2016年-世界发展银行全球_Automotive_in_South_Asia___From_Fringe_to_Global_45页_1mb

Summary of Automotive in South Asia

Core Content

The automotive industry in South Asia, particularly in India and Pakistan, is analyzed in this case study to understand its potential for global competitiveness and the policy measures needed to enhance its productivity and export capabilities. The study highlights the importance of the sector in job creation and economic growth, with India alone supporting 19 million direct and indirect jobs. The paper also compares the industry with East Asian countries like China, Vietnam, and the Republic of Korea, drawing insights from their experiences in building competitive automotive sectors.

Main Viewpoints

• India's Automotive Sector:

  • Has shown rapid growth, with a CAGR of 11-15% from 2005 to 2015.
  • It is the sixth-largest global producer of four-wheelers, second for two-wheelers, and eighth for commercial vehicles.
  • Auto parts production has grown significantly, with 70% of output coming from the organized sector.
  • Exports are still a small fraction of production, but the sector is showing signs of potential for growth.
  • High import tariffs on completely built units (CBUs) have historically attracted OEMs but now hinder the spread of global best practices.

• Pakistan's Automotive Sector:

  • Passenger car production is at one-third of India's level (per capita).
  • Motorcycle production has increased tenfold since 2001, but the sector is still dominated by a few firms, primarily Honda.
  • High import tariffs on motor vehicles (76%) and auto parts (35%) have limited both domestic and export growth.
  • Exports are minimal, mostly low-value parts and tractors for the Afghan market.

Key Information

Performance of the Auto Sector

• Output:

  • India's auto industry has seen significant growth, with 4 million cars produced in 2013.
  • Auto parts sales in India increased by 11% annually from 2010-2015.
  • The Indian auto parts sector is estimated to be worth US$20-41 billion in 2013.
  • Pakistan's auto industry is the sixth-largest manufacturing subsector, but production of passenger cars has been stagnant since 2006.

• Trade:

  • Exports account for a small share of production in both countries, with India owning less than 1% of global auto exports.
  • Auto parts exports in India are around 44% of production, while final car exports are less than 20%.
  • China's auto parts exports account for 10% of global exports, compared to India's 1%.
  • Pakistan's auto parts exports are limited and mostly low-value.

• Productivity:

  • India's value added per worker is lower than China's, which is about three times higher.
  • China's higher productivity is attributed to greater scale, higher capacity utilization, and better quality.
  • In India, most OEMs operate below efficient scale, with only a few achieving high capacity utilization and profitability.

Drivers of Competitiveness

• Scale Manufacturing and Capacity Utilization:

  • Larger firms are more profitable and resilient to market downturns.
  • Capacity utilization is a critical factor in reducing costs and improving productivity.

• Innovation, Design, and R&D:

  • Investment in R&D is low, but a few global firms are moving their R&D centers to India.
  • Innovation and design capabilities are essential for moving up the global value chain.

• Quality Control:

  • High levels of quality control among Tier 2 and Tier 3 firms in India.
  • Quality tools are used to meet international standards, which is a key differentiator.

• Workforce Skilling:

  • Investment in worker and managerial training is important for improving productivity.
  • The Indian auto parts sector has a higher share of skilled workers than China.

• Agglomeration Economies:

  • Firms located in clusters benefit from shared infrastructure and knowledge spillovers.
  • Cluster-based firms have better access to markets and higher productivity.

• Linking to Global Value Chains (GVCs):

  • Firms that are linked to GVCs benefit from exposure to global standards and practices.
  • Collaborations with foreign firms and joint ventures help in technology transfer and innovation.

Constraints to Productivity

• Trade Protection:

  • High import tariffs on CBUs and auto parts limit exposure to global practices.
  • India's import tariffs on CBUs are 60%, while China's is 25% and Korea's is 7.9%.

• Industry Standards:

  • Standards in India are not aligned with global practices, limiting competitiveness.

• Tax Policies and Logistics:

  • Inefficient logistics and fragmented domestic markets raise operational costs.
  • Tax policies in India and Pakistan contribute to market fragmentation.

• SME Challenges:

  • SMEs face difficulties in linking with lead firms and accessing global value chains.
  • Weak linkages hinder the spread of best practices and innovation.

Suggested Measures

• Reduce Import Tariffs on Final Cars:

  • Gradual reduction could catalyze global competitiveness and export growth.

• Converge with Global Standards:

  • Aligning with international environmental and safety standards would improve the sector's integration into global markets.

• Integrate the Domestic Market:

  • Reducing trade logistics barriers and promoting market integration would lower costs and improve efficiency.

• Support SMEs:

  • Provide assistance to help SMEs develop linkages to value chains and clusters.
  • Improve their operations and competitiveness through training and support programs.

• Invest in Design and R&D:

  • Support for innovative design and R&D activities is crucial for moving up the value chain.

Conclusion

The automotive sector in South Asia is poised for global growth, but it faces significant challenges in terms of productivity and integration into global value chains. The case of India demonstrates that with the right policy interventions, the sector can move from a domestic growth model to a productivity-driven global model. Pakistan, with its higher import tariffs and limited export capacity, has a greater need for structural reforms to unlock its potential. The study underscores the importance of reducing trade barriers, improving industry standards, and enhancing linkages between firms and global markets to foster competitiveness and sustainable growth.