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The Japanese Motor Vehicle
Industry in N America.
The Japanese motor vehicle industry has a large impact in the USA with 25% of the US market. The
Japanese industry has decided to locate in the traditional rustbelt:
Japanese Motor Industry - N America
E Nummi (Toyota - GM)
California
0
Honda
E
Cami (Suzuki - GM) E EToyota
MazdaE
E Nissan-Ford
Subaru-Isuzu
Ohio
E
Honda
E
0
Illinois
0
E Honda
E Indiana
0
Daimlar Star
E Toyota
0
Kentucky
Nissan
0E
Tennessee
Glocalisation – A system of production whereby production takes place outside the home country.
However, instead of assembly branch plants there is a local sourcing of parts to allow JIT.
Pattern of Growth
11 of the 12 Japanese plants are located in the rustbelt from Ontario to Tennessee. This is called auto
alley. The factories are located along interstate highways for transport links. The suppliers are located
nearby as part of an integrated vehicle production complex. The suppliers need to be no more than 2
hours away for JIT to work.
Reasons for Japanese expansion into N America:
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Avoid the threat of tariffs on imports.
Rise in the value of the yen leads to greater export costs from Japan to N America.
Markets are more competitive in Japan so they seek new markets.
Japanese manufacturers were becoming more productive than US companies.
As the Japanese share of the US market grew, investment in the US became more attractive.
Competitive reaction after Honda & Nissan move to the US
Component manufacturers also move as they have contracts in Japan.
Incentives from local governments in the US
Product Cycle
Phase 1 – Company introduces a new product to the home market due to technical innovation
Phase 2 – Output expands to take advantage of economies of scale, keeping prices down.
Phase 3 – A market is identified in another country & the company begins to export.
Phase 4 – Company sets up an assembly plant in the host country and the product is sent as a kit to be
assembled in the host country.
Phase 5 – Company develops manufacturing in the host country, allowing the factories to become
more efficient.
Phase 6 – Company invests in additional plants. Rival plants follow suit to the host country as a
competitive reaction to create a cluster.
The last stage of this product cycle is Foreign Direct Investment.
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Effect on the US Domestic Production
As Japanese companies take a larger share of the market US profits fall meaning that many factories
have had to close with the loss of 1000s of jobs. GM is now no longer the richest Car Company
although it is still the biggest. US companies are therefore less able to put money back into design &
R&D and so the trend continues. However, competition does encourage greater efficiency.
Coventry – Car Industry
Changes in industry in Coventry
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Development of industry in 1930s.
The Midlands is a good location in the middle of the UK with good access to markets. The
area already has an engineering heritage and so there is a skilled workforce. There was a
progression from:
Silk  Watches  Bicycles  Cars.
Agglomeration of Industry
More industries grow up around successful industries as part of the multiplier effect. Suppliers
set up to be close to industry causing more industry to locate near to them.
Decline since 1970s
General contraction of the industry as plants move abroad for cheaper labour & merge for
economies of scale. This leads to job loss in the area. There was decline in the Midlands due
to government policy e.g. encourage companies to NE away from the Midlands. However
there have been grants, financial support & motorway improvements to help the Midlands.
There is now ver little manufacturing left in Coventry & lack of investment means that they are unable
to compete with Europe. Therefore many companies e.g. Ford move to Europe, especially due to strong
pound. Companies in the UK can’t compete with foreign competition in LEDCs.
Changes in the Car Industry: Proton - Malaysia
The Malaysian economy has grown rapidly due to the location of the car industry there with up to 8%
per year. The area used to have high unemployment but it is now less than 4% and there are some
shortages in certain jobs. The important point is that profits for Proton remain in Malaysia. This has
allowed Malaysia to develop & improve its plants. Wages have increased & so some cheap labour from
Bangladesh is now used.
Malaysia as an NIC
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Types of industry
There are many types of industry, in particular the car industry with proton and its component
manufacturers. Tyres are made locally and the rubber industry was already very important. There
is also quite a large hi-tech industry.
Money
Most of the money is provided by outside investors who want the cheap labour & nearby markets
of Malaysia e.g. Mitsubishi funded Proton. The government also helps with a 10-year tax break &
grants.
Markets
Generally cars are sold to SE Asia but they are now also exporting to Europe & the US. The home
market is only small so most is exported.