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The problem is too many "national champions." Korea alone has two auto companies (Hyundai and Kia). France (Peugeot, Citroeb, Renault) and Italy (Fiat) have the
by soniman 7y ago
The problem is too many "national champions." Korea alone has two auto companies (Hyundai and Kia). France (Peugeot, Citroeb, Renault) and Italy (Fiat) have their own car companies, even though neither country is known as manufacturing powerhouse. Until those national champions are shut down or consolidated (politically difficult), there will continue to be overcapacity.
- yardie 7y agoSo that’s never going to happen. You may as well say why build highways when rail is more efficient. Most developed countries will want to have some local manufacturing for national defense reasons. A car plant can be retooled to make tanks, planes, and guns. But if you don’t have one now you wont have it when you need it. Also, r&d consumes a lot of resources. Shared platforms are the way to go. VW outsourced beetle production to Mexico where they continued to produce them even after VW stopped selling them. They were good and cheap enough. Exactly what a developing economy needed.
- gcbpp 7y agoso very wrong. but unfortunately a common misconception in the colonial world we live in. older car models are not made in 3rd world because of some grandiose benevolent plan to bring robustness and cheap cars to the poor pitiful people. older models are usually more expensive to produce, less economical to run, have less confort and everything, and the margins are lower. BUT, the tooling and RD cost is already paid for. so with zero investment (simply shipping what would be scrap metal otherwise) they can extract profits from markets starved of any other offering. And let's not forget they negotiate tax breaks on top, after all they bring jobs to the poor pitiful people.