In the beginnings of the automobile industry, low distribution costs were the pull factor of a company to an area. For example, in 1911, Ford located its first assembly plant outside the USA, choosing to serve the European market from Manchester.
As well as giving incentives to UK companies to relocate, great efforts were also made to attract foreign companies to whom a variety of financial incentives were offered. This has been in competition with the governments of other countries offering similar incentives. Toyota in Burnaston, Derby, which was built in the 90's. Toyota aimed to make cars in Europe, as it was the only way they could sell cars in Europe. Burnaston was 1 of 10 sites including Cardiff and it offered large flat site, skilled workforce, good labour relations and close to Peak District. It's proximity to the components firms of the east and west midlands have a long tradition of supplying components to car firms. The site has transport links to the EU, as the plant lies alongside the M1/M6, link to the rest of England and the EU. The area has a skilled workforce, and by the end of 1992 the plant had received more than 20,000 job applicants, 50% from within a 15 mile radius. Toyota also had problems with other EU countries; Germany had high labour costs and the government did not want them whilst both France and Italy had non-receptive governments. This shows the role of governments in the location car industries.
Increasingly, as distance and transport costs become less important, labour requirements of industry can dictate the location or expansion of industry. The new international division of labour suggests core areas with skilled but expensive labour, and peripheral regions characterised by cheaper but less skilled workforce. Different activities within an industry are seen to have different labour requirements In the new international division of labour, low skilled manual work is being transferred from the first world to the third world in order to take advantage of plentiful labour and low wages. This explains why MNC’s are investing overseas, particularly in low income countries, whilst simultaneously closing plants in high income countries. This explains the flurry of investment by leading automobile manufacturers in countries such as Brazil, Argentina and Mexico during the 1990s.
The drive to reduce costs has forced firms to become more global in their operations. The first truly global corporations were Ford and GM. In the 1990's they were joined by the three Japanese giants: Toyota, Nissan and Honda. And by the end of the century European companies such as VW and Fiat had begun to globalise production, establishing assembly plants in North America, South America and Eastern Europe. Europe and Japan had been busy reconstructing their manufacturing capacity in the years following World War II, and their smaller, more fuel-efficient automobiles became popular with the American consumer.
Globalisation caused a fundamental shift in the location of car production. Instead of companies supplying national and regional markets and exporting cars around the world, production shifted to the places where cars were sold. The globalisation of the automobile industry occurred for three reasons. Firstly to reduce costs and increase efficiency. Economies of scale are essential to volume car producers. The fixed costs of investment in plant, machinery, R&D and design are huge. Production is only profitable when these costs are spread over an output measured in millions of cars. Secondly, to avoid trade barriers. This was a major reason for the location of Japanese assembly plants in the USA in the 1980's and in Europe in the 1990's. Japanese cars built in Japan and exported to the EU are classed as foreign and are subject to import duties, tariffs and quotas. However, if Japanese companies build the same cars in the EU, using local labour and components sourced from within the EU, the cars qualify as EU in origin. Thirdly, to exploit new markets. Today's demand for cars in MEDCs is more or less static. Most car purchases simply replace existing cars. These 'mature' markets offer few prospects for growth. However, emerging markets in Central and South America, the Middle East and Asia give scope to expand production. Globalisation has resulted in, however the decline of car industries in countries, such as UK and USA who have a historic stake in the industry.
The rise of the Japanese automobile industry has a huge impact on the location and production trends of the industry. Imported cars, with their lower price and better fuel efficiency, became very popular in the 1970s, due in part to the rising cost of gasoline. In 1973 and again in 1979, the Organisation of Petroleum Exporting Countries (OPEC) cut off the supply of oil to the United States. In an effort to conserve energy, the U.S. government began setting fuel economy standards, but these often conflicted with the air pollution and safety standards it set in the 1970 Clean Air Act. As American carmakers struggled to meet these new demands, Japanese imports soared. Japanese car makers such as Toyota, Nissan, and the relative newcomer , also had the advantage of better industry-government collaboration, newer factories, and a comparatively cheaper, more disciplined labour force. By the end of the 1970s, Japanese car makers were selling 2.5 million cars a year in the United States, which amounted to about one of every four units sold.
Changes in the production trends of the automobile industry include the U.S. carmakers adopting successful Japanese methods, known collectively as lean production. This involved closer co-operation between car assemblers and parts suppliers and the outsourcing of parts on a larger scale. Assemblers held very small stocks of parts. By keeping only minimal stocks of components and ordering them as needed, assemblers can cut costs significantly. However, such a system depends on high-quality components with zero defects and their reliable delivery to assembly plants just in time (JIT).
Consumer industries locational trends have changed dramatically in recent years, predominately, with MEDC's having been under pressure for many years with the rise of Japan and the subsequent spread of manufacturing to Asian economies. Companies that solely made goods in the UK have been taken over by the cheap products from overseas, so that in many aspects, there are no home made goods in the UK. As for the car industry, the most dramatic developments have been in the building of new plants and the increasing productivity in car production by the NICs, such as South Korea, and in Japan. This has occurred at the same time as a relative decline in the manufacturing output of the USA and UK, two nations with an historic stake in the industry. Trends in global car production are likely to see a continuing shift in the location of manufacturing plants in the market share of particular companies.