R
Winning the BRIC
Auto Markets
Achieving Deep Localization in Brazil, Russia, India,
and China
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Winning the BRIC Auto
Markets
Achieving Deep Localization in Brazil, Russia, India,
and China
Nikolaus S. Lang
Stefan Mauerer
With regional contributions by
Marcos Aguiar (Brazil)
Ewald Kreid (Russia)
Arindam Bhattacharya (India)
Christoph Nettesheim (China)
January 2010
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Contents
Executive Summary
4
Localizing in the BRIC Markets
6
Diverse Market Size, Growth, and Structures
6
Varying Degrees of Localization
8
Taking a Close Look at the BRIC Markets
11
Brazil
11
Russia
15
India
20
China
24
Prioritizing Investments Across the BRIC Markets
31
Formulating a Cross-BRIC Strategy
33
Evaluating Current Localization Profiles
33
Developing an Optimal Localization Profile
35
Six Key Lessons from the BRIC Markets
40
For Further Reading
41
Note to the Reader
42
W  BRIC A M

Executive Summary
F
or the next decade, the future of the automotive
industry lies in the BRIC countries. Together, Brazil, Russia, India, and China will account for
some 30 percent of world auto sales in
2014—while also offering significant opportunities for cost-effective R&D, sourcing, and manufacturing. Yet,
although virtually all multinational automotive OEMs and
suppliers are now conducting operations in the BRIC countries, they are not fully capturing those markets’ strategic potential. Why is that? And what should auto companies be doing differently?
In this report, the second in our series on capturing global advantage in the automotive industry,1 we examine the strategies employed by leading OEMs and suppliers in localizing
their R&D, sourcing, manufacturing, and sales in the BRIC
countries. Specifically, we analyze the degree of localization of
49 OEMs and suppliers in each BRIC country for each function, compare localization across the BRIC countries, assess
the future development of these markets, compare local capabilities and resources, identify particularly promising combinations of functions and countries, and define numerous best
practices that can help automotive OEMs and suppliers operate effectively in the BRIC countries.
Industry participants can use the observations presented in
this report to develop new localization strategies for individual BRIC countries, refine existing strategies, design an overall cross-BRIC strategy, and profit from other companies’ experiences. The analyses and best practices presented here,
while focusing on the BRIC countries, are applicable also to
other rapidly developing economies.
Auto markets in three of the four BRIC countries
have strongly outperformed triad markets (Europe,

Japan, and North America) during the crisis—and will
continue their strong growth.
◊ While the economic crisis plunged many of the world’s
automotive markets into free fall, markets in the BRIC
countries were generally less affected and now offer
prospects for exceptional growth.
◊ Whereas auto sales in the most developed markets
will grow only moderately from year-end 2009 through
2014, at an average rate of some 2 percent per year,
sales in the BRIC countries will grow at rates ranging
from 3 to 15 percent per year, to end up accounting for
some 30 percent of the global auto market in 2014.
Auto companies are not fully realizing the strategic
potential of the BRIC countries as locations for conducting R&D, sourcing, manufacturing, and sales.
◊ Although the BRIC countries offer advantageous conditions for conducting R&D, sourcing, manufacturing,
and sales, less than 10 percent of leading automotive
OEMs and suppliers are deeply localized in all four
countries.
◊ This is not to say that more localization in a particular
country is necessarily better than less, or that all automotive companies should localize all their operations
in all four BRIC countries. Nonetheless, it is clear that
there is considerable room for deeper—and more profitable—localization.
1. Our first report in the series was Winning the Localization Game:
How Multinational Automotive OEMs and Suppliers Are Realizing the
Strategic Potential of China and India, BCG report, January 2008.
T B C G
◊ Companies that are localized are oen operating in
ways that are less than optimal. Some 55 percent of
foreign automotive companies’ R&D centers in China
and India, and 30 percent of those in Brazil, are “engineering nuclei” that have little or no autonomy from
global R&D centers and only low levels of project responsibility. In sourcing, volumes remain low: foreign
OEMs’ sourcing from China, for example, typically averages just 1 to 5 percent of their overall sourcing. And
in manufacturing, companies are generally paying a
premium of 5 to 15 percent to manufacture in the
BRIC countries, mainly because of diseconomies of
scale and higher quality-assurance costs; only in Brazil
do they actually save money on manufacturing.
The four BRIC countries differ dramatically in market development and local capabilities, as well as
consumer preferences.
◊ Brazil, China, and India are the BRIC countries’ safe
bets. All three will continue growing through 2014.
While Brazil will grow moderately at about 3 percent
per year, China will grow at about 5 percent per year
and India at about 9 percent per year.
◊ In contrast, Russia is the BRIC countries’ roller coaster.
Sales dropped by an estimated 50 percent in 2009 but
are expected to stabilize in 2010, achieving growth of
some 15 percent per year through 2014. Russia’s development is hard to anticipate, however, because it will
depend greatly on external factors, such as prices of
raw materials.
◊ China will remain by far the largest of the four automotive markets, expanding its share of total BRIC
sales volume from 53 percent in 2008 to 61 percent
in 2014.
◊ Brazil is the most mature and stable of the BRIC markets and is likely to remain the second largest of the
four through 2014.
◊ India will outpace both Brazil and China in growth
throughout our forecast period, occupying third place
in terms of market size until 2014, when Russia’s
strong postcrisis recovery is likely to propel it to that
rank, nudging India down to fourth place.
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◊ Companies must understand that there is no standard
BRIC car: Brazilian consumers favor sporty hatchbacks, Russians prefer Western sedans and sport-utility vehicles without visible local adaptations, Indians
seek ultra-low-cost minicars, and the Chinese enjoy affordable luxury-style sedans with flair.
Our recommendations to auto companies fall under
three general headings:
◊ In terms of country strategies, make China the cornerstone of any BRIC strategy, strengthen the company’s
presence in Brazil and India, and invest selectively in
Russia with a view to its long-term potential.
◊ Until each BRIC country provides enough scale to justify completely individualized products, adapt standard
platforms significantly to meet local requirements, and
engage local partners as needed to help develop appropriate local sales-and-marketing concepts.
◊ Expand sales networks in all four BRIC countries and,
depending on the company’s capabilities and prospects, invest selectively in particular countries to increase local R&D, sourcing, and manufacturing where
those activities are most advantaged.
About the Authors
Nikolaus S. Lang is a partner and managing director in
the Munich office of The Boston Consulting Group; you
may contact him by e-mail at lang.nikolaus@bcg.com.
Stefan Mauerer is a project leader in the firm’s Munich
office; you may contact him by e-mail at mauerer.
stefan@bcg.com.
Regional contributors: Marcos Aguiar (Brazil) is a senior
partner and managing director in BCG’s São Paulo office;
you may contact him by e-mail at aguiar.marcos@bcg.
com. Arindam Bhattacharya (India) is a partner and
managing director in the firm’s New Delhi office; you
may contact him by e-mail at bhattacharya.arindam@
bcg.com. Ewald Kreid (Russia) is a partner and managing director in BCG’s Moscow office; you may contact
him by e-mail at kreid.ewald@bcg.com. Christoph
Nettesheim (China) is a senior partner and managing
director in the firm’s Beijing office; you may contact him
by e-mail at nettesheim.christoph@bcg.com.

Localizing in the BRIC
Markets
T
he world’s leading automotive OEMs and
tier 1 suppliers, facing stagnating or declining sales at home in the triad markets (Europe, Japan, and North America), are turning their attention to the BRIC countries.
Auto markets in other rapidly developing economies
(RDEs) in Eastern Europe, Latin America, and Southeast
Asia are either stagnant or still relatively small. In contrast, Brazil, China, and India are showing above-average
resistance to the current economic crisis. All three markets have grown, and together with Russia they will
achieve exceptional growth through 2014. (See Exhibit 1.)
Specifically, the four BRIC countries together will provide
approximately 30 percent of global automotive sales in
2014. To capture that growth, automotive companies
must be present in each BRIC market, selling vehicles
that local consumers want to buy.
Most leading OEMs and tier 1 suppliers have localized at
least some of their R&D, sourcing, manufacturing, and
sales in the BRIC countries. Many of these companies
have attempted to standardize their products, processes,
and localization approaches across the BRIC countries,
on the assumption that standardization would ensure a
cost-effective market presence. However, in view of these
markets’ highly diverse capabilities and requirements,
companies should take differentiated approaches to them
in order to realize the full value of localization.
Diverse Market Size, Growth,
and Structures
The four BRIC automotive markets have developed—
and will continue developing—quite differently. (See Exhibit 2.) During the current financial crisis, China’s market has achieved strong sales growth, while markets in

Brazil and India have also continued growing. All three
will continue to grow through 2014. The Russian market,
in contrast, will achieve very high recovery rates aer
having contracted by approximately 50 percent in 2009.
However, forecasts for Russia must be viewed with some
caution because of the Russian market’s strong dependence on the prices of raw materials, including oil
and gas.
Of the four markets, Brazil’s will likely be the most stable,
with comparatively slow postcrisis growth through 2014;
Brazil has already overtaken Russia to rank as the second
largest of the four markets and will retain that rank
throughout our forecast period. India’s market will show
the second-highest growth rates, outpacing both Brazil
and China; however, as it is growing from a relatively
small base, it will remain third in rank through 2013 and
will then be surpassed by the Russian market in 2014.
And China’s massive market, bullish in 2009, will likely
experience a slowdown in sales growth from 2010 on, as
government incentives end, but will nonetheless expand
its share of BRIC sales volume from 53 percent in 2008 to
61 percent in 2014. (See Exhibit 3.) Aer 2014, the Russian market will grow more moderately. In contrast, India’s market will continue to boom and will likely become the second largest of the BRIC markets by year-end
2018, followed by Russia and then Brazil.
Like market size and growth, market structures also vary
across the BRIC countries. While imports and vehicles
made by localized foreign OEMs will continue to account
for virtually the entire Brazilian market over the forecast
period, local OEMs will likely gain market share in China
and India. The market share of imported vehicles will
stay relatively stable in Brazil, China, and India and will
decline significantly in Russia, partly because of Russia’s
T B C G
Exhibit 1. The BRIC Automotive Markets Will Grow Strongly Through 2014...
Automotive marketa
(millions of units)
90
The BRIC markets will
drive 31 percent of world
growth through 2014
78–87
80
70
60
70
–12
62
15
While the world market
shrank, the BRIC
markets grew
50
40
30
12–17
4
23–27
4–8
19
55–60
55
43
20
10
0
World
market,
2007
BRIC
markets’ gain,
b
2007–2009
Rest of world
market’s loss,
2007–2009b
World
market,
2009b
BRIC
markets’
gain,
2009b–2014b
Rest of world
market’s
gain,
2009b–2014b
World
market,
2014b
Rest of world
BRIC
Sources: IHS Global Insight, November 2009; BCG analysis.
a
Passenger cars and light commercial vehicles up to 3.5 tons.
b
Estimates.
Exhibit 2. ...But Growth Patterns Will Differ Among the Four Markets
Estimated Estimated
performance CAGR
2008–2009 2009–2014
(%)
(%)
Sales indexa (2008 = 100)
200
180
China
India
42
13
5
9
Brazil
11
3
Russia
–48
15
160
140
120
100
80
60
0
2008
b
2009
b
2010
b
2011
b
2012
2013
b
b
2014
Sources: IHS Global Insight, November 2009; Economist Intelligence Unit, November 2009; BCG analysis.
a
Passenger cars and light commercial vehicles up to 3.5 tons.
b
Estimates.
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
Exhibit 3. China’s Automotive Market Will Continue to Dwarf Other BRIC Markets in 2014
2008 Salesa
(millions of units)
Estimated 2014 Salesa
(millions of units)
Total: 16.1 million units
<0.1
Local
OEMs’
vehicles
<0.1
0.5
0.8
4.2
0.6
2.3
Localized
foreign
OEMs’
vehicles
2.9
1.4
b
2.0
1.2
b
4.1
Imports
0.6
1.0
8.4
Local
OEMs’
vehicles
Localized
foreign
OEMs’
vehicles
Total: 24.9 million units
1.1
0.6
Imports
0.4
Brazil
2.7
6.6
1.6
0.3
China
8.6
<0.1
India Russia
3.0
1.7
Brazil
3.5
0.3
China
15.3
<0.1
India Russia
3.0
3.1
Sources: IHS Global Insight, November 2009; Economist Intelligence Unit; BCG analysis.
a
Passenger cars and light commercial vehicles up to 3.5 tons.
b
Including Maruti.
negative incentives against imports, which were instituted at the beginning of the 2008–2009 downturn, but principally because foreign OEMs will expand their local production capacity.
In the context of the BRIC countries’ varied market size,
growth, and structures, how are leading automotive OEMs
and suppliers participating in these markets? The answer
is that they have been entering them in a number of
ways, achieving varying degrees of localization, and learning many valuable lessons along the way.
Varying Degrees of Localization
Assessing the degree to which foreign companies are localized in a given country or region is far from simple. In
Winning the Localization Game, our earlier report in this
series, we introduced the BCG localization framework,
which lays out the typical progression of automotive
OEMs and suppliers as they become increasingly localized in an RDE market. (See Exhibit 4.)
In general, companies localizing in RDEs (including the
BRIC countries) occupy one of five localization stages:

◊ Home players serve the local market only by exporting
low volumes from their home bases, which are generally in Europe, Japan, or North America
◊ Exporters have a minor presence in the local market
but keep all localized functions under tight control
from their headquarters
◊ Explorers have localized some independent functions
in the RDE, but their headquarters still have a strong
impact on local strategies
◊ Settlers have localized all their core functions in the
RDE and have empowered them to act relatively independently from headquarters
◊ Global players give their operations in the RDE not only
considerable autonomy but also global responsibility
for particular functions and products—for example,
making a given BRIC country the sole production hub
for a product line sold globally
It should be noted that a company’s various functions—
R&D, manufacturing, sourcing, and sales—can occupy
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Exhibit 4. Companies Typically Move Through Five Stages of Localization
Home players
Functions in the value chain
Characteristics
Exporters
Explorers
Settlers
Global players
Serve the BRIC
markets only
through lowvolume exports
Minor presence in
the BRIC markets;
key functions
under tight control
from headquarters
Some independent
presence in some
functions; headquarters still exert
strong impact on
development
Fully independent
from headquarters; all key functions managed
by local staff and
organization
Fully independent
from headquarters,
with global responsibility for some or
all functions
No presence
No presence;
vehicles exported
with only minor
adaptations
Conduct minor local R&D activities
Conduct major
local R&D activities
Maintain major
R&D centers
with global
responsibility
No presence
Source simple
parts
Source
submodules
Source a wide
array of products
Conduct full-scale
sourcing to serve
the company
worldwide
No presence
CKD production
or small local
production1
Operate one or two
full-scale plants
Operate several
plants
Operate several
large plants for
local and export
markets
Low-volume
exports
Only key functions
localized
Sales network
serves tier 1 and
tier 2 cities
Sales network
serves first- to fihtier cities
Sales department
also manages
exports
R&D
Sourcing
Manufacturing
Sales
Source: BCG analysis.
1
CKD = completely knocked down.
different stages of localization in different countries or
even within the same country. A company can be described as having attained “deep localization” in one or
more of its functions when it has localized those functions to the settler or global player stage.
We identified the degree of localization of all 49 top international automotive OEMs and suppliers in the BRIC
markets, and then combined those scores to show overall
patterns of localization. (See Exhibit 5.) Interestingly,
none of the companies have reached the highest level of
localization across all four markets. Each company’s pattern of localization varies significantly across the BRIC
countries and across functions within each country.
Typically, companies’ sales and manufacturing functions
are more localized than their sourcing, and far more so
than their R&D. The few exceptions to this general rule
reflect distinctive business models. For example, a European power-train-engineering company has localized its
R&D and sales in China to a greater extent than its sourcing and manufacturing because this company is partnering with local Chinese OEMs in the development of their
power-train technology.
W  BRIC A M
Looking country by country at the levels of localization
that foreign auto companies have achieved, we again see
distinctive patterns:
◊ China shows the highest levels of localization,
thanks to the vast size of its current and potential
market
◊ Brazil follows closely aer China, in part because foreign OEMs have such a long-established presence
there
◊ India trails China and Brazil in the degree of foreign
auto companies’ localization, mostly because its relatively small market size and specific requirements
pose challenges for industry participants
◊ Russia has the lowest level of localization to date, partly because the international automotive industry began entering the Russian market even later than it entered India
As these major differences among BRIC markets suggest,
auto companies cannot succeed in them by offering one
Exhibit 5. Foreign Automotive Companies Are Most Deeply Localized in China and Brazil
Average degrees of localization in each country
Home players
Exporters
Explorers
Settlers
Global players
R&D
Sourcing
Manufacturing
Sales
Russia
India
China
Brazil
Sources: Corporate information; company interviews; BCG localization database; BCG analysis.
Note: Forty-nine companies were evaluated.
size-fits-all BRIC products, processes, or approaches.
Nonetheless, companies are creating significant value by
pursuing cross-BRIC learning, synergies, sharing of best
practices, and investments—while also respecting the
unique characteristics of each market. In the following

section, we look at Brazil, Russia, India, and China individually.
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Taking a Close Look
at the BRIC Markets
T
he four BRIC countries differ dramatically
in their market development and local capabilities, as well as in consumer preferences. Each offers a unique constellation
of challenges and opportunities for automotive companies.
Brazil
The Brazilian automotive market can be considered the
most mature and stable of the four BRIC markets and the
front-runner in terms of auto companies’ localization. In
1921, the Ford Motor Company began producing its Model T there. Later, as in many European countries, Volkswagen introduced its Beetle to spearhead the country’s motorization, winning a peak market share of close to 80
percent in the late 1960s. The Brazilian auto market was
dominated by the “first wave” OEMs—Fiat, Ford, General
Motors, and Volkswagen—through the 1980s. Subsequently, a second wave brought companies such as Daimler,
Honda, Hyundai, Land Rover, Mitsubishi, PSA, Renault,
and Toyota into the market. Thanks to this long history,
Brazil has a relatively stable automotive market, in which
most OEMs and suppliers are localized to a high degree.
This is not to deny that there has been considerable market volatility in recent years, with annual sales expanding
and contracting by as much as some 30 percent. Nonetheless, of the four BRIC automotive markets, Brazil’s is
now the most mature and very likely will remain so
throughout our forecast period. We expect sales to climb
by some 5 percent in 2010, aer having grown by a strong
10 percent in 2009, and then to stabilize at around 2 percent per year through 2014. (See Exhibit 6.) Aer 2014,
we expect the Brazilian market to achieve continuous
moderate growth but to be overtaken eventually by the
W  BRIC A M
faster-growing Indian and Russian markets, which will
rank second and third among the BRIC markets, respectively, in 2018.
Brazil’s market structure differs significantly from those
of the three other BRIC countries. Unlike China, India,
and Russia, Brazil did not block international automotive
OEMs from gaining access to the country’s auto market
during the early decades of the industry’s development.
Therefore, the presence of highly competitive foreign
companies has historically hindered the establishment of
local automotive OEMs. Apart from a few small-volume
niche players—including Agrale and Marcopolo—the
Brazilian auto market belongs entirely to foreign OEMs.
We expect distribution of market shares to remain stable
throughout our forecast period.
Manufacturing is concentrated in the southern part of the
country, in four main automotive clusters, as shown in Exhibit 6. Recently, several automakers have also opened
factories outside these clusters. Examples include Ford’s
factory in Camaçari, Hyundai’s in Anápolis, and Mitsubishi’s in Catalão. Within these clusters—and beyond
them—the overall degree of localization is high. The four
foreign OEMs that arrived in the first wave are far ahead
of their competitors, having achieved deep localization in
all four major functions. These companies typically have
local R&D centers with international reach, operate several production plants for both local sales and export,
and manage broad sales networks not only in the largest
cities but also in third- to fih-tier cities, such as Lagarto,
Rodonopolis, and Santarém.
Such OEMs have established significant footprints. For example, Volkswagen is operating four large plants in Brazil—in São Bernardo do Campo, São Carlos, Taubaté, and

Exhibit 6. Brazil’s Automotive Market Will Grow Moderately Through 2014
Moderate growth aer a strong 2009
Currently four main production clusters
(selected examples)
OEM plants: 19
Tier 1 plants: ~50
3% per year
Sales volumea
(millions)
Local OEMs’
vehicles
2.7
<1%
~3.0
<1%
Minas Gerais
OEMs:
Daimler, Fiat,
Iveco
Suppliers: Delphi, Magneti
Marelli
~3.5
<1%
São Paulo
OEMs:
Ford, General
Motors, Honda,
Nissan, PSA
Peugeot Citroën,
Renault, Toyota,
Volkswagen
Suppliers: Bosch, Bridgestone, Delphi,
Goodyear,
Magneti Marelli,
Mahle, Pirelli,
TRW, Valeo
83%
Localized
foreign
OEMs’
vehicles
Imports
81%
86%
14%
2008
19%
17%
2009b
2014b
Rio Grande do Sul
OEMs:
Agrale, General
Motors,
Marcopolo,
Navistar
Suppliers: Delphi, Pirelli,
Valeo
Paraná
OEMs:
Supplier:
General Motors,
Nissan, Renault,
Volkswagen,
Volvo
Delphi
Sources: IHS Global Insight, November 2009; Economist Intelligence Unit; corporate information; company interviews; companies’ annual reports and
press releases; BCG analysis.
Note: Includes only OEMs and international suppliers with significant production footprints in Brazil.
a
Passenger cars and light commercial vehicles up to 3.5 tons.
b
Estimates.
São José dos Pinhais. And Fiat’s plant in Betim, with a capacity of 700,000 units, is not only the company’s largest
but one of the industry’s five largest in the world. Like
these leading OEMs, the top suppliers in Brazil have very
advanced localization profiles, and each top supplier typically supplies most of the OEMs.
In contrast to the front-runners, however, most other foreign OEMs and suppliers are pursuing little or no R&D
activities in Brazil. In general, their sourcing activities are
limited to buying submodules for their international
needs. Their plants tend to be relatively small, and their
dealers serve mainly first- and second-tier cities, such as
São Paulo, Rio de Janeiro, Belém, and Cuiabá.
On average, then, the international automotive industry
in Brazil has attained a medium level of localization in

R&D, manufacturing, and sourcing, and an advanced level in sales. We discuss these four functions individually
below.
R&D
In localizing R&D to RDEs, companies typically set up
four kinds of R&D centers: offshore units, engineering nuclei, local R&D hubs, and centers of competence. (See the
sidebar “Four Roles for Localized R&D Centers.”)
In Brazil, specifically, companies can benefit from the
more than 40,000 well-trained engineers who graduate
each year, as well as from Brazil’s large population of experienced engineers who have acquired deep familiarity
with the automotive industry over decades. Drawing on
these strengths, foreign auto companies in Brazil maintain three of the four types of R&D centers:
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Four Roles for Localized R&D Centers
R&D centers in the BRIC countries—and in other RDEs—
typically play one of four roles. (See the exhibit below.)
◊ Offshore Unit. This kind of R&D center takes advantage
of low local factor costs to develop specific contents for
products; typical examples include soware programming and electronics engineering. Offshore units have
local autonomy in executing projects and managing local human resources; however, the company’s R&D
headquarters defines their processes, standards, and
interfaces and monitors the quality of their work.
◊ Engineering Nucleus. This kind of center adapts worldwide products to local requirements; an example would
be designing exterior body adaptations to a global model to make it more appealing for the Chinese market.
Engineering nuclei have local autonomy in exploring
customer needs and managing day-to-day projects. The
company’s R&D headquarters ensures that these units
have appropriate capabilities and arranges international exchanges of best practices and R&D staff.
◊ Local R&D Hub. A local R&D hub develops products for
the local market; for example, developing flex-fuel applications for Brazilian customers. Local R&D hubs have
autonomy in defining business cases and product specifications; the company’s R&D headquarters acts as a
consultant and facilitates exchanges of best practices.
◊ Center of Competence. This kind of center has global leadership responsibility for developing products or technologies for worldwide use. An example might be developing a small, low-cost SUV for markets around the globe.
The company’s R&D headquarters ensures each center’s integration into the company’s global network.
It is generally not advisable for a given R&D center to try
to play more than one of these roles at the same time. Often, a localized R&D center in an RDE will progress from
the first, simplest role through the subsequent roles and
eventually evolve into a center of competence.
Localized R&D Centers in RDEs Are of Four Types
Share of OEMs and suppliers operating in each type of R&D setup
High
Local R&D hub
Center of
competence
50%
25%
20%
10%
1
10%
5%
1
NA
Brazil China India Russia
NA
Brazil China India Russia
Engineering nucleus
Offshore unit
Autonomy from
global R&D center
55%
55%
30%
30%
NA1
Brazil China India Russia
10%
1
0%
NA
Brazil China India Russia
Low
Local
Project
responsibility
Global
Sources: Company interviews; BCG analysis.
Note: Total number of OEMs and suppliers interviewed = 49. Most were interviewed in all four BRIC countries.
1
NA = not applicable.
W  BRIC A M

◊ Engineering Nuclei. Thirty percent of the industry’s
R&D centers focus on adapting (also referred to as
“tropicalizing”) the company’s worldwide products to
local requirements under tight control from the company’s R&D headquarters. Example: A European supplier of heating, ventilating, and air conditioning systems uses its 55 engineers and 20 support staff to build
prototypes and operate testing facilities to adapt its
products to specific local conditions, including high
heat and humidity.
◊ Local R&D Hubs. Half of the industry’s local R&D centers not only adapt worldwide products but also develop products to meet the needs of Brazilian consumers. Example: A North American supplier of
engine and transmission components used a local
R&D hub to develop a low-cost torque control for small
front-wheel-drive cars.
◊ Centers of Competence. Only 20 percent of the industry’s
Brazilian R&D centers have full responsibility for developing products and technologies for both local and
global use. Example: Foreign OEMs’ and suppliers’ local R&D centers have been given global responsibility
for low-cost four-wheel-drive technology, small multipurpose vehicles (MPVs), and sporty, ultra-low-cost
hatchbacks.
Contributing to the potential value of conducting R&D in
Brazil is local market demand for vehicles and technolo-
gies that are also attractive for worldwide use, such as
ultra-low-cost small cars and flex-fuel. Familiarity with
R&D projects in these areas is positioning Brazilian R&D
centers to serve global markets as well. (See Exhibit 7.)
Sourcing
International OEMs’ high volume of production in Brazil
provides sufficient scale to justify the local production of
some 80 percent of the parts used, mostly by international suppliers with generally high levels of quality and productivity. However, auto companies do not yet source
from Brazil a significant percentage of the parts used in
their global operations. Brazil exported just $9.1 billion
worth of parts in 2008—far less than China’s $30 billion.
Some OEMs operating in Brazil are sourcing from lowercost suppliers in other Latin American countries or even
in China. For example, one OEM has launched a China
sourcing strategy for its Brazilian production in order to
profit from favorable exchange rates between the Brazilian real and the Chinese renminbi. It plans to source
50,000 tires and 15,000 light wheels from China, where it
manufactures products similar to the ones it makes in
Brazil.
Manufacturing
As mentioned above, Brazil is the only BRIC country in
which production costs are lower than those in the triad
markets—and far lower than those in the three other
BRIC countries. Our interview partners confirmed that
Exhibit 7. R&D Hubs in Brazil Excel in Applications for Global Market Niches
Global
niches
Flex-fuel
technologies
Low-cost
off-road
technology
Small cars
and engines
Local
low-cost
materials
Examples
Contributing
circumstances
◊ Electronic control
units
◊ Flex start systems
Domestic sugar-cane ethanol production and government energy policies led
to the development of key expertise in flex-fuel engines and related power trains
◊ Torque-controlling
differentials
Rough local road conditions, the popularity of off-road vehicles and vehicle styling,
and the local focus on affordability led to the development of competencies in
low-cost off-road technology
◊ 1.0-liter engines
The dominant share of the 1.0-liter “popular” car led to the development of key
competencies and specialization in the design of B-segment cars and small,
efficient engines
◊ Low-cost plastics,
alloys, and textiles
The focus on affordability, together with consumer preferences and local climate
conditions, led to specialization in less expensive materials that are better adapted
to local use
Sources: Company interviews; BCG analysis.

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OEMs Are Targeting Market Niches in Brazil
One sign that a market is maturing is that OEMs begin to
seek market “white spaces”—niches of previously unidentified consumer demand for specific products and features—and introduce low-volume models designed to
meet that demand. Over the past 15 years, OEMs in Brazil
have targeted several such niches. For example:
◊ Fiat gained market leadership in entry-level cars with
the ultra-low-cost Uno/Mille
◊ Japanese OEMs successfully introduced midsize sedans,
including the Honda Civic and the Toyota Corolla
Brazil’s cost advantage rests on the market’s relatively
large scale of production, reliable product quality, and
largely manual performance of processes not critical to
quality. Furthermore, in response to past market volatility, the Brazilian industry has developed a specific local
competence: production flexibility. Brazilian plants are
now generally more flexible than plants in the triad markets. One interview partner—a U.S. supplier—told us:
“High spending on robotics is not justifiable. The core of
the business is balancing the tradeoffs between automation and flexible manual labor.”
Nonetheless, despite Brazil’s attractive manufacturing
cost position, most automotive production is dedicated
to the domestic market. Only 18 percent of vehicles manufactured in Brazil are exported, of which some 85 percent go to other Latin American markets owing to production strategies focusing on these countries. Exports
outside Latin America are low largely because of Brazil’s
relatively volatile currency, its only partially developed
export infrastructure, its bureaucratic customs procedures, and its complex taxation system, which discourages exports.
Sales
The first-wave OEMs have now built up extensive sales
networks with wide regional coverage and a strong presence even in third- to fih-tier cities. The sales networks
of OEMs that began operating in Brazil more recently are
less extensive.
The cars being sold by the first-wave OEMs and by some
later-wave OEMs reflect the highest degree of product adW  BRIC A M
◊ Ford attacked the unexplored niche for small, low-cost
SUVs with the EcoSport
◊ GM successfully created the small-MPV market with the
Chevrolet Meriva
Thanks to these and other pioneering forays into niche
markets, the market share of so-called white-space
vehicles swelled from 0.2 percent in 1996 to 22 percent
in 2008.
aptation to local requirements among the BRIC countries.
For instance, most OEMs offer a version of the carro popular—a small, inexpensive hatchback with a one-liter engine. Examples include the Chevrolet Celta, the Fiat Palio,
and the Volkswagen Gol. The largest OEMs offer more
than one carro popular. As is typical in maturing markets,
OEMs in Brazil have begun to identify and target market
niches. (See the sidebar “OEMs Are Targeting Market
Niches in Brazil.”)
In contrast to new-car sales, used-car and aer-sales networks are considerably less developed in Brazil than in
the triad markets. However, OEM pioneers in Brazil’s carfinancing market have reached a high level of maturity.
One OEM has developed a car-financing offering that covers a wide range of both automotive and unrelated products; some of its offerings involve partners.
While most suppliers in Brazil serve multiple OEMs, some
have not yet managed to level out demand among their
various OEM clients. Because they are overly dependent
on one or a few companies, they are not yet realizing the
full potential of the Brazilian market. However, the leading suppliers are successfully serving most or all OEMs
and have started offering parts and systems designed specifically to meet local requirements for low cost and the
ruggedness to withstand rough terrain.
Russia
In contrast to Brazil, with its long experience of hosting
international automotive companies, Russia has a history
of solely domestic production. Most of that production

has emanated from what was once the world’s largest
auto factory, the AvtoVAZ (Lada) plant in Togliatti. The
plant opened in 1969, initially producing a single model—the Lada 2101—which was based on the Fiat 124.
From the mid-1970s through the mid-1980s, the market for Lada vehicles exceeded 1 million units per year;
thereaer it stagnated and fell to between 600,000 and
1 million units per year until the beginning of this
century.
With the deregulation of the Russian automotive market
in the late 1990s, international companies began exporting into the Russian market, some OEMs and suppliers
began localizing sales there, and sales volumes resumed
growing, driven almost entirely by imports and localized
foreign companies. Russian carmakers were able to
maintain their production volumes, but as the market
expanded, they lost share to the newly arrived outsiders.
Among the first to begin localizing operations in Russia
were Ford, GM, Hyundai, and Renault; others soon followed.
Because of Russia’s relatively short history as an international automotive market, it is more volatile than the
other BRIC markets and its future development is less
predictable. It has also been hardest hit by the economic
downturn. While auto sales in China skyrocketed by
some 40 percent in 2009, and auto sales in Brazil and India grew strongly, sales in Russia dropped by approximately 50 percent. Even when the economy recovers,
sales will attain 2008 levels only in 2014. (See Exhibit 8.)
Meanwhile, as Russia’s market contracted in 2009, it fell
to fourth place among the BRIC markets. It will likely remain there until 2014, when its strong postcrisis recovery
Exhibit 8. The Russian Market’s Contraction Will Be Followed by a Strong Growth Surge
Currently five main production clusters
(selected examples)
Shi away from imports
15% per year
Sales volumea
(millions)
Local OEMs’
vehicles
Localized
foreign
OEMs’
vehicles
~3.1
3.0
Kaliningrad
OEMs:
Avtotor, BMW,
Chery, General
Motors, Kia
Supplier: Brisk
20%
28%
19%
44%
~1.5
36%
Imports
54%
28%
36%
36%
2008
2009b
b
2014
Greater Moscow and Kaluga
OEMs:
Mitsubishi, PSA
Peugeot Citroën,
Renault, Škoda,
Volkswagen
Suppliers: Continental, Hella,
Magneti Marelli,
Michelin
OEM plants:
Tier 1 plants:
13
23
Saint Petersburg
OEMs:
Ford, General
Motors,
Hyundai,
Nissan, Opel,
Toyota
Suppliers: Asahi Glass,
Toyota
Boshoku,
Denso, Johnson
Controls, Lear
Nizhny Novgorod
OEM:
GAZ
Suppliers: Benteler,
Faurecia,
Ficosa, Johnson
Controls, Lear,
Magna, Valeo
Togliatti and Samara
OEMs:
AvtoVAZ, General
Motors
Suppliers: Bosch, Delphi,
Federal Mogul,
Johnson Controls,
Tenneco, Woco
Sources: IHS Global Insight, November 2009; Economist Intelligence Unit; press research; corporate information; company interviews; companies’ annual
reports and press releases; BCG analysis.
Note: Includes only OEMs and international suppliers with significant production footprints in Russia; also includes completely knocked down (CKD) and
semi-knocked-down (SKD) production.
a
Passenger cars and light commercial vehicles up to 3.5 tons.
b
Estimates.

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should propel it into third place, displacing India. Aer
2014, however, India’s market will outpace Russia’s,
while Brazil’s will grow more slowly, so that by year-end
2018 the Russian market is likely to be smaller than China’s and India’s but larger than Brazil’s.
Moreover, in Russia the downturn has brought a significant shi in market share between imports and local production. While localized foreign OEMs have been increasing their market shares considerably, the share of imports
has been decreasing, for two main reasons:
◊ Local production has become much more attractive
economically, given the devaluation of the ruble, the
imposition of import barriers for used cars, and the increased duties on imported new cars
◊ International OEMs have increased their localized production volumes significantly, using existing plant capacity and expansions that had been planned before
the downturn
The indigenous Russian automotive industry is focused
in two clusters, where some international suppliers have
also localized, whereas the localized foreign OEMs and
suppliers are focused in three main clusters, as shown in
Exhibit 8. The international automotive industry overall
is considerably less localized in Russia than in the other
BRIC countries, and the focus of its localization is on
manufacturing and sales. Most foreign companies have
no local R&D activities in Russia and do not source there
for either domestic or international purposes.
In Russia, unlike in Brazil, the difference in localization
between the average localized foreign automotive companies and the localization front-runners is comparatively small. For example, one of the first OEMs to have entered Russia—a company that now has R&D centers
totaling more than 1,000 employees in Bangalore, São
Paulo, and Shanghai—conducts no major R&D in Russia.
The major distinction between front-runners and average industry participants, in terms of localization, is that
the front-runners no longer do completely knocked down
(CKD) production exclusively but have built large plants
for full-fledged production; they have also extended their
sales networks to include more of the smaller cities. The
localized foreign suppliers, meanwhile, primarily serve
localized foreign OEMs; only a few have begun cooperating with indigenous Russian OEMs.
W  BRIC A M
R&D
Although Russia graduates an impressive 400,000 engineers a year, and thus provides a large pool of qualified
R&D talent, no international OEMs or suppliers have
built up R&D centers in Russia to a significant scale.
There are a number of reasons why they have not felt the
need to do so:
◊ Russian consumers prefer triad-market vehicles. In the
Russian market’s SUV and Western sedan segments,
the slogan “Equal to the West” is an important selling
point. Russians demand virtually the same models
that are sold in Europe, Japan, and the United States
and will not accept adapted versions. In the low-cost
segment, international competitors have gained market share by selling low-cost models from other countries.
◊ Local engineers lack automotive R&D experience. Russia’s
significant numbers of well-educated engineers are focusing on other industries, such as electronics and the
military. Local OEMs have not provided a strong foundation for developing automotive experience; instead,
they have focused their product-development activity
on updating existing product designs.
◊ Engineers’ wages are rising. Engineers’ wages have been
rising by approximately 20 percent per year; by 2008,
they had reached fully half the level of wages in Western R&D centers.
Sourcing
Here, too, the international automotive industry is only
slightly localized in Russia. Many OEMs still operate on a
semi-knocked-down (SKD) or a CKD basis and import
more than 80 percent of their components.
Russian exports of automotive parts totaled just $1.7 billion in 2008—a very minor amount in the overall picture
of global automotive sourcing. A major challenge to growing this percentage is that less than 5 percent of Russian
suppliers meet international OEMs’ global sourcing policies and quality standards. Moreover, few international
suppliers have entered Russia so far, mainly because low
production volumes, together with an existing stock of vehicles that have short remaining life spans, combine to
limit suppliers’ likely return on their investments. Those
international suppliers that have localized in Russia produce mainly low-value-added products.

For these reasons, most localized OEMs are struggling to
meet Russia’s official requirement that they achieve 30
percent local content aer three years of operations.
However, localizing sourcing in Russia could become
easier as the country’s suppliers of raw materials increasingly meet international standards. (See the sidebar
“Creating Conditions for Higher Local Content in
Russia.”)
nificantly, productivity was relatively low, and employee
attrition was high. Today, however, with both wage levels
and attrition rates declining, companies need to explore
opportunities to replace costly automation with lowercost manual processes. Companies willing to take this approach can learn from best practices in Brazil, China, and
India.
To address the scale disadvantage by bundling volumes,
one international OEM has developed a joint sourcing
task force with a Russian OEM. The international OEM is
introducing international quality standards and providing supplier development, while the Russian OEM is contributing broad knowledge of and access to the Russian
supply base. An additional goal is to jointly attract new
international suppliers to invest in Russia.
Another way to address the cost issue is by adopting more
flexible approaches to automotive manufacturing. As in
Brazil, where historical market volatility led companies
to develop special competence in flexible manufacturing,
in Russia companies are beginning to hedge against
fluctuating demand with highly flexible production
systems. (See the sidebar “Addressing Volatility by Expanding the Model Range and Employing Flexible Production.”)
Manufacturing
Sales
In manufacturing, as in R&D and sourcing, foreign automotive companies are still in relatively early stages of localization in Russia. Those that have set up production
there are operating primarily in low-scale SKD or CKD
modes. Currently, most of their Russian plants are subscale, leading to a significant cost disadvantage compared
with triad markets.
Most global OEMs are present in Russia. They have employed independent multibrand dealer networks to cover
tier 1 and tier 2 cities, such as Moscow, Saint Petersburg,
Nizhny Novgorod, and Samara, where the bulk of current
demand is located. OEMs are now expanding into thirdto fih-tier cities, which are home to some 70 percent of
the Russian population—and some 55 percent of the
country’s income. These regions will increase their share
of demand as incomes rise. A best-practice example in
this market is a North American OEM that has located 35
percent of its more than 120 dealerships in third- to fihtier cities—almost as many as the 39 percent of its dealers that are in tier 1 cities.
One factor driving high costs in Russia is that most foreign companies have duplicated their home-country production processes there, using large amounts of costly automation. Before the downturn, this approach made
sense because the cost of skilled labor was increasing sig-
Creating Conditions for Higher Local Content in Russia
Despite Russia’s role as a net exporter of raw materials,
OEMs making cars there still tend to rely on imported
steel, chemicals, and other materials and parts. This could
change soon. Local and international automotive suppliers are building up the infrastructure that will allow OEMs
operating in Russia to reduce their dependence on imports. The goal is to encourage these OEMs to benefit
from Russia’s cost advantages—and in turn benefit the
economy—by buying locally.
For example, to address the issue that the quality of Russian-produced steel has not been high enough for stamping body parts for foreign OEMs’ cars, Magnitogorsk Iron

and Steel Works is opening a new plant especially designed to produce automotive steel. The quality of the
steel should meet the standards of the entire Russian automotive industry.
Similarly, to address the problem that it has not been possible to source polypropylene parts in Russia because of
the absence of polyolephines (chemical elements that are
essential to polypropylene production), a European petrochemical company has announced plans to open a plant
that will produce polyolephines in Russia.
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Addressing Volatility by Expanding the Model Range and Employing Flexible Production
In 2007, the Volkswagen Group opened its first production
plant in Russia in Kaluga, near Moscow. The plant, operated by Volkswagen Group Rus, is part of the Volkswagen
Group’s international expansion strategy in one of the
world’s most important long-term growth markets. In the
project’s first stage, the plant began assembling SKD kits
in November 2007. As of late 2009, the plant had reached
a capacity equivalent to 85,000 vehicles annually.
To comply with Decree 166, which governs the share of local content of vehicles manufactured in Russia, Volkswa-
Before Russia’s tax on imported used cars jumped to 30
percent in 2009, one Japanese OEM actively fostered its
used-car imports into Russia. The company is now leveraging the resulting heightened brand awareness, positive
brand image, and sales infrastructure—especially in remote areas—for its new-car sales.
Some OEMs adjust their products to local requirements—
for example, by outfitting them with “bad road” suspensions. However, Russia-specific adaptations are limited.
This is partly because Russian consumers prefer cars very
similar to those driven in Europe and the United States,
gen Group Rus recently began full production using local
content. In October 2009, 11 months ahead of schedule, it
began employing the plant’s own body shop, paint shop,
and assembly lines to manufacture the Volkswagen
Tiguan and the Škoda Octavia. During 2010, the plant is
expected to attain its maximum production capacity,
equivalent to 150,000 vehicles annually. Volkswagen
Group Rus intends to expand local production to add
three more models, including a Volkswagen notchback especially developed for the Russian market.
rather than those common in the other BRIC countries.
As a consequence, the Russian market’s segmentation resembles that of the U.S. market. (See Exhibit 9.)
International suppliers have been hesitant to enter Russia, largely because OEMs’ production volumes for each
model are low, making potential supplier volumes subscale. Suppliers that have localized in Russia tend to focus mainly on simple, low-value-added products.
The Russian market remains immature and volatile, in
part because international companies entered the mar-
Exhibit 9. Russian Preferences for SUVs and Sedans Resemble U.S. Preferences
Hatchbacks, sedans, SUVs, and MPVs sold in 2008 (percentage of total sales)
100
7
80
10
11
21
26
17
32
9
8
60
66
49
40
60
60
46
52
20
18
23
China
Russia
0
India
Western
Europe
Brazil
Hatchback markets
Hatchbacks
Sedans
SUVs
6
United
States
Sedan markets
MPVs
Others
Sources: IHS Global Insight, November 2009; BCG analysis.
W  BRIC A M

ket so recently. But Russia offers considerable potential
for localization, if only because it is starting from a small
base. As India’s example shows, market stability can
contribute to deep localization of the automotive
industry.
India
For decades, India’s automotive market consisted almost
entirely of vehicles produced domestically by Indian companies, using designs based closely on European models.
Foreign automakers entered the Indian market only a little over a decade ago. Before they arrived, Indian consumers achieved automotive mobility largely by means
of models such as the Hindustan Ambassador and the
Premier Padmini, whose designs changed only slightly
over the decades. Car production volumes grew from
19,000 in 1960 to 44,000 in 1983, then increased substantially aer the 1983 founding of Maruti, a joint venture
between the Indian government and Suzuki. (Suzuki held
a minority stake until 2002 and now holds a 54 percent
stake, qualifying Maruti for inclusion in our analysis of
localized foreign auto companies.) Aer the Indian government deregulated the automotive market, the growth
in sales accelerated, sometimes reaching rates as high as
50 percent per year. Growth was driven primarily by the
entry of foreign companies and by emerging local competitors, such as Tata Motors.
That rapid growth is likely to continue. Despite some historical similarities between India’s automotive history
and Russia’s, their markets are very different. India’s
stricter import regulations, more distinctive consumer requirements, and less saturated market have positioned
the Indian market for healthy growth. (See Exhibit 10.)
Even during 2009, a particularly difficult year, sales grew
by more than 10 percent; we expect that they will continue growing at approximately 9 percent per year through
2014—faster than either Brazil’s or China’s markets. Although the Russian market is likely to overtake the Indian market in 2014, thanks to its strong postcrisis recovery,
we expect that by 2018 India will have surpassed both
Russia and Brazil to become the second largest of the
BRIC auto markets.
Imported vehicles’ share of the national market is by far
the smallest among the BRIC countries because of India’s
significant barriers to market entry and Indian consumers’ exceptional price sensitivity. The Indian carmakers’

share of the market will increase from 30 percent in 2009
to 33 percent in 2014. The ability of local OEMs, such as
Tata, to ensure that their vehicles perfectly meet Indian
consumers’ demands for ultra-low-cost cars will drive this
growth. In addition, foreign OEMs are planning to ramp
up their production significantly and to launch less expensive vehicles in order to retain as much market share
as possible.
Currently, production takes place in India’s three main
automotive clusters, as shown in Exhibit 10. Foreign automotive companies have already achieved, on average,
a medium degree of localization in India in all four functions. However, the localization front-runners, such as
Bosch, Hyundai, and Maruti, are far more localized than
the rest of the foreign companies operating in the country. The front-runners have distinguished themselves
from their competitors by adapting their products to local
market requirements. They also establish strong local
R&D hubs, which oen undertake soware development,
among other projects. In addition, localization front-runners use local sourcing for much of their products’ contents; this includes sourcing some components (oen
metal parts) for international use. They all engage in
large-scale local production. Front-runner OEMs have extensive local sales networks, which oen include third- to
fih-tier cities such as Dharmapuri, Godhra, and Secunderabad. Front-runner suppliers sell large shares of their
production to local OEMs. However, the localization frontrunners are far from representative of all the foreign automotive companies operating in India.
R&D
With Indian universities graduating some 500,000 engineers a year, and wages well below those in the triad
markets, one might expect that foreign automakers would
choose to conduct large portions of their R&D in India.
However, most foreign auto companies operating in India
have not localized their R&D there significantly. Although
many have established R&D centers in India, some 30
percent of those centers are “offshore units,” typically developing soware, electronics, and other contents—rather than entire cars or engines—for vehicles to be produced outside India. Generally, the company’s R&D
headquarters executes tight control over these centers,
defining processes, standards, and interfaces and monitoring quality. Another 55 percent of foreign auto companies’ R&D centers in India are engineering nuclei, which
have local responsibility for adapting hardware compoT B C G
Exhibit 10. The Indian Automotive Market Will Grow Fast from a Relatively Small Base
Local OEMs’ share will increase
Currently three main production clusters
(selected examples)
OEM plants:
Tier 1 plants:
9% per year
Sales volumea
(millions)
Delhi and Gurgaon
OEMs:
Honda, Maruti
Suppliers: Continental,
Delphi, Denso,
Lear, Visteon, ZF
~3.0
33%
Pune and Mumbai
OEMs:
Mahindra, Škoda,
Tata, Volkswagen
Suppliers: ArvinMeritor,
Bosch, Continental, Dana, Johnson
Controls, Lear,
Magna, TRW,
Visteon, ZF
~2.0
1.7
30%
Local OEMs’
vehicles
Localized
foreign
OEMs’
vehicles
31%
66%
69%
70%
Imports
<1%
2008
<1%
b
2009
<1%
2014b
22
60
Bangalore and Chennai
OEMs:
BMW, Daimler,
Ford, General
Motors, Hyundai,
Mahindra, Toyota
Suppliers: Aisin, ArvinMeritor, Bosch, Dana,
Delphi, Denso,
Faurecia, Toyota
Boshoku, TRW,
Visteon
Sources: IHS Global Insight, November 2009; Economist Intelligence Unit; press research; corporate information; company interviews; companies’ annual
reports and press releases; BCG analysis.
Note: Includes only OEMs and international suppliers with significant production footprints in India; also includes CKD production.
a
Passenger cars and light commercial vehicles up to 3.5 tons.
b
Estimates.
nents such as suspensions, front ends, and seats. Only 15
percent of the R&D centers are local R&D hubs or centers
of competence and have more autonomy from the global
R&D headquarters.
plier told us: “Our engineers at headquarters are not
trained to develop low-cost products. Only by developing
products locally, with local engineers, could we gain significant volume from local Indian suppliers.”
Although Indian consumers have the most distinctive automotive requirements among the BRIC countries—for
instance, a growing demand for vehicles that cost well below $5,000—foreign OEMs have so far made few local adaptations to those requirements. Moreover, they generally
lead whatever adaptations they make from their R&D
headquarters in the triad markets.
Sourcing
In contrast, pioneering suppliers have transferred R&D
responsibility for local products to their Indian R&D centers. (See the sidebar “Shiing Responsibility for R&D to
India.”) As one interview partner from a European supW  BRIC A M
While pioneering OEMs and suppliers have established
full-fledged local production based on significant levels of
local sourcing, a number of other companies still conduct
CKD production or rely on high levels of imported parts
and raw materials. In 2008, India exported only $3 billion
worth of auto parts—one-tenth as much as China. Nonetheless, “local for global” sourcing is growing fast.
Clearly, companies have not yet realized the full potential
of sourcing from India. This is partly because most foreign OEMs and suppliers have just recently set up their

Shifting Responsibility for R&D to India
In 2007, one North American supplier inaugurated a technology park in Chennai that included an R&D center that
was given global responsibility for the company’s soware
development. The center also has sole responsibility for
the development and validation of electronic modules
and a variety of additional business processes. According
to plans, close to 1,000 soware engineers and business
process staff will be employed there.
Indian sourcing offices, and partly because their sourcing
is focused on commodities rather than on technologies,
and on localized foreign suppliers rather than on local
suppliers.
Manufacturing
Most foreign OEMs and suppliers have localized production, though their volumes are below the levels they produce in Brazil and China. Our interview partners confirmed that production costs are somewhat higher in
India than in the triad markets because of low scale effects, far higher quality costs, and higher costs for the logistics involved in importing parts.
To address the cost challenges, auto companies are undertaking a number of initiatives to do more production
manually and to improve quality. Several competitors,
particularly local suppliers, are applying the latest quality
approaches and succeeding in bringing failure rates to
within international standards. (See the sidebar “Sona
Koyo Steering Systems Sets the Quality Standard.”)
Sales
In this area also, foreign auto companies have reached a
medium level of localization in India. Some foreign
OEMs, including Ford, GM, Hyundai, and Maruti, have
expanded their sales networks to tier 3, tier 4, and tier 5
cities, reflecting the distribution of market potential.
Hyundai is a front-runner in this area, along with Maruti.
Other foreign OEMs tend to focus their sales efforts on
tier 1 cities. To tap into previously uncovered regions,
OEMs may find aer-sales satellites useful. One interview partner from an international OEM told us: “Indian
consumers may travel long distances to buy a car, but not
to repair it. Without a nearby option for service and repair, they won’t buy even the most attractive car. Outlets

Similarly, a European OEM uses its proprietary Indian
R&D center for, among other activities, conducting basic
and applied research in encryption, image and signal
processing, and telematics; doing soware engineering
and development; and consulting in technology, embedded soware, and IT security.
specialized in aer-sales or ‘fly-in’ technicians are the solution.”
Foreign OEMs have not yet developed vehicles specifically to meet local Indian requirements, nor have they
entered the rapidly developing ultra-low-cost microcar
segment. Instead, they mostly adapt global models to Indian consumers’ requirements—for example, by fitting
the vehicles with diesel engines and by increasing their
utility (for instance, with larger storage space) and stability (for instance, with “dog bars” in the front to protect
the vehicle from accidents involving animals). Even market leader Maruti has been focusing on older Suzuki
models, such as the Maruti 800 or the Maruti Omni, or on
newer designs, such as the Swi or the SX4; and only recently has Maruti started to offer models based on substantial development by Indian engineers, such as the
A-star. In contrast, local automaker Tata has boldly broken new ground with the Nano, for which it has also developed innovative approaches not only to the product
itself but also to its manufacture and sales. Suppliers supported Tata significantly in meeting the vehicle’s low cost
targets. (See the sidebar “Tata Mobilized Suppliers to
Meet Indian Requirements.”)
As in the Nano example, suppliers in India have begun to
serve local OEMs with ultra-low-cost components that
were developed locally, at least in part. Thus they are expanding their market shares with local OEMs, increasing
their volume, and contributing to the further localization
of the industry.
Foreign automotive companies operating in India have
managed to achieve a medium degree of localization despite their relatively short tenure in the country. In contrast to Russia, India’s stable development in the past and
T B C G
Sona Koyo Steering Systems Sets the Quality Standard
Sona Koyo Steering Systems, an Indian supplier, has participated in a joint venture with a major Japanese partner
since 1985. From the beginning, Sona Koyo has always
stressed quality management initiatives.
In 1988, it began implementing total quality management
and total productive maintenance practices throughout
the organization. Thanks to these measures, the company
was able to reduce customer rejection rates from 1,579
parts per million in 1998 to 112 parts per million in 2004.
In parallel, it invested in tier 2 supplier development and
implemented quality programs at its suppliers. These efforts led to a reduction of supplier rejection rates from
35,000 parts per million to 932 parts per million during
the same period. (See the exhibit below.)
In 2003, Sona Koyo’s achievements were honored with the
Deming Prize, which is awarded by the Union of Japanese
Scientists and Engineers to companies that make major
contributions to the advancement of quality. Since then,
the company has launched several new initiatives, such
as just-in-time production, flow management, breakthrough management, risk hazard analysis, and kaizen. Its
objective is to lower customer rejections to 5 parts per
million and supplier rejections to 300 parts per million.
Sona Koyo is seen as the benchmark for quality management in India.
Sona Koyo’s Quality Program Has Achieved Extraordinary Performance Improvement
Supplier rejections
(parts per million)
In-house rejections
(parts per million)
35,000
18,000
30,000
15,000
Customer rejections
(parts per million)
1,600
1,200
25,000
12,000
20,000
35,000
15,000
–97%
9,000
17,300
800
–95%
1,579
–93%
6,000
10,000
400
3,000
5,000
932
0
876
0
Past
Aer
introduction
of quality
program
Past
Aer
introduction
of quality
program
112
0
Past
Aer
introduction
of quality
program
Sources: Sona Koyo; BCG analysis.
W  BRIC A M

Tata Mobilized Suppliers to Meet Indian Requirements
In the Nano, Tata has succeeded in launching a car that
can be afforded by millions of Indians whose annual incomes are below 2 lakhs of rupees ($4,300)—effectively, a
car that competes in price with large motorcycles. The
Nano’s features are not luxurious, but they meet Indian
consumers’ requirements: a large interior space, four
doors, and five seats. The principal levers Tata employed
to develop the Nano included a low-investment production strategy that avoids, for example, expensive welding;
a distribution strategy that focuses on direct orders, direct
sales, and avoiding dealer margins where possible; and
an innovative supplier strategy whereby Tata selected
some 100 suppliers on the basis of their ability to coinvest
in R&D, ramp up their capacity, and perform in-house
anticipated strong growth in the future give automotive
companies a sound planning horizon, and thus a good
basis for investing in further localization.
China
Among the BRIC automotive markets, the Chinese market has experienced the most radical transformation over
the past three decades. When foreign carmakers first entered China in the early 1980s, the automotive market—
with sales of less than 10,000 units annually—consisted
mainly of two models, both domestic: the Hongqi and the
Shanghai. By the early 1990s, despite the localized production of vehicles such as the Volkswagen Santana and
the Audi 100, China still had the smallest sales volume of
the four BRIC auto markets. But from the early 1990s to
the early years of this century, the explosive growth of
China’s auto market took it soaring past the other BRIC
markets, from fourth place to first. Today China makes up
more than half of the total BRIC market volume—and its
share is steadily increasing. Moreover, no country on
earth has more foreign OEMs and suppliers localized
within its borders: virtually all major OEMs and suppliers
now have localized production in China.
China’s economic stability during the current downturn,
coupled with its strongly growing demand for cars, mean
that China’s prominence among the BRIC automotive
markets will continue to expand. Clearly, China needs to
be the cornerstone of every international automotive
company’s BRIC strategy. However, aer operating very

testing. One large European supplier, which gained more
than 10 percent of the Nano’s supply volume by locally
adapting or developing low-cost components, is serving
Tata, among others, with throttle position sensors, 35-amp
generators, an engine management system, a motor starter, and various electric body parts.
More than 70 percent of the Nano’s parts were designed
and are produced in India. Eighty-five percent of the parts
were either developed from scratch or adapted from motorcycle applications. The scope and creativity of the Nano
project demonstrate the level of flexibility required of
foreign and local suppliers alike when serving local Indian OEMs.
successfully through the downturn in 2009, the Chinese
automotive market will experience more moderate
growth, owing partly to the expected discontinuation of
sales stimuli. (See Exhibit 11.) Over the five-year period
from the beginning of 2010 through 2014, the market will
grow at approximately 5 percent annually, reaching sales
of some 15 million units in 2014.
Because of Chinese restrictions on imports, their share of
the Chinese automotive market is small and will remain
so. Local Chinese OEMs and foreign OEMs with localized
production currently divide up most of the market almost
equally. We expect that over the next few years, the local
automotive industry will expand its share by promoting
inexpensive models tailored specifically to Chinese consumers’ needs, thus attaining a market share of 55 percent in 2014.
The Chinese automotive industry currently includes more
than 100 plants belonging to foreign OEMs and tier 1 suppliers. While the Chinese government has expressed its
intention to locate new plants in the north and especially
in the west of the country, plants currently fall into four
main automotive clusters along the east coast, as shown
in Exhibit 11.
Despite China’s relatively brief history as a base for foreign automotive companies, these companies have already achieved a slightly higher degree of localization in
China than even in Brazil. Nonetheless, that localization
can still be characterized as medium, rather than adT B C G
vanced. And unlike the situation in Brazil and India, the
top three localization pioneers in China are only slightly
more localized than most others in the market. In short,
there is significant potential for auto companies to create
value by pushing for further localization in all four major
functions.
At present, some 55 percent of foreign auto companies’
Chinese R&D centers function as engineering nuclei. One
European supplier, for example, transferred to its Chinese
R&D center full responsibility for adapting gearboxes to
local application needs; but the center remains under
tight control from the company’s headquarters and serves
China only.
R&D
Most foreign companies in China use their local R&D centers mostly to adapt their existing models to meet local
needs, rather than giving them responsibility for worldwide projects. But auto companies’ use of Chinese R&D
centers is evolving fast, driven by the massive scale of the
current and potential market and the specificity of Chinese consumers’ automotive requirements. It is also helpful that China graduates an astonishing 1.8 million engineers annually.
Another 25 percent of these centers function as local
R&D hubs. One supplier, for example, keeps its R&D center occupied primarily with applications engineering and
only occasionally assigns it responsibility for more sophisticated work, such as developing backlights for a new
model or adapting hardware or soware.
Some localization pioneers have begun undertaking local
development of models designed specifically to meet Chi-
Exhibit 11. China’s Auto Market Will Continue Its Impressive Growth Through 2014
Stable and strong market growth
Currently four main production clusters
(selected examples)
OEM plants: 32
Tier 1 plants: ~70
5% per year
Sales volumea
(millions)
Changchun and Shenyang
OEMs:
Audi, BMW,
General Motors,
Toyota, Volkswagen
Suppliers: Autoliv, Continental, Johnson
Controls, Lear,
TRW, Valeo, Visteon
~15.3
~12.2
55%
8.6
Local OEMs’
vehicles
Localized
foreign
OEMs’
vehicles
52%
49%
47%
46%
43%
Imports
3%
3%
2%
2008
2009b
2014b
Beijing and Tianjin
OEMs:
Daimler,
Hyundai,
Toyota
Suppliers: Aisin, Autoliv,
Delphi,
Denso,
Johnson
Controls,
Lear, TRW,
Visteon,
Yazaki
Shanghai
OEMs:
Fiat, Ford, General
Motors, Hyundai,
Iveco, Kia, Škoda,
Volkswagen
Suppliers: Aisin, Autoliv,
Guangzhou
Bosch, Continental,
OEMs:
Honda,
Delphi, Denso,
Nissan,
Faurecia, Johnson
Toyota
Controls, Lear,
Suppliers: Aisin, Autoliv,
Magna, TRW,
Continental,
Valeo, Visteon,
Denso,
Yazaki
Johnson
Controls,
Lear, Magna,
Valeo, Yazaki
Sources: IHS Global Insight, November 2009; Economist Intelligence Unit; press research; corporate information; company interviews; companies’ annual
reports and press releases; BCG analysis.
Note: Includes only international OEMs and suppliers with significant production footprints in China.
a
Passenger cars and light commercial vehicles up to 3.5 tons.
b
Estimates.
W  BRIC A M

nese market demand. One European OEM, with this goal
in mind, is already managing multiple full-fledged R&D
centers in China. It operates two R&D centers, each with
more than 500 employees; both focus primarily on local
adaptation tasks, including developing products for local
production on the basis of existing platforms. Some localized foreign suppliers are now serving not only foreign
OEMs but also local Chinese OEMs, providing low-cost
components either developed locally from scratch or
heavily adapted from global products. To benefit from
China’s ambition to become a leader in electric-vehicle
technology, some companies have started developing
R&D capacities there. (See the sidebar “China Pushes for
E-Car Leadership.”)
local staff access to their headquarters’ servers, while providing their localized international staff access from offsite locations, such as their home offices.
One of foreign auto companies’ main concerns about
conducting R&D in China is the protection of their intellectual property (IP). Especially in China, it is essential to
take precautions to ensure IP protection. The first step is
to secure the company’s know-how through licenses, patents, and nondiffusion agreements. A German OEM was
able to forestall the production of a copy of its small vehicle only because of previous patent and license protection, while a North American competitor could not prevent such copying because the company lacked a design
patent under Chinese law.
Sourcing
The second step to ensure IP protection is restricting access to critical or proprietary information. Several European OEMs and suppliers take the precaution of denying
The third step companies should take to protect their IP
is promoting employee retention. One supplier makes a
special effort to retain employees who are familiar with
the company’s IP by implementing a mentoring program
for them.
Although these measures by no means ensure total IP security, they can reduce leakages and provide some safeguards. Clearly, IP protection needs to be high on the
agenda of all Chinese operations.
In sourcing, foreign automotive companies have achieved
high levels of localization in China. For instance, several
OEMs and suppliers are investing significant efforts in
supplier development. Far more than in Brazil, foreign
OEMs and suppliers alike are already using China sourcing to meet not just local but also worldwide demand. In
2008, China exported some $30 billion worth of automotive parts, compared with Brazil’s $9.1 billion.
However, no automotive company has yet allowed its
China local-for-global sourcing to represent a truly significant share of its overall sourcing. Typically, even localization front-runners’ local-for-global sourcing in China
amounts to just 1 to 5 percent of their total worldwide
China Pushes for E-Car Leadership
China wants to become the technology leader in electric
vehicles. Some 60 million electric scooters already travel
China’s roads. The government has set the ambitious target of producing and selling 500,000 electric, fuel-cell, and
hybrid vehicles by year-end 2011.
To achieve that goal, the Chinese government strongly
supports the development of relevant technological competencies. Since 2008, it has issued incentives to foster
the development of environment-friendly vehicles. In addition, the government has dedicated some $1.5 billion to
vehicles and parts that are based on new forms of energy.
The government also subsidizes each purchase of an ecar with an incentive of $8,800. China’s ambition is supported by its large reserves of raw materials, such as neo-

dymium, that are essential to the production of batteries
for e-cars.
The Chinese battery-and-car producer BYD is seen as having significant potential to become a future e-car leader.
Drawing on its experience in both businesses, it recently
launched its model F3DM. Priced at approximately
$22,000, it promises a battery range of 100 kilometers, or
62 miles.
China’s strong incentives and relevant competence clusters may change the logic of where to conduct R&D for
electric vehicles. Already some international automotive
companies are considering localizing their e-car R&D centers of competence in China.
T B C G
spending. Only one North American supplier has grown
its China sourcing to more than 10 percent of its total
spending. At these volumes, the ambitious local-for-global sourcing programs that auto companies have been conducting for many years have had relatively little impact.
As we learned from our interview partners, the worldwide crisis and the increasing need to reduce the cost of
worldwide production provided significant “tail wind” to
existing programs for offshore sourcing, with targets rising and new programs being set up. For successful localfor-global sourcing, a clearly delineated functional structure is essential. (See Exhibit 12.)
Furthermore, foreign OEMs and suppliers source
mainly from localized foreign suppliers rather than from
local Chinese suppliers. Of these companies’ Chinasourcing volumes, 56 percent is from localized foreign
suppliers. But because these suppliers’ production systems and cost positions in China closely resemble those
in their home countries, the OEMs that source from
them are not fulfilling China’s potential for low-cost
sourcing.
Many companies cite quality issues and unfamiliarity
with international processes, such as ramping up production, as the core obstacles to increasing their sourcing
from China. Some auto companies have surmounted
these obstacles by building up supplier development capabilities on the ground in China.
For example, one European company has created a supplier development unit that supports the company’s 40
core local suppliers in implementing improvements related to quality, cost, manufacturing, logistics, and project
management. The unit uses external and internal resources, and coordinates and monitors the initiative centrally across the company’s joint ventures.
Best-practice automotive companies have twice as many
supplier development staff as purchasing staff. As a European OEM in China put it: “Local Chinese suppliers usually do not match the tight time frames of our strict R&D
processes. For example, it takes them much longer to produce samples that match our drawings. To keep deadlines
within the R&D process, many companies choose international suppliers instead of starting to develop local sup-
Exhibit 12. Worldwide Sourcing Offices Need a Proven Structure and Clear Accountabilities
Head of local
sourcing office
Planned sourcing
volume: $100 million
to $150 million
Purchasing
Possible
head count
Key activities
~6 to 8
b
◊ Supplier
identification
◊ Prequalification
◊ Request-forquote support
and negotiation
Quality
Logistics
Product
developmenta
Supplier
development
~2 to 4b
~3 to 5c
~1 to 3d
~1 to 3e
a
◊ Quality auditing
◊ Quality training
◊ Management
of local qualitycontrol
infrastructure
a
◊ Logistics auditing
◊ Supplier-LLP
interface
management
◊ Local logistics
optimization
◊ Explanation
of specs and
drawings
◊ Codevelopment
support
◊ Supplier
productivity
enhancement
◊ Supplier network
structuring
Source: BCG project experience.
Note: LLP = lead logistics provider.
a
Functional reporting to headquarters.
b
Head count will increase with sourcing volume.
c
Start-up team with broad functionality; only limited further increases in head count.
d
Will depend on type of sourced parts.
e
Will depend on nature of local supplier base.
W  BRIC A M

pliers up front. The consequence is that they pay higher
prices over years.”
fih-tier cities such as Benxi, Kashi, and Wenchang. In
contrast, the networks of smaller and premium foreign
OEMs still focus only on first- and second-tier cities.
Manufacturing
While all major international OEMs and suppliers have
localized some of their production in China, the suppliers
have established particularly wide production networks.
For example, one supplier of suspension and power train
modules has built up a network of some 20 production
sites, which are coordinated centrally by a corporation set
up to direct the network and identify synergies within it.
Thanks to China’s massive automotive market, which allows carmakers to produce very large volumes of each
model, the benefits of scale are significantly higher there
than in the other BRIC countries, especially India and
Russia, although they do not yet reach triad market levels. Meanwhile, China’s factor-cost advantages, including
low wages, do not make up for the country’s higher costs
in the areas of quality assurance and logistics. Taking all
these conditions together, automotive production costs
slightly more in China, on average, than it does in the triad markets. Moreover, whatever is produced by localized
foreign OEMs and suppliers goes almost entirely to meet
demand in the Chinese domestic market. Almost none of
it is exported, mainly because of the scale of internal demand and the higher logistics costs for exports.
Some companies have begun carefully replacing some of
their automated manufacturing processes with manual
ones—especially processes that have little impact on
quality and allow the company to reduce its investment
in machinery and tools. For example, one European OEM
has, at least in part, switched to manual production
processes for body welding, scribing of the chassis number, and wheel mounting—in which minor variances in
the process are unlikely to have a significant impact on
the product’s final quality—but has kept quality-sensitive
activities, such as merging the body with the power train
and postproduction testing, as automated as in the company’s home-country plants. (See Exhibit 13.)
To meet Chinese consumers’ demand for “high status”
vehicles, OEMs have been extending their cars’ wheelbases, adding exterior chrome, and installing entertainment
and control equipment in rear seats, where the car’s owner can access it while the car is being driven by a chauffeur. A number of OEMs, including premium carmakers,
now offer such long-wheelbase versions of their products
in China. Localization front-runners go one step further
and develop China-specific vehicles rather than modifying existing designs. Market leader Volkswagen recently
launched two models specifically developed for China:
the New Bora and the Lavida. Both are based on the platform of the former Volkswagen Bora, but their new designs are geared specifically to Chinese tastes and they
target two different segments: consumers with conservative tastes and consumers with sportier tastes.
Recognizing the growing significance of the Chinese market and its specific needs, foreign companies have begun
testing their new sales approaches in China rather than
in their home markets. For example, some OEMs have established innovative incentive schemes for their dealers.
One Japanese OEM pays out part of the margin for sales
performance directly to the dealers’ employees, including
the general manager and the sales, service, parts, and financial services staff.
Leading foreign OEMs in China have developed sophisticated offerings involving not only sales of new vehicles
but also aer-sales services, financial services, and usedcar businesses. Some examples:
◊ Aer-Sales Services: A North American OEM has established a layered, spun-off aer-sales network with service satellites.
◊ Financial Services: Most European OEMs have developed extensive financing and insurance offerings.
Sales
Foreign automotive companies’ sales operations in China
have almost reached the deep localization levels of their
sales operations in Brazil, despite these companies’ much
shorter history in China. As in Brazil, most of the major
foreign OEMs in China have widespread sales networks
that serve not only tier 1 cities but also smaller, third- to

◊ Used-Car Businesses: A Japanese OEM is supporting
its dealers by investing in their used-car businesses.
Like the major international OEMs, all the leading international suppliers now have localized production capacity in China. Most have started to serve local Chinese
T B C G
OEMs as well as localized foreign ones. However, their
sales to those local OEMs remain far smaller than they
could be. Although one European supplier of electronic
parts now sells 60 percent of its production to local Chinese OEMs, this is an exception to the rule. Most localized
foreign suppliers sell on average just 15 percent of their
production to local Chinese OEMs—though a share of
more than 50 percent would more accurately reflect the
number and purchasing power of local OEMs.
Expanding sales to local Chinese OEMs clearly represents
a large opportunity for localized foreign suppliers. Several suppliers are adapting their existing product designs
to local requirements by reducing their specifications and
contents, using lower-cost materials that can be sourced
locally, and transplanting low-cost designs from other
RDEs to sell to local Chinese OEMs. Chinese OEMs are
especially interested in international suppliers’ engineering and design capabilities, as well as their quality performance. As one of our interview partners—an international supplier localized in China—put it: “We won contracts
with the local OEM only because we could help define its
so-far nonexistent requirement specification.”
Regulations in China have required foreign OEMs and
suppliers to form joint ventures with local companies.
Exhibit 13. Converting Noncritical Processes from Automated to Manual Can Cut Costs
Process Overview
Selected steps in car manufacturing
Testing on the roller
dynamometer
Body welding
Germany China
Germany China
1. Liing of
body part
2. Positioning
3. Welding
a
s
a
s
s
a
1. Testing of
◊ Driving
performance
◊ Brakes
◊ Controls
◊ Electrical
functions
2. Analysis of
failure data
Layout of a typical
automotive plant
Body shop
Paint shop
Window mounting
Assembly
Germany China
1. Delivery of
window to
preassembly table
2. Application of glue
3. Mounting of
window
a
s
a
a
m
a
a
a
a
a
a
a
a
a
Delivery
Mounting
s
Germany China
Level of automation
Scribing the
chassis number
Germany China
1. Delivery of body
2. Application of
scribing head
3. Scribing of
chassis number
4. Removal of
scribing head
a
a
a
m
m
a
a
a
m
Quality relevance
a Automated
High
s Semiautomated
Medium
m Manual
Low
1. Cockpit
mounting
2. Wheel
mounting
a
s
a
m
Merging the body with
the engine (“marriage”)
Germany China
1. Lowering of
body
2. Raising of
platform
3. Joining with
screw rod
a
a
a
s
a
a
Sources: Company interviews; BCG analysis.
W  BRIC A M

However, many local joint-venture partners also represent their partners’ suppliers, customers, and competitors
at the same time, which generates conflicts of interest.
For this reason, some companies question the merits of
further localization. To manage their joint ventures successfully, foreign companies in this situation need to rethink them and adopt the following principles:
◊ If possible, engage in more than one joint venture to
avoid power plays and overdependence on a single
partner
◊ Ensure clarity and alignment on long-term strategic
objectives
◊ Set up pragmatic escalation processes to solve strategic
and operational disputes
◊ Staff the joint ventures adequately from the board to
the operational level
◊ Be prepared for ongoing negotiation and regular reevaluation of each partner’s contribution to the joint
venture
All four BRIC automotive markets offer opportunities.
The art lies in determining which functions to localize in
each country, and to what extent.
◊ Clearly define which joint-venture partner takes the
lead in which role

T B C G
Prioritizing Investments
Across the BRIC Markets
A
utomotive companies’ strategic approaches
to the BRIC markets differ tremendously.
In general, companies have adopted detailed strategies for each BRIC country and
each function in which they are active.
However, in our experience, such strategies are oen
flawed. For instance, some companies focus their investments not on the countries that offer the highest potential profits but on those in which their own operations are
already most or least localized. But any investment strategy that is based on the company’s current pattern of localization, rather than on a carefully thought out crossBRIC strategy, is unlikely to realize the BRIC countries’
opportunities for growth and profit. On the other hand, a
strategy that focuses on standardized cross-BRIC approaches is equally risky, because different levels of localization require different forms of investment.
In our view, companies can optimize their investment activity across the BRIC markets by focusing specifically on
the “sweet spots” of localization. We recommend allocating investments in each of the BRIC automotive markets
on the basis of the following criteria:
◊ The Market’s Current Degree of Automotive Industry
Localization: How localized are foreign auto companies’ R&D, sourcing, manufacturing, and sales in comparison with their activities in the other BRIC countries?
◊ The Outlook for Profit Opportunities: How will profit
drivers, such as market growth, cost-competitiveness,
and the availability of local talent, evolve?
◊ Future Market Size: How big will the market be when
the investment becomes effective?
W  BRIC A M
With these criteria in mind, it is critically important to deaverage the localization process. Companies need to select the particular functions in each of the BRIC countries
that offer the highest potential benefits, as well as the
particular BRIC countries that offer the best prospects for
localizing functions. On the basis of our extensive research and firsthand experience, we have developed a
matrix of investment attractiveness by country and function. (See Exhibit 14.) Let’s look at the four BRIC markets
individually.
Brazil, like India, is a prime choice for localizing R&D because it has very specific customer requirements, highly
qualified local capabilities, and a relatively low risk of intellectual property loss or employee attrition. Given the
relative stability of the Brazilian market and its likely future growth, OEMs and suppliers should reinforce their
current positions in the country and invest in improving
their cost positions even further. They should also consider the right balance between automated and manual
processes in order to cope with the market’s volatility in
terms of model demand. To avoid overcapacities, companies should invest in expanding organically as well as in
identifying and addressing all capacity bottlenecks in existing plants and sales networks.
In Russia, with its highly unpredictable market, companies should carefully consider investment decisions. Companies should also try to make their production and sales
capacities more flexible—for example, by importing best
practices in flexible manufacturing from Brazil.
Although India is currently the second smallest of the
BRIC automotive markets, its expected fast growth and
entry barriers against imports qualify it as a good target
for further investment, especially in R&D and manufac
Exhibit 14. Some Combinations of Functions and Countries Are Particularly Attractive
Functions
R&D
Brazil
India
Russia
uu
Very attractive
thanks to
experience and
need for countryspecific models
u
Attractive as long
as employees can
be retained
uu
Attractiveness lies
primarily in India’s
IT specialists
v
Lack of countryspecific consumer
needs makes R&D
relatively
unattractive
u
Local-for-local
sourcing viable
owing to trade
barriers; currency
makes local-forglobal difficult
uu
Very attractive
owing to import
barriers, large
number of
suppliers, and low
factor costs
u
Attractive owing to
low factor costs,
but local-content
requirements are
low
v
Less attractive
owing to small
number of
suppliers, relatively
low quality, and
currency risk
u
Attractive regional
hubs, skilled labor,
and attractive cost
position
uu
Very attractive, as
large local market
can outweigh
challenging cost
situation
uu
Very attractive
owing to large and
growing labor
force, although
local market is
relatively small
t
Comparatively
high labor costs,
but presence
useful as hedge
against external
factors
u
Moderate growth
locally, but good
potential for
exporting to
nearby markets
uu
Largest BRIC
market by
far—and expanding relative to
others
u
Very strong growth,
but market is
relatively small
u
Hardest hit by
crisis, but likely to
make a strong
recovery
Sourcing
Manufacturing
Sales
China
Most attractive combinations of functions and countries.
Sources: IHS Global Insight, November 2009; Economist Intelligence Unit; IMD World Competitiveness Yearbook; World Economic Forum, The Global
Competitiveness Report 2008–2009; BCG analysis.
turing. However, for foreign auto companies to profit from
local potential, they must undertake further localization—for example, by using local R&D capabilities to develop ultra-low-cost opportunities both for India and
for global markets. To compensate for the relatively small
scale of production, India could be considered as
an export base, especially for low-cost components or vehicles.
Among the BRIC countries, China should be automotive
companies’ primary target for low-cost sourcing. It offers
a lower risk of currency fluctuations than the other three
countries, stricter directives mandating local sourcing,
and a much larger number of local suppliers that already
perform at high levels and have the potential to ramp up
production significantly. China’s massive and growing
market also makes it a prime contender among the BRIC
countries as a site for both manufacturing and sales. China’s status as the current and future BRIC stronghold dic-

tates that auto companies should make it the primary focus of their investment strategies. However, to maintain
a competitive edge there in view of the Chinese market’s
rapid growth and keen price competition, companies will
need to move quickly to further localize, expanding first
their sales and aer-sales networks and potentially also
their production facilities.
While China’s massive market makes it a particularly attractive locale for automotive sales, all four BRIC auto
markets are more promising than most other markets. All
of them should therefore be considered worthy targets
for possible investment in sales infrastructure.
Once a company has determined its investment focus by
country and by function, the next step is to decide precisely where to invest and how to embed those investments in effective cross-BRIC strategies.
T B C G
Formulating a Cross-BRIC
Strategy
F
◊ In Russia, it participates in a local joint venture that
has produced emissions control systems since 1995,
selling principally to local OEMs
◊ Evaluate the company’s current localization profile
across the BRIC countries, both in its own right and in
comparison with competitors
◊ In India, it has engaged in local production since 1952
and currently operates 11 plants, exporting some 20
percent of their production; it also has a technical center that provides soware and engineering solutions
for locations in some 15 countries
◊ Develop an optimal localization profile on the country
and function levels
◊ In China, it operates 14 branch offices, seven joint ventures, six trading companies, and four R&D centers
Evaluating Current Localization Profiles
To extend their globalization further, BRIC champions
such as this company could consider creating global centers of competence for R&D, sourcing, and manufacturing, as well as enforcing the sharing of best practices
across the company.
or many automotive companies, developing
an integrated cross-BRIC strategy will be a
new exercise. To date, companies have tended to approach the BRIC markets opportunistically rather than systematically, and to consider them individually rather than as elements of a
global strategy. To arrive at an integrated cross-BRIC
strategy, companies must take two important steps:
To assess the present status of a company’s localization
in the BRIC markets, it is useful to apply a systematic
framework. (See Exhibit 15.) We have conducted this
evaluation for 49 automotive companies across the four
BRIC countries and the four relevant functions. Our analysis revealed that most of these companies follow one of
four patterns of localization—BRIC champion, country
champion, function localizer, or centralist—while onequarter of them may be considered selective opportunity
seekers, since they do not exhibit a clear pattern.
Brazilian suppliers to provide their products to all the
company’s worldwide plants
The largest proportion of companies (45 percent) are
country champions—companies that focus their localization efforts on one or two BRIC countries. For example,
one supplier has no major activities in India or Russia but
is strongly localized in Brazil and China.
Only 8 percent of the companies we profiled are BRIC
champions—companies that have achieved deep localization in all four BRIC countries. For example, one German
supplier has established the following capabilities:
◊ In Brazil, where the company has been present since
1978, it operates 11 plants and two R&D centers, exporting some 20 percent of its production; it also does
local development of products for production outside
Brazil
◊ In Brazil, it has seven plants and runs a global supplier-development program that enables the company’s
◊ In China, which it entered in 1996, it operates three
plants and two R&D centers; local customers, includ-
W  BRIC A M

Exhibit 15. Automotive Companies Follow Five Patterns of Localization
Localization pattern
Description
Percentage of
companies1
BRIC
champion
Deeply localized in all BRIC countries at
settler level or higher
8
Country
champion
Localized primarily in one or two BRIC
countries, oen China or Brazil; less
present in Russia
45
Function
localizer
More localized in some functions—oen
manufacturing or sales—than in others
14
Centralist
Localized to a low-to-medium degree—at or
below the explorer level—in all BRIC countries
8
Selective
opportunity
seeker
No discernible localization strategy (typically
true of suppliers rather than OEMs)
24
Sample
localization curves
Sources: BCG localization database; BCG analysis.
1
Within the BCG study group.
ing Chery, Geely, and Great Wall Motors, purchase
more than half of its production
Companies in the country champion category need to review their current degree of localization country by country and ensure the exchange of best practices from countries in which they are more localized to those in which
they are less localized.
Another 14 percent of the companies we evaluated are
function localizers—companies that focus on localizing certain functions. For example, one Japanese OEM heavily
localizes its sourcing and sales in the BRIC countries while
keeping local R&D under tight control from headquarters
and applying standard Japanese production processes.
materials it needs for products for the Chinese market,
while it sources in India some 75 percent of its spending for new models that it produces in that country); it
sources primarily from localized Japanese suppliers
with which it has long-term relationships
◊ In manufacturing, the company produces high volumes in all four BRIC countries, generally employing
standard production processes and high degrees of automation
◊ In sales, the company operates extensive networks
that serve a number of third- to fih-tier cities across
the BRIC markets
◊ In R&D, all the company’s centers outside Japan offer
only technical support and development that involves
minor adaptations; they do not have research capability
Companies in the function localizer category need to review their current degree of localization of each function
in each country, and to develop clear policies governing
the effective distribution of roles between the company’s
headquarters and local hubs.
◊ In sourcing, the company localizes significant shares of
its global spending in the BRIC countries (for instance,
it sources in China fully 85 percent of the parts and
Just 8 percent of the companies we evaluated are centralists—companies that serve the BRIC countries mainly
from their headquarters. One European premium OEM

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takes this approach, maintaining only minor operations
in the BRIC countries.
tion and then developing a master integration map and
strategic plan.
◊ In Brazil, the OEM serves the market by means of imports from its European and North American plants
Developing an Optimal Localization
Profile
◊ In Russia and India, it operates local CKD plants that
produce fewer than 10,000 units per year; it also maintains an exclusive sales network in each country but
conducts no significant R&D or sourcing activities
there
Once a company has identified its current BRIC localization profile, it can be helpful to compare that profile with
competitors’ profiles in order to identify areas where strategic changes may be needed. However, more is not necessarily better: we do not generally recommend that all
automotive companies localize all four functions in all
four BRIC countries.
◊ In China, it has a large CKD plant producing 50,000
units annually, as well as a sales network focusing on
tier 1 and tier 2 cities; but it conducts no significant
R&D or sourcing activities
Companies that operate as centralists need to challenge
their current degree of centralization and explore the potential advantages of extending their localization in specific areas.
Almost one-quarter of the companies we evaluated (24
percent) are selective opportunity seekers—companies that
either have no overall localization strategy or have one
that is not evident. For example, one supplier appears to
be focusing on different combinations of countries and
functions.
◊ R&D in Russia. The supplier operates an engineering
office in Novgorod, where some 15 engineers develop
technological solutions based on orders from the German headquarters.
To decide which functions to localize to which degree in
which BRIC countries, companies need to address certain
core issues relevant to each function. The goal in each
case is to achieve the optimal balance between taking a
decentralized, market-specific approach and achieving
global synergies.
In localizing R&D, automotive companies that are experienced in conducting multinational R&D networks stress
that it is crucial to assign clear local and global R&D responsibilities that take advantage of each country’s particular R&D expertise. Currently, the four BRIC countries
have highly diverse areas of R&D focus. (See Exhibit 16.)
So, for instance, it might make sense for a company to distribute its R&D as follows:
◊ Soware development in India
◊ Electronics applications in China
◊ Manufacturing in Brazil. The supplier operates plants in
Campinas, Camaçari, Porto Real, and São José dos
Pinhais to produce axes, suspensions, and body parts.
The company also does local production in the other
BRIC countries but is less localized there.
◊ Alternative fuel technologies in Brazil
◊ Sourcing from India and China. In India, the supplier
runs a global sourcing office in Bangalore for automotive components. In China, its sourcing activities
have achieved a local sourcing share of close to 70
percent.
Aer having identified the focus of R&D in each BRIC
country, the company must define the role of each local
R&D center as one of the following: an offshore unit, an
engineering nucleus, a local engineering hub, or a center
of competence. It is generally not advisable for a center
to be tasked with playing more than one of those roles.
The company must also set forth the rules and mechanisms governing the centers’ interactions with the company’s R&D headquarters.
Automotive companies that have no clear pattern of localization can benefit by reevaluating the attractiveness
of their localization opportunities by country and funcW  BRIC A M
Of course, these BRIC specializations would need to be
aligned with the competencies in the company’s existing
R&D centers.

Exhibit 16. R&D in the BRIC Countries Focuses on Different Products and Technologies
Representative Areas of R&D Specialization
Russia1
◊ Special vehicles
◊ Electronic controls
◊ CAD and modeling
◊ Body design
Brazil
◊ Small SUVs
◊ B-segment cars
◊ Flex-fuel and related
combustion technology
◊ Low-tech electronic parts
◊ Small engines
◊ Suspension
◊ Materials
China
India
◊ Minicars and small cars
◊ Soware
◊ Embedded control systems
◊ CAD and virtual manufacturing
◊ Materials
◊ Cars designed for RDEs
◊ Electrical components
◊ Body and exterior
◊ Vehicle design and
prototyping
◊ Testing
◊ Battery technology
◊ Electronics
Sources: Corporate information; company interviews; BCG analysis.
1
Russia is not yet at the level of the other BRIC countries. The categories cited are those in which Russia is currently closest to achieving competitive
parity.
In sourcing, companies should identify their primary
sourcing needs and determine which countries or regions
offer the best combination of high quality and low cost
for each category of sourced items. (See Exhibit 17.)
Armed with this awareness, a company might choose, for
example, to localize its network of sourcing offices as
follows:
◊ Brazil for processed metal
◊ India for IT and engineering services
◊ China for electric modules and electronics
◊ Russia for selected body parts
Aer deciding where to locate each sourcing office and
what it should source, it is important to design a common
blueprint and governance tools to link the offices across

functions and regions. (See the sidebar “Governance
Tools Play a Key Role in a Worldwide Sourcing Network.”)
At the same time, headquarters should ensure that each
sourcing office’s organization, available functions, and
skills reflect country-specific requirements.
In manufacturing, as noted above, costs are higher in most
BRIC countries than in automotive companies’ home
countries—Brazil being the one exception. To keep costs
as low as possible, companies need to take full advantage
of the following cost levers, adapting them to local conditions in each location: exploiting scale advantages; benefiting from low-cost labor (for example, by performing
noncritical processes manually, as discussed above); carefully managing sourcing (for example, by conducting extensive supplier-development programs); and applying
proven quality-assurance techniques.
In designing a BRIC-based manufacturing network, companies should consider adopting one of the following
T B C G
Exhibit 17. Sourcing in the BRIC Countries Focuses on Different Parts and Technologies
Principal Automotive Exports and Representative Sourcing Categories
$1.7
billion
$30.0
billion
Brazil
$9.1
billion
◊ Aluminum
parts
◊ Brakes
◊ Crankshas
◊ Cylinder blocks, valve
heads, and crankcases
◊ Engine pistons
◊ Gearboxes
◊ Injection pumps
Value of 2008 exports of automotive components
$3.0
billion
India
◊ Bolts
◊ Cabling and wiring
◊ Cast steel
◊ Crankshas
◊ Gearboxes
◊ IT and engineering services
◊ Lamps
◊ Weld nuts
Russia
◊ Batteries
◊ Flat, cast, and
welded steel
◊ Glass
◊ Paints
◊ Plastic fittings
◊ Stamping parts
China
◊ Brakes
◊ Cabling and wiring
◊ Electronic motors
◊ Forged or die-casting
engine parts
◊ Fuses and switches
◊ Glass
◊ Heating systems
◊ Hydraulic parts
◊ Plastic and rubber parts
◊ Radios
◊ Speakers
◊ Wheels and seat parts
Sources: UN Comtrade Database; corporate information; company interviews; BCG analysis.
Governance Tools Play a Key Role in a Worldwide Sourcing Network
The backbone of every global sourcing strategy is a strong
network of local sourcing offices. Typically, these offices
are charged with implementing five core functions: purchasing, quality assurance, logistics, product development, and supplier development. The allocation of functions may vary from country to country, depending on the
kinds of commodities being sourced and the maturity of
the local supply base. For example, a Japanese OEM that
sources in all four BRIC countries has a ratio of one supplier-development employee per purchasing agent in Japan, a ratio of two to one in China, and a ratio of three to
one in India, reflecting the greater need for supplier development in the BRIC countries than in Japan.
To coordinate such a global sourcing network, companies
need a set of specific governance tools and techniques.
Six types of tools have proved particularly effective:
W  BRIC A M
◊ A shared sourcing strategy developed jointly between
headquarters and sourcing offices, with local and global
targets clearly specified
◊ Weekly conference calls among all sourcing offices and
sourcing headquarters to make major decisions
◊ Weekly conference calls between sourcing offices and
sourcing headquarters to align organizational topics
◊ Weekly or every-other-week functional conference calls
to review supplier panels
◊ Global information sharing to exchange supplier information and RFP documents
◊ Global progress-tracking documents

three approaches, depending on whether their primary
goal is to secure volume-related cost advantages, maximize their localization, or achieve high quality at
low cost:
◊ The Global-Scale Network. To secure volume-related cost
advantages, a company should consider establishing
one to three large plants in the BRIC countries to supply markets worldwide. One Korean OEM has made
India its core manufacturing hub for low-cost minicars,
serving all RDE markets from there and thus minimizing investment and maximizing scale effects.
◊ The Broken-Chain Network. To maximize a company’s
localization, it should consider distributing pre- and final assembly in different countries. For example, one
Indian supplier is delivering relatively simple products
from India and highly complex products—together
with customer support—from the triad markets. This
approach allows the company to realize the advantages of low factor costs without compromising quality or
service.
◊ The Isolated-Empire Network. To achieve high quality at
low cost, a company should consider serving world
markets from several regional hubs. One Japanese
OEM has been able to shi the production of its pickup-truck models from high-cost Japanese plants to
plants in several RDE countries while maintaining its
strict quality standards, thus offering products with
Japanese performance and quality at competitive prices in the RDE markets.
These three approaches represent different forms of a decentralized but synergistic network, ensuring that operations in the BRIC markets profit from those in the triad
markets and vice versa.
In maximizing sales, the first requirement is to gain an intimate knowledge of local market tastes, preferences, and
requirements so that products can be adapted accordingly. As noted above, consumers’ automotive preferences
vary dramatically across the BRIC markets. (See Exhibit
18.) And taste is not the only issue. As one of our interview partners from a European OEM put it: “Not only are
consumers’ tastes highly different, but car buyers in all
BRIC countries, and especially in Russia and China, may
consider the manufacture and sale of a car that was originally developed for another BRIC country as an insult.”

It is clear that there can be no such thing as a single, homogeneous “BRIC car.” On the contrary, the differences
in automotive tastes are much more pronounced among
the BRIC countries than among countries in the triad
markets. Brazilian consumers demand sporty hatchbacks,
Russians want Western sedans and SUVs without adaptations, Indians require ultra-low-cost minicars, and the Chinese prefer luxury-style sedans with flair. The challenge
is to produce these various models at sufficient scale to
make them economically viable over the next few years,
while the individual BRIC markets are still developing
and before each one becomes large enough to justify the
design and production of an individual, nonstandardized
product. One possible way to meet that challenge is to
develop a common platform that allows multiple local
adaptations for BRIC markets, using local partners to
help implement that solution.
For example, a European OEM has developed a vehicle
platform for low-cost countries with a standard wheelbase of 2,630 millimeters and a standard track of 1,480
millimeters. To cater to individual market requirements,
the company not only has made local product adaptations but also has undertaken country-specific branding
and marketing, and has engaged in joint ventures with local partners where appropriate. To satisfy Brazilians’ preference for sporty hatchbacks and small SUVs, the company introduced, in addition to its sedan, a hatchback
model and a model that resembles an SUV and is marketed as a sporty adventure car. In Russia, the company
produces the sedan without major adaptations, collaborating on production and sales with a local partner and
enjoying strong government support. The model is positioned to compete successfully against top-selling local
vehicles. To meet Indians’ need for low-cost products, the
OEM redesigned the vehicle to pare away 15 percent of
its costs. In China, the car is scheduled for production in
2010; there, too, the OEM will work with a local partner.
Aer a company answers the core strategic questions for
each key function and designs an overall BRIC strategy,
the next step is implementation. In that effort, cross-market learning through the exchange of best practices can
be invaluable in helping to get strategies “on the road.”
In the course of our study, we identified many best practices in every BRIC country. Most of them are found in
only one BRIC country, despite the fact that transferring
them to other countries could create value. Only rarely
T B C G
Exhibit 18. Consumers in the BRIC Countries Demand Different Models
Russia
Brazil
“Carro popular”—
1.0-liter hatchback
◊ Ethanol and flex-fuel,
no diesel
◊ Off-road-style vehicles
and small SUVs
◊ B-segment car family
◊ Hatchbacks rather
than sedans
◊ Sporty pickups
Example: Chevrolet Celta
India
Minicars
◊ Ultra-low-cost vehicles
1
◊ Extra stability, such as “dog bars”
◊ Improved capabilities for flooded
roads
◊ Greater practicality, such as larger
interior spaces and trunks
◊ High-temperature gear, including
stronger air-conditioning systems
Example: Tata Nano
Western sedans
and SUVs,
RDE-made sedans
◊ Western sedans and
SUVs: no adaptation
except kits for cold
weather and rough
roads
◊ RDE-designed
sedans: robust
technology, lower
safety and emissions
standards, less
equipment
Examples: Lada
Priora, Toyota Camry
China
Midsize and larger sedans
◊ Extended wheelbases
◊ Luxurious rear-seat appointments (for larger vehicles)
◊ Large trunks
◊ Comfort and luxury items, such
as diode lights and chrome
◊ Entertainment equipment
Example: Volkswagen Passat
Sources: Corporate information; company interviews; companies’ annual reports; BCG analysis.
1
An iron bar on the front end to protect the vehicle from impact during a crash with an animal.
are best practices not transferable because of local conditions. In almost all cases, companies can benefit significantly from transferring best practices. For example, a
European OEM holds regular dealer conventions in Brazil to identify issues on both sides and improve knowledge and data transfer. The company then convenes
small work groups, composed of representatives from
W  BRIC A M
both the OEM and the dealerships, to address each issue.
This approach could be usefully applied in China, India,
and Russia as well.

Six Key Lessons from
the BRIC Markets
T
hroughout this report, we have identified six
key lessons for leveraging a company’s presence across the BRIC countries.
5. Adapt standard designs to meet local needs. Benefit
from scale and offer tailored products by using standard
platforms with significant product adaptations, local partnering, and market-specific sales and marketing concepts.
1. Actively allocate investment spending across BRIC
countries and functions. Keeping in mind the company’s overall strategy, prioritize the relevance and value of
conducting each of the four functions within each of the
four BRIC countries. Take into consideration the company’s current degree of localization in each area, the prospects for profitable development of each particularly
promising combination of function and BRIC country,
and the future size and growth of the market.
6. Accelerate localization by transferring best practices among BRIC countries. Identify and transfer all
applicable best practices across all functions and locations.
2. Localize R&D to take advantage of local engineering strengths. For instance, a company might focus R&D
in India on soware and IT, in China on electronics, and
in Brazil on metal parts and low-cost components.
3. Seek opportunities to cut sourcing costs according
to individual markets’ strengths. For instance, a company might focus its sourcing in Brazil on processed metal, in India on IT and engineering services, in China on
electric modules and electronics, and in Russia on selected body parts.
A final note: Although this report focuses on the BRIC
markets because of their size and potential for helping
auto companies recover sales volumes lost to the crisis, it
is important to recognize that our analysis of effective
strategies for achieving deep localization in the BRIC
markets can be applied with equal success in other rapidly developing economies, such as Argentina, Indonesia,
Iran, Mexico, or Thailand. In all such markets, unique
constellations of local capabilities and market tastes require individually tailored approaches. That said, the
smaller sales volumes in some RDE markets can exacerbate scale-related localization challenges. The BRIC countries, in which localization is relatively advanced, can
serve as a valuable source of best practices and potential
synergies with other RDE markets.
4. Orchestrate BRIC manufacturing to optimize cost,
localization, and quality. Use the global-scale approach
to profit from volume-related cost advantages, the broken-chain approach to drive localization, or the isolatedempire approach to improve quality and cost.

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For Further Reading
The Boston Consulting Group publishes other publications on capturing global advantage and on the automotive industry that may be of
interest to readers of this report.
Some recent examples are listed
here.
Batteries for Electric Cars:
Challenges, Opportunities,
and the Outlook to 2020
A Focus by The Boston Consulting Group,
January 2010
From Crisis to Opportunity:
How Global Challenger
Companies Are Seeking Industry
Leadership in the Postcrisis World
A White Paper by The Boston Consulting
Group, September 2009
The 2009 BCG 100 New Global
Challengers: How Companies
from Rapidly Developing
Economies Are Contending for
Global Leadership
A report by The Boston Consulting
Group, January 2009
The Comeback of the Electric Car?
How Real, How Soon, and What
Must Happen Next
A Focus by The Boston Consulting Group,
January 2009
Winning the Localization Game:
How Multinational Automotive
OEMs and Suppliers Are Realizing
the Strategic Potential of China
and India
A report by The Boston Consulting
Group, January 2008
W  BRIC A M
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Note to the Reader
Acknowledgments
The authors would like to thank all
the people who contributed to this
report. In researching it, our multinational team of colleagues at BCG
conducted more than 250 interviews
with senior executives at the leading
automotive OEMs and suppliers that
are active in the BRIC countries. We
spoke with high-ranking individuals
at every automotive OEM, at 15 of
the top 20 suppliers, and at many
tier 2 suppliers—as well as at universities, industry associations, and government institutions. We are particularly indebted to all the people who
spoke with us and generously shared
their insights into the challenges of
achieving deep localization. In addition, we would like to thank the following people:
◊ The executives at the automotive
companies with which BCG has
worked to shape their localization
strategies in the BRIC markets,
who kindly allowed us to include
our insights from those experiences in this report
◊ The project team of consultants
and researchers: Pascal Bruckner,
Ilson Dal-Ri, Judith Eimannsberger, Susanne Frick, Jonatas
Garcia, Benjamin Gubitz, Kiyotaka
Ishige, Nicole Landauer, Bernd
Loeser, Karsten Meier, Tobias
Mezger, Alex Mittelman, Raphael
Pfältzer, Stefan Reiter, Arist von
Harpe, Hadi Zablit, and Christiane
Zorn

◊ Kathleen Lancaster, for her assistance in writing the report
◊ Barry Adler, Gary Callahan, Kim
Friedman, and Sharon Slodki, for
their editorial and production assistance
For Further Contact
If you would like to discuss our observations and conclusions, please
contact one of the authors:
Nikolaus S. Lang
Partner and Managing Director
BCG Munich
+49 89 2317 4459
lang.nikolaus@bcg.com
Stefan Mauerer
Project Leader
BCG Munich
+49 89 2317 4595
mauerer.stefan@bcg.com
You may also contact any of our senior industry experts:
Marcos Aguiar
Senior Partner and Managing Director
BCG São Paulo
+55 11 3046 3533
aguiar.marcos@bcg.com
Arindam Bhattacharya
Partner and Managing Director
BCG New Delhi
+91 124 459 7000
bhattacharya.arindam@bcg.com
Ewald Kreid
Partner and Managing Director
BCG Moscow
+7 495 258 34 34
kreid.ewald@bcg.com
Xavier Mosquet
Senior Partner and Managing Director
BCG Detroit
+1 248 688 3500
mosquet.xavier@bcg.com
Christoph Nettesheim
Senior Partner and Managing Director
BCG Beijing
+86 10 8527 9000
nettesheim.christoph@bcg.com
Georg Sticher
Senior Partner and Managing Director
BCG Munich
+49 89 23 17 40
sticher.georg@bcg.com
This report was sponsored by BCG’s
Industrial Goods and Global Advantage practices.
For further information about BCG’s
Industrial Goods practice, please
contact its global leader, Josef Rick, a
senior partner and managing director in BCG’s Düsseldorf office, at
rick.josef@bcg.com.
For further information about BCG’s
Global Advantage practice, please
contact its global leader, David
Michael, a senior partner and managing director in BCG’s Beijing office,
at michael.david@bcg.com.
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For a complete list of BCG publications and information about how to obtain copies, please visit our Web site at
www.bcg.com/publications.
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