China is widely regarded as major manufacturing hub of the world and biggest exporter across large variety of goods. Also, China is largest consumer as well as producer of passenger vehicles across the globe. So these two facts imply that China must be leading exporter of passenger vehicles too. But the answer is, NO! Japan, Germany and South Korea are holding the pole position since long time and surprisingly China ranks 21st when it comes to net export. Noteworthy point is all three leading exporters are developed countries and labor cost is on higher side of the spectrum in comparison to emerging countries of the world.
Export is always core to the formulation of trade policies by any Government. Being net export positive helps country to earn income (preferably in $ or €) and generate higher domestic employment. Thus many countries are quite eager to have free trade agreements with other countries and specially trade blocks like NAFTA, Euro Zone, ASEAN et al.
For this analysis I have considered Net Export/Import Volume by deducting the Total Vehicles Sold in the country including imports from the Total vehicles manufactured and shipped from the country to domestic and foreign market. So this is different from the export figures published by each country. This way vehicles imported by the countries are also accounted for. Hence we get a clear picture if country is really having an export advantage.
Net (+)Export/(-)Import = Total vehicles manufactured and shipped from the country to domestic and foreign market – Total Vehicles Sold in the country including imports
Toyota, Honda and Nissan are the front-runner in the game of export, despite the fact, that these and many other Japanese companies do have strong manufacturing base in other markets across the globe. Japanese automakers chose export route since 60s to establish them in global market. Focus is not only on products but there is also great emphasis on process of manufacturing, which help them to keep cost low, without compromising on quality.
They learnt a lot from their eastern neighbor-Japan. With every passing year Hyundai and Kia are getting stronger and stronger in the global market. In 90s they were considered as cheap alternative to the Japanese products in western markets. Their transformation journey began in 21st century with dramatic change in design language and better quality. Results are pretty apparent now.
Unlike Japan and South Korea our export is not led by homegrown companies like Tata or Mahindra but foreign manufacturers like Hyundai, Maruti Suzuki, Renault-Nissan, Ford, VW, GM et al. Yes it certainly helps in generation of employment but not much on foreign earnings side, as these companies have options to take money outside our country, as India allows 100% repatriation of profit. Most of these companies had export led India-entry strategy in first place, which sometimes helps in offsetting low domestic sales, for some of the players.
It was a pleasant surprise to see Thailand as 4th largest exporter in Asia, considering its domestic market is 10th largest in Asia. Thailand is leading exporter to South East Asian trade block, known as ASEAN. ASEAN, Middle East and Australia accounts for 30%, 20% and 20% of Thailand’s exports, respectively. Similar to India, export is led by foreign manufacturers.
VW Group, Daimler, BMW brings in huge export numbers for Germany, despite being developed country and high wage rate.
Spain is second largest manufacturer from Europe, initially it was little surprise to me, as, I was expecting France or UK to occupy this rank. It is actually biggest beneficiary of free trade zone of Europe thus selling to all neighboring countries. Ford and GM have pumped in huge investment to make Spain their production base in Europe. SEAT is only company from Spain, but it is owned by VW group since 1986. In addition, VW group companies, Peugeot, Renault, all have their export oriented factories in Spain.
CZECH REPUBLIC, SLOVAKIA, HUNGARY, ROMANIA, TURKEY, POLAND, SLOVENIA, SERBIA
All East European countries have low-labor-cost advantage in comparison to Western European countries and benefitted by free trade zone of Europe.
MEXICO & CANADA
That is advantage of being neighbor to world’s wealthiest country-the USA, and having free trade agreement called NAFTA. Thus few foreign automobile manufacturers had set up factories in low cost region to export vehicle to high labor cost region. Over the years, Americans have lost jobs because few manufacturers have moved these jobs to Mexico and Canada. Current American President wants to reverse this phenomena and negotiation is on.
Has turned net exporter in 2016. Reason is, Brazil is suffering from recession, translating into de-growth in domestic consumption which is leading to underutilized production capacity which has been turned into exports.
Data Source : http://www.oica.net/
(The article is written by the Newest Pundit on the team – Rohan Rishi. You can connect with him at email@example.com)