the competitiveness of the european automotive industry
TRANSCRIPT
The competitiveness of the European automotive industry
Alexandru Leonte, National Bank of Romania
Lucia Orszaghova, European Central Bank and National Bank of Slovakia
ECB CompNet Workshop, Frankfurt am Main, 12-13 December 2013
Motivation #1
The automotive sector has a high relevance in many European countries, in terms of both output and employment
0
5
10
15
5
10
15
20
25
30
SK CZ HU DE RO SE SI ES PL UK PT FR AT BE IT EE NL BG LV FI DK** LT** HR** IE CY
Sector* share in total manufacturing (2011)
production value added employment (2nd axis)
**) values for 2010
Source: Eurostat
% %
*) sector = manufacture of motor vehicles, trailers and semi-trailers
0
2
4
6
8
10
0
4
8
12
16
20
1995 1997 1999 2001 2003 2005 2007 2009 2011
Share of aggregate EU 27 sector* production (VA)
in manufacturing production in manufacturing VA
in total production (2nd axis) in total VA (2nd axis)
% %
*) sector = transport equipment
Source: WIOD, authors' calculations
Motivation #2
This industry is also relevant for EU countries from an international trade perspective
EU countries are highly representative in world automotive trade
0
10
20
30
40
50
60
1999 2001 2003 2005 2007 2009 2011
Share in world automotive trade
EU28 North America Asia China
North America: Canada, Mexico, USA
Asia: China, Japan, Korea, India, Thailand
Source: BACII, authors' calculations
%
0
5
10
15
20
25
30
35
40
SK HU CZ RO DE SI ES PL PT SE AT UK FR BE-LU
IT FI EE LV NE LT BG DK HR CY IR GR MT
Automotive export share in country exports
2011
2007
1998
Source: BACII, authors' calculations
%
The most important automotive exporters (2011): EU countries are included
>10%
5-10%
2-5%
1-2%
0.9
1.0
1.1
1.3
1.3
1.3
1.3
1.6
1.7
1.8
2.0
2.4
2.6
2.9
3.1
3.3
3.5
4.2
4.2
5.0
6.6
8.9
10.9
18.1
Ro
man
ia
Bra
zil
Ind
ia
Tu
rkey
Sw
ed
en
Au
str
ia
Slo
vakia
the N
eth
erl
an
ds
Th
ailan
d
Hu
ng
ary
Po
lan
d
Czech
Rep
.
Belg
ium
an
d
Lu
xem
bo
urg
Can
ad
a
Italy
Sp
ain
UK
Mexic
o
Fra
nce
Rep
. o
f K
ore
a
US
A
Ch
ina
Jap
an
Germ
an
y
Share of world exports (%)
Source: BACII, authors' calculations
However, in terms of market share, different patterns appear within the EU
EU core countries’ automotive export share is on a downward path, even if they further account for the bulk of EU automotive exports
EU core NMS Other EU
% in EU automotive
trade
2000
2011
0
2
4
6
8
10
35
39
43
47
51
55
1998 2001 2004 2007 2010
EU core NMS
% in world automotive trade % in world automotive trade
EU core: AT, BE (LU), DE, ES, FI, FR, IT, NL, PT, SE, UKNMS: CZ, HU, PL, RO, SK
Source: BACII, authors' calculations
Moreover, there is some heterogeneity within the EU core group
Most countries witness market share losses, except for Germany – the main exporter
0
4
8
12
16
20
0
2
4
6
8
10
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
France UK Spain Italy Germany (2nd axis)
% in world automotive trade
Source: BACII, authors' calculations
% in world automotive trade
This evolution is usually associated with outsourcing and externalization of production, as firms are more integrated
in GVCs
Sturgeon, Van Biesebroeck and Gereffi (2008) and Sturgeon and
Van Biesebroeck (2011), among others, discuss the evolution and
the main features of international automotive production
di Mauro, Plamper and Stehrer (2013) point out that higher
integration of firms into GVCs is often made the culprit of adverse
economic developments such as output drop and job shedding
In this paper…
We analyze the competitiveness of the European automotive industry, by attempting:
to identify the main competitors of the EU automotive exporters, gaining
knowledge about the countries that might increase their market share at the
expense of the EU core
to assess the benefits that countries get from participating in automotive
global value chains
In doing so, we heavily build on a number of methodologies that have been discussed / developed / improved in CompNet WS 1 and WS 3
Our study consists of two parts – a “classical” analysis, based on trade flows, and a “GVC-based” analysis, which takes into account countries’ integration into global value chains
I. “Classical” analysis – The competition pressure indicator
Benkovskis (2012) uses this methodology to identify Latvia’s main competitors
The pressure exerted by a competitor on a certain country:
a) in a certain market:
b) overall:
GoodrdCountry
GoodCompetitorrdCountry
Country
GoodrdCountryCountryGoodrdCountryCompetitor
CountryM
M
X
XP
,3
,,3,3,,3,
rdCountry Good
GoodrdCountryCompetitor
Country
Competitor
Country PP3
,3,
Exports Imports
Basic level indicator
Aggregate level indicator
Main competitors of EU core (4) countries in the auto sector
EU core countries are seriously competing against each other, yet other groups are also important
Pressure from North America is more acute in Germany and the UK
Pressure from the NMS is more acute in France and Spain
China has been gaining importance as a competitor
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20111 1 1 1 1 1 1 1 1 1 1 13 3 3 3 3 3 3 3 3 3 3 31 1 1 1 1 1 1 1 1 1 1 11 1 1 1 1 1 1 1 1 1 1 11 1 1 1 1 1 1 1 1 1 1 11 1 1 1 1 1 1 1 1 5 5 51 1 1 1 3 3 3 5 5 1 1 43 3 3 3 1 1 5 5 5 5 4 51 2 5 5 5 2 5 3 1 4 5 12 1 2 5 1 5 1 1 4 3 3 15 5 1 2 5 5 4 5 6 6 1 31 1 1 1 2 4 5 4 5 5 6 65 5 1 1 6 6 1 6 3 2 2 21 1 5 1 5 5 2 2 2 1 5 51 5 5 6 1 1 6 1 1 1 1 1
France
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20111 1 1 1 1 1 1 1 1 1 1 11 1 3 3 3 3 3 3 3 3 3 33 3 1 1 1 1 1 1 1 1 1 21 1 1 1 1 1 3 1 2 1 2 12 1 1 1 1 3 1 2 1 1 1 41 2 2 1 3 2 1 1 1 2 4 12 2 1 2 1 1 4 1 1 4 1 11 1 2 3 2 2 2 3 3 1 2 31 3 3 2 2 1 2 2 5 5 1 13 1 5 5 1 4 1 5 4 3 3 21 1 1 1 5 5 5 4 2 5 5 52 5 1 2 2 1 1 1 5 5 5 51 1 1 1 4 1 1 5 1 2 5 55 2 2 1 1 2 5 5 5 1 1 11 1 1 4 1 1 5 1 1 1 5 1
UK
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20111 1 1 1 1 1 1 1 1 1 1 11 1 1 1 1 1 1 1 1 1 1 13 1 3 3 3 3 1 1 3 1 1 11 1 1 1 1 1 3 3 1 1 3 31 3 1 1 1 1 1 1 1 3 1 11 1 1 1 1 1 1 1 1 1 5 53 5 5 3 3 3 5 5 5 5 1 15 1 1 5 5 5 3 5 6 5 5 51 3 3 1 1 5 5 6 5 6 6 62 2 2 5 5 6 6 3 3 3 3 35 5 5 2 6 1 1 1 1 5 4 41 6 1 1 1 2 1 1 5 4 5 51 1 5 6 2 1 2 2 1 5 5 25 1 1 1 1 5 5 5 4 2 2 11 1 1 1 1 1 1 4 2 5 5 5
Spain
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20113 3 3 3 3 3 3 3 3 3 3 31 1 1 1 1 1 1 1 1 1 1 12 1 1 1 1 1 1 1 1 1 1 11 2 1 1 1 1 1 1 1 1 1 21 1 2 1 1 1 1 1 1 1 1 11 1 1 2 2 2 1 1 1 1 2 32 2 2 2 3 3 3 2 2 2 1 11 1 1 3 1 2 2 3 3 3 3 12 2 3 1 2 1 2 2 2 2 2 41 3 2 1 1 1 1 1 1 4 4 21 1 1 2 1 1 1 1 4 5 5 53 1 1 1 2 2 5 4 1 5 5 21 1 1 1 1 4 4 5 5 1 2 51 1 1 1 4 1 5 5 5 2 5 51 5 5 5 5 1 2 2 2 6 1 1
Germany
EU core NMS North America Asia (without China) China Other1 5 2 3 4
Source: BACII, authors’ calculations
Main competitors of NMS (4) countries in the auto sector
The NMS are mainly competing against EU core countries, Asia and each other
Growing pressure from China, very strong in Hungary
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20111 1 1 1 1 1 1 1 1 1 1 11 1 1 1 1 1 1 1 1 1 1 11 1 1 1 1 1 1 1 1 1 1 11 1 1 1 1 1 1 1 1 1 1 53 3 3 3 3 3 3 3 5 5 5 11 1 1 1 1 1 1 1 3 1 1 31 1 1 1 1 1 1 5 1 3 3 13 5 1 1 3 3 5 1 5 1 5 45 2 1 5 5 5 5 5 1 5 1 12 1 5 3 5 2 3 3 3 3 4 51 1 3 5 1 1 1 1 4 4 3 31 3 2 1 1 5 1 6 1 1 5 55 1 5 5 4 1 6 4 6 6 1 11 1 1 6 1 6 2 1 1 5 5 61 5 5 1 1 4 1 2 2 5 6 5
Czech Rep.
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20111 1 1 1 1 1 1 1 1 1 1 11 1 1 3 3 3 3 3 3 1 3 31 1 1 1 2 1 2 2 2 3 1 13 1 1 2 1 1 1 1 1 1 1 11 3 3 1 1 1 1 1 1 2 1 21 1 1 1 1 2 1 1 1 5 5 51 1 1 1 1 1 3 3 1 1 2 15 5 5 1 1 1 1 1 3 1 1 15 5 2 3 1 2 1 2 5 5 5 31 1 5 5 2 3 2 1 1 1 1 55 2 1 1 3 5 1 1 5 3 3 42 5 5 2 5 1 2 5 2 5 4 13 1 5 5 5 5 5 2 4 5 5 51 1 1 2 2 5 5 5 6 6 5 51 3 1 5 5 1 5 6 1 4 1 1
Slovakia
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20111 1 1 1 1 1 1 1 1 1 1 11 1 1 1 1 1 1 1 1 1 1 11 1 1 1 1 1 1 1 1 1 1 13 3 5 1 3 3 1 1 5 5 5 51 5 1 1 1 1 5 5 3 1 1 11 1 1 5 1 5 1 3 1 3 3 15 1 3 3 1 1 3 5 1 1 1 31 1 1 1 5 1 5 1 5 1 5 51 1 1 1 1 1 1 1 1 5 1 15 5 5 5 5 5 1 1 6 6 6 43 3 1 3 1 3 6 6 1 1 4 61 1 3 1 3 1 3 3 4 5 1 11 1 1 6 1 6 1 1 3 4 5 12 2 6 1 6 2 1 4 1 5 5 55 6 2 1 1 5 5 1 5 3 1 5
Poland
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20111 1 1 1 1 1 1 1 1 4 4 41 1 1 1 1 1 1 4 4 1 1 11 1 1 1 1 1 1 1 1 3 1 11 1 1 1 4 4 4 1 1 1 1 13 3 3 3 3 3 1 3 3 1 1 11 1 5 1 1 1 1 1 1 1 5 51 5 1 5 1 1 5 1 5 5 3 51 2 1 1 3 3 1 1 3 5 5 35 1 1 1 1 1 3 5 1 3 3 31 1 1 2 5 1 5 3 5 1 1 12 2 2 3 1 5 3 5 1 1 1 12 1 1 4 1 2 1 1 1 1 1 11 1 3 1 1 1 1 1 1 1 5 15 3 5 1 2 5 1 1 1 5 1 53 2 2 5 5 1 2 2 2 1 2 3
Hungary
EU core NMS North America Asia (without China) China Other1 5 2 3 4
Source: BACII, authors’ calculations
Competition pressure analysis – main results
There is strong intra-EU competition in the automotive sector. An
overall conclusion would be that EU countries mainly compete against
other EU countries. However, the other groups (especially Asia) also
pose significant threats
The increasing importance of the NMS as competitors in the cases of
France and Spain suggests a possible market share drain
China’s competitor role has been growing over time in all the analyzed
countries. The UK (in the EU core (4) group) and Hungary
(in the NMS (4) group) face the strongest competition from China
Slovakia has the most “diversified” group of competitors among
the NMS (4)
II. GVC analysis: focuses on Value Added (VA)
The link between production and exports, on the one hand, and
country benefits (income, jobs), on the other, is not 1:1
“The foreign content share in gross exports has almost doubled on
average since 1970” (IMF, 2013)
“Increasing fragmentation of production across borders is changing
the nature of international competition. As a result, conventional
indicators of competitiveness based on gross exports become less
informative and new measures are needed” (Timmer et. al, 2013)
“Gross exports as reported in trade statistics may fail to capture the
value actually created in an economy by the production of its
exports” (Amador, Cappariello and Stehrer, 2013)
Auto industry performance in terms of value added (VA)
Our goal is to trace the contribution of national and foreign sectors to final goods production in the automotive sector
We rely on the WIOD database, which contains World Input Output Tables, as well as other indicators (see Timmer (2012) for a detailed description)
40 economies (EU27 + other 13 countries) + rest of the world
35 sectors per economy, our focus is on the transport equipment sector (aggregation of manufacture of motor vehicles, trailers and semi-trailers – NACE 1.1 code 34 – and manufacture of other transport equipment – NACE 1.1 code 35)
Input-Output Analysis methodology (Timmer et al., 2013)
41
1
35
1
41
1
,j t
ij
j
iji tsmsfsy
Output of sector s in country i
Final good in country j
Intermediate good for sector t in country j
Input – Output Analysis methodology (continued)
ty
tsmtsa
j
ij
ij
,,
14351435,
xij tsaA
global intermediate input coefficients matrix
11435xi syy
sfsfj
iji
41
1
11435xi sff
fAIyfyAy 1
Switching to matrix use:
Value added: sy
svasp
i
ii
11435xi spp 14351435
ˆx
pdiagp
11435xi svava
fAIpypva 1
ˆˆ
Despite diminishing automotive market shares, national VA in the main EU core automotive exporters is larger than in most NMS
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5
10
15
20
0
10
20
30
40
50
60
70
80
90
100
2000 2011 2000 2011 2000 2011 2000 2011 2000 2011
Germany France UK Spain Italy
EU core (5)
National VA
Automotive export market share
0
1
2
3
0
10
20
30
40
50
60
70
80
90
100
2000 2011 2000 2011 2000 2011 2000 2011 2000 2011
Czech Rep Slovakia Hungary Poland Romania
NMS
National VA
Automotive export market share
Source: WIOD, authors’ calculations
Negative correlation between export performance and national VA in the automotive sector in the EU countries…
y = -0.3212x + 39.044R² = 0.2116
0
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50
30 40 50 60 70 80 90
Ox: National VA (% of national transport equipment final good production)Oy: Country automotive exports, share in total country exports, from 2000 to 2011
Country sample: BE (LU), CZ, DE, EE, ES, FR, IT, CY, HU, AT, PL, PT, RO, SI, SK, FI, SE, UKSource: BACII, WIOD, authors' calculations
y = -0.6206x + 54.718R² = 0.5767
y = -0.0311x + 20.789R² = 0.0018
0
10
20
30
40
50
30 40 50 60 70 80 90
NMS (7) EU core (11)
…which is induced by the NMS group
GVC income and GVC jobs are direct measures of the benefits
arising from participation in a global value chain
GVC income refers to the compensations received by production
factors
GVC income = Compensation of L + Compensation of K
Similar data source and methodology as in the case of VA
Automotive industry performance from the perspective of GVC income and GVC jobs
Low values of GVC income in some countries of the NMS group
In all cases, most of the GVC income is kept within the EU
EU countries are competing against each other for GVC income
0
10
20
30
40
50
60
70
80
90
100
2000 2008 2000 2008 2000 2008 2000 2008 2000 2008
Germany France UK Spain Italy
EU core (5)
China
Asia
North America
Other EU
National
0
10
20
30
40
50
60
70
80
90
100
2000 2008 2000 2008 2000 2008 2000 2008 2000 2008
Czech Rep Slovakia Hungary Poland Romania
NMS
China
Asia
NorthAmerica
Other EU
National
Source: WIOD, authors’ calculations
In terms of jobs, China seems to be an important benefactor of production externalization
However, lack of correlation with GVC income evolution suggests specialization in low-skilled jobs
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
2000 2008
EU core 5 (agg.)
China
Asia
North America
EU
0
200
400
600
800
1,000
1,200
1,400
1,600
2000 2008
NMS (agg.)
China
Asia
North America
EU
thou. jobsthou. jobs
Source: WIOD, authors’ calculations
GVC integration analysis – main results
Despite worsening market shares, the weight of national VA in total VA for the countries in the EU core 5 is higher on average than in the EU NMS group
In the case of the NMS, a good export performance is negatively correlated with national VA (relative to total VA)
For the NMS, the higher the market share, the smaller the ratio between country benefits, on the one hand, and production and exports, on the other
Most of GVC income is being kept within the EU, which means that EU countries are competing against each other
The number of Chinese jobs associated with the EU automotive production has risen, but Chinese GVC income is still reduced
Concluding remarks
EU countries are mainly in competition with each other in the automotive industry. There is a possible drain of market share between some states of the EU core and some NMS
Good export performance (in the case of NMS) may constitute a sign for a reduced ratio between national and total VA
China’s importance as a competitor has been growing. It has gained a consistent number of jobs from participating in the European automotive GVCs, however, the lack of correlation with GVC income suggests that these jobs are low-skilled
Further research relies on fully exploiting the CompNet WS 1 and WS 3 indicators, as well as the potential of the WIOD database
References
Amador, J., R. Cappariello and R. Stehrer, 2013 – Global value chains: a view from the euro area, paper presented at the June CompNet Workshop, Frankfurt am Main
Benkovskīs, Konstantins, 2012 – Competitiveness of Latvia’s exporters, Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, Vol. 12 (2)
di Mauro, F., H. Plamper and R. Stehrer, 2013 – Global value chains: a case for Europe to cheer up, CompNet Policy Brief 03
IMF, 2013 – Trade Interconnectedness: the World with Global Value Chains, International Monetary Fund Policy Paper
Sturgeon, T., J. Van Biesebroeck and G. Gereffi, 2008 – Value chains, networks and clusters: Reframing the Global Automotive Industry, MIT IPC Working Paper 08-002
Sturgeon, T., J. Van Biesebroeck, 2011 – Global value chains in the automotive industry: an enhanced role for developing countries?, International Journal of Technological Learning, Innovation and Development, Vol. 4 (1,2,3)
Timmer, M. (editor), 2012 – The World Input-Output Database (WIOD): Contents, Sources and Methods, WIOD Working Paper Number 10
Timmer, M., B. Los, R. Stehrer and G. de Vries, 2013 – Fragmentation, income and jobs:
an analysis of European competitiveness, Economic Policy, Vol. 28 (76)