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The automotive industry in developing countries and its potential contribution to economic development

How have different countries fared when trying to build up a domestic automotive industry and what can explain success and failure?

A new CAE working paper by Tobias Wuttke reviews the existing literature on automotive industries in several developing and emerging economies and develops a success-failure spectrum, founded on an understanding of economic development that emphasizes international competitiveness and linking up to GVCs, firm-level technological capabilities, and local ownership and linkages to the domestic economy. Based on a review of the automotive GVC literature and the author’s own primary data from his doctoral research, the paper also develops an analytical framework that can explain differential performance across countries. The framework interacts three sets of explanatory factors: automotive GVC factors, specifically lead firm strategies; government industrial policy; and local demand and production conditions. It shows why countries like Thailand and Turkey have fared so much better than countries like Argentina and South Africa.

Read the paper here.