstream vehicle manufacturers In parallel those purchasing and using cars in the traditional manner have remained by far the majority compared with more innovative solutions such as car clubs city car sharing schemes and other alternatives that might presage the end of established automobility cultures The question is whether the collective and cumulative impact of all the new developments sweeping through the industry will be sufficient to herald the arrival of a new lsquoautomotive ecosystemrsquo as some have termed it or lsquoregimersquo according to others and one in which the dominance of the established vehicle manufacturers and their entrenched supply chains is challenged by a new order of communi-cations and mobility providers Some caution on these issues is urged here The automotive industry is not immune to hype cycles or the fevered imaginations of those professional change‐mongers with a vested interest in fermenting and emphasizing the new over the continuous
12 Continuity and Change
The book as a whole therefore represents an attempt to capture continuity and change in the global automotive industry this theme is brought to the fore in the first main chapter of the book Chapter 2 as change is very much a feature of the current phase of the automotive system Change of course needs to be seen in historical perspective and as such many of the chapters offer up a historical narrative that builds a temporal dynamic into the account of the subject under consideration There is some need in seeking to understand the structures and practices of the present to delve into the past If nothing else path dependency theory tells us that many decisions are nonlinear irreversible steps that result in distinct historical outcomes bounded by time and place As we have sought to delineate elsewhere the cluster of innovations that created the template for the mass production automotive industry occurred largely in the United States in the early years of the twentieth century the Ford moving assembly line with standardized and inter‐changeable parts the Budd all‐steel body that could be stamped
4 The Global Automotive Industry
welded and painted and the Sloan multi‐brand company with marketing innovations such as consumer credit and annual model changes these developments are outlined in Chapter 5 Despite many years of incremental change the basic architecture of the industry remains in place That such durability is evident speaks volumes for the scope for productivity improve-ment within this basic architecture over many decades and the efficacy of the system as a whole in terms of matching the imperatives of production economics to the demands of the market For this reason key early chapters in the book for example Chapters 3 4 5 and 6 are about the production system and the market for cars There is no subscription here to the simple neoclassical economics assumption that lsquoconsumersrsquo demand and lsquoproducersrsquo provide Rather there is a continuing dynamic tension between supply and demand sides that is never entirely resolved
13 Overview
The chapters in this book are thus essentially an attempt to take stock of the industry in its present state of a well‐established industry on the verge of potentially radical change tracking some of its history ndash trying to answer the question of how did we get here ndash assessing key aspects of its current state while also plotting some possible futures for the industry and its products This book does not seek to present chapters that are held together by a common the-oretical thread Such works can be tremendously informative and insightful (see Geels et al 2012) but of course tend to place primary emphasis on the question of theoretical coherence Rather the approach here has been more agnostic in theoretical terms and has been to seek insights and individual views by those who are established experts in their fields and who are known for their knowledge of the automotive industry (or a specific aspect of it) alongside their particular theoretical or methodological frameworks Each chapter is thus a cameo able to stand alone as a concise insight into one dimension of this multi‐faceted industry but also serves as a piece in the jigsaw that describes and explains how this industry really works
There are some gaps of course It is not possible to give consideration to all the countries producing cars and the unique contexts within which they operate The salience of the lsquovari-eties of capitalismrsquo school of thought (see Section 23) is acknowledged here and some com-parative chapters are pertinent to this school notably those on labourndashmanagement relations in North America and Japan (Chapters 7 and 8 respectively) While the question of labour relations in Japan has remained largely immune to external influence (notwithstanding the substantial impact of Renault on operations at Nissan and the rather lesser impact of Ford on Mazda) the story in North America has a strong thread in which lsquoJapanizationrsquo has been highly significant Chapters 9 10 and 11 cover the broad sweep of the automotive industry in Asia highlighting South Korea China and India respectively ndash both Korea and India have become comparatively neglected in view of the immense attention directed at China Interestingly both these countries are more than passive recipients of automobility and can claim to be home to significant companies within the industry of the modern era while also representing unique markets
An apparent gap in the account includes a chapter that explicitly deals with the global supply chain of components and raw materials to the vehicle manufacturers ndash where typically up to 85 of the ex‐works value of a new car is accounted for by bought in components and materials The theme of supply chain management is an important facet of the industry but
4 The Global Automotive Industry
welded and painted and the Sloan multi‐brand company with marketing innovations such as consumer credit and annual model changes these developments are outlined in Chapter 5 Despite many years of incremental change the basic architecture of the industry remains in place That such durability is evident speaks volumes for the scope for productivity improve-ment within this basic architecture over many decades and the efficacy of the system as a whole in terms of matching the imperatives of production economics to the demands of the market For this reason key early chapters in the book for example Chapters 3 4 5 and 6 are about the production system and the market for cars There is no subscription here to the simple neoclassical economics assumption that lsquoconsumersrsquo demand and lsquoproducersrsquo provide Rather there is a continuing dynamic tension between supply and demand sides that is never entirely resolved
13 Overview
The chapters in this book are thus essentially an attempt to take stock of the industry in its present state of a well‐established industry on the verge of potentially radical change tracking some of its history ndash trying to answer the question of how did we get here ndash assessing key aspects of its current state while also plotting some possible futures for the industry and its products This book does not seek to present chapters that are held together by a common the-oretical thread Such works can be tremendously informative and insightful (see Geels et al 2012) but of course tend to place primary emphasis on the question of theoretical coherence Rather the approach here has been more agnostic in theoretical terms and has been to seek insights and individual views by those who are established experts in their fields and who are known for their knowledge of the automotive industry (or a specific aspect of it) alongside their particular theoretical or methodological frameworks Each chapter is thus a cameo able to stand alone as a concise insight into one dimension of this multi‐faceted industry but also serves as a piece in the jigsaw that describes and explains how this industry really works
There are some gaps of course It is not possible to give consideration to all the countries producing cars and the unique contexts within which they operate The salience of the lsquovari-eties of capitalismrsquo school of thought (see Section 23) is acknowledged here and some com-parative chapters are pertinent to this school notably those on labourndashmanagement relations in North America and Japan (Chapters 7 and 8 respectively) While the question of labour relations in Japan has remained largely immune to external influence (notwithstanding the substantial impact of Renault on operations at Nissan and the rather lesser impact of Ford on Mazda) the story in North America has a strong thread in which lsquoJapanizationrsquo has been highly significant Chapters 9 10 and 11 cover the broad sweep of the automotive industry in Asia highlighting South Korea China and India respectively ndash both Korea and India have become comparatively neglected in view of the immense attention directed at China Interestingly both these countries are more than passive recipients of automobility and can claim to be home to significant companies within the industry of the modern era while also representing unique markets
An apparent gap in the account includes a chapter that explicitly deals with the global supply chain of components and raw materials to the vehicle manufacturers ndash where typically up to 85 of the ex‐works value of a new car is accounted for by bought in components and materials The theme of supply chain management is an important facet of the industry but