the competitiveness of the european automotive industry

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


%

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 (%)


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


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


% 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

0

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

10

20

30

40

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


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


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)

the competitiveness of the european automotive industry

Documents