19 October 2015

Mature Western Nations & Car Making

Historically, most cars were made and sold in what we would call the Western world. Sales have more recently been down in this area of the world while the growth has been elsewhere. Car production is moving that way too. What are some reasons?

Wage costs are lower in non-Western lands. Mainstream cars are price sensitive, especially small ones. Lower remuneration helps the bottom line. Even filling a factory with robots may not be enough to secure production in a Western country.

Being closer to the market. Shipping cars is an expensive exercise and it saves by having cars made as close the the market they sell on. Of course, the volume has to be cost effective, otherwise it is still cheaper to ship them from a large factory on the other side of the world.

Import duties can be prohibitive. Many nations put high tariffs on cars outside of national boundaries or regional trading blocs. If the market size justifies it, building a plant circumvents the duty.

So what of the traditional car making nations? They are under pressure to reduce costs and remain competitive. If not they become under-utilised, unprofitable and even shut down altogether. A series of blogs will look at how this has affected car production in the Western world.

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