Briefly describe the history of the car industry, focussing on its locational changes.

Nick Dunn

Locational Case Study

The Growth and Spread of the Car Industry

The first motor car was built in 1885 by Karl Benz, but it was the USA that established early dominance in the industry by introducing production-line assembly. Whilst global production is still dominated by developed countries, a number of developing nations, e.g. Brazil and South Korea are improving their production rates. The industry became multinational in 1911 when Ford chose Manchester as the first location outside of the United States.

In the UK, the country was selected by three of the leading Japanese manufacturers (Nissan, Toyota and Honda). After a collapse of production from 1975 to 1982 in the West Midlands, there was room for new industry and companies to move into the area to make use of the experienced labour. Nissan began in Sunderland from 1986, and Toyota and Honda followed in Derbyshire and Swindon respectively in 1992.

With the introduction of new car models, the lead manufactures decided to create new plants for these models specifically. Toyota chose to locate the third factory at Lens, northern France.

A change in the corporate structure of manufactures has also influenced the locational changes. For example, Rover, previously owned by BAe was bought by BMW in 1994 began investing billions of pounds into market research and plant production. With the renewed market interest in the UK, Ford and GM (Vauxhall) committed fresh investment also.

Summary: Pre-1950 the USA dominated, and Western Europe not far behind. Us manufacturers began ...

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With the introduction of new car models, the lead manufactures decided to create new plants for these models specifically. Toyota chose to locate the third factory at Lens, northern France.

Summary: Pre-1950 the USA dominated, and Western Europe not far behind. Us manufacturers began setting up in Europe, but in 1960s the European market boomed and US companies began producing in developed countries such as Brazil, and production in Japan increased significantly. During the 1970s and beyond, the Japanese companies now dominate and have plants globally in both LEDCs and MEDCs.

Outline the way in which politics can have significant influence on industrial location, using Toyota’s European expansion as an example.

Toyota decided to locate in France for a variety of reasons, with political factors having a strong emphasis.

Considered Prague, but poor labour climate put Toyota off.
Toyota was uneasy about uncertainty of Poland’s prospects for EU membership and how this could affect future exports, labour and economy. Decided against Poland because it was too much of a risk.
Toyota wanted to ‘break’ the French car industry. The French said they have a “greater degree of nationalism” because the market is so difficult to break. They prefer to purchase French-built cars. Locating in France would provide a firm base to begin to sell more cars there.
The UK was considered but turned down after Toyota stated “we would prefer to [locate] in continental Europe rather than Britain”. They did not wish to place all of their production at one site on the edge of Europe e.g. UK or Poland.
The location within France was also carefully considered and Valenciennes was chosen for its short distance to Brussels, both home of the European Union, and Toyota Europe’s HQ.
High unemployment in the area would help prevent inflation.
North-eastern France was a government priority zone so Toyota were offered sweeteners in the way of training aids, social security contributions, property tax reductions, land price reduction and aid to start up Japanese local schooling.

Describe and explain the establishment and growth of the car industry in Brazil.

Rapid expansion and development of the industry because of huge investment in brazil by transnational companies in the automotive sector.
One car to 11.3 people, growth potential is higher than Europe and US.
Current vehicles in Brazil have an average age of 15+ years, promising a booming replacement market in the near future.
Originally only one government-owned truck manufacturing plant in the whole country. Foreign companies invited by government to set up branch plants and then pressed for complete manufacture to be in Brazil.
Seen as a key industry to stimulate development of other industries thanks to variety of quality components required.

Good regional raw materials
Large pool of skilled labour
Near Santos – huge port complex
Mature industrial contacts
Largest market internally
Sao Paulo hub of road, rail, air and telecommunications
Welcoming state and federal governments

Once Sao Paulo established, other southwest locations developed (Rio de Janeiro and Belo) – 1987 Fiat opened employing 10,000 producing 130,000 vehicles per year
Other regions now attracting investment – high labour costs in Germany forced Mercedes-Benz to locate in Brazil.
Renault, lacking space in Europe, moved to alternative locations within Brazil, for the following reasons:

High quality of life
Improvements in port, with low handling charges
Proximity to large southeast markets
Near expanding markets elsewhere
Low tax

Summary: Foreign transnationals assembling components mainly produced in LEDCs for Brazilian market. Then they used Brazil to produce for Brazilian market, and then used Brazil to produce for expanded South American market also. Now exporting parts and vehicles to other LEDCs.