Trends in global production and trade

This report examines key trends in global production and trade in Automotive Parts. Our focus is on the competitiveness of emerging economies ('low-cost countries', LCCs) as global source countries.

As to the composition of the Automotive Parts industry, we distinguish between (a) powertrain parts, (b) other mechanical parts, and (c) electrical parts.

The study is based on an analysis of cross-border trade flows. Flows of cross-border trade reflect the views of investors and traders on the ability of source countries to supply international markets.

Between 2002 and 2006, world exports of Automotive Parts grew at an average annual rate of 11.8 percent.

With exports from emerging economies growing at a considerably higher rate (20.8 percent), their share of world exports increased from 23.1 percent in 2002 to 31.5 percent in 2006.

Chart 1B shows the importance and dynamics of LCCs as locations of global production by sector:

► In terms of world export share, LCCs are much more important as source countries for electrical parts than for powertrain and mechanical parts.

► Over time, however, LCCs have gained more ground in mechanical parts (10.1 percentage points) than in powertrain (7.7) and electrical parts (4.7).

According to Chart 1C, all major regions are important sources low-cost supply. But, since 2002, Asian LCCs have significantly gained in importance, mainly at the expense of the Americas.

The geographical reach of a product's supply chain reflects the tradeoff of users between (a) accessing the most competitive source of supply worldwide, and (b) the benefits of proximity to end-product markets.

In this study, we measure the reach of supply chains by examining the extent  to which imports from LCCs cross regional borders (as reflected in the relative size of intra and extra-regional import flows).

Chart 2A brings out the importance attached by users of Automotive Parts to LCC within their home regions. Moreover, regional supply chains play a sightly greater role in powertrain parts than in mechanical and electrical ones.

There are also differences in the geographical reach of supply chains between regions. Chart 2B suggests that:

► users of Automotive Parts in the Americas and Europe rely more than Asian ones on global sources of low-cost supply,

► users in the Americas are more inclined than users elsewhere to shift from regional to global sources of supply (reflecting the growing role of Asian low-cost source countries).

Chart 3A lists the ten leading low-cost source countries for Automotive Parts. With a world export share of 7.0 percent in 2006, Mexico is by far the most important source country, followed by China (3.4), Hungary (3.4), Poland (3.0) and South Korea (2.3).

Since 2002, the share of the Top-5 source countries in world low-cost exports declined by 3.4 percentage points to about 61 percent in 2006. This points to a widening range of dynamic low-cost source countries in the Automotive Parts industry.

Between 2002 and 2006, Mexico's share of world low-cost exports declined by no less than 10.9 percentage points to 22.4 percent in 2006.

Relative to other LCCs, Mexico has a competitive advantage in electrical parts. Since 2002, Mexico has further strengthened its position in this sector.

Between 2002 and 2006, China's share of world low-cost exports increased by 5.0 percentage points to 16.8 percent in 2006.

Relative to other LCCs, China has a competitive advantage in mechanical and electrical parts. Over time, China has strengthened its position in powertrain parts.

Between 2002 and 2006, Hungary's share of world low-cost exports declined by 2.1 percentage points to 10.7 percent in 2006.

Relative to other LCCs, Hungary has an advantage in powertrain parts. Since 2002, Hungary has lost some ground in electrical parts.

Between 2002 and 2006, Poland's share of world low-cost exports fluctuated at around 10 percent.

Relative to other LCCs, Poland has a competitive advantage in powertrain parts. Over time, Poland has improved its position in mechanical parts, while losing some ground in powertrain and electrical parts.

Since 2002, South Korea's share of world low-cost exports increased by 4.0 percentage points, reaching 7.6 percent in 2006.

Relative to other LCCs, South Korea has a competitive advantage in mechanical parts. Over time, the country has strengthened its position in powertrain parts, while losing ground in mainly electrical parts.