In a break from their longstanding practice, car companies are slowly starting to use factories in the developing world to supply the major markets of the U.S., Japan and Europe. It’s a big shift that could have big ripples around the world, creating new industrial bases in Third World countries and threatening the jobs of workers in the higher-cost factories of North America, Japan and Western Europe.
Wages in Africa, Thailand and Latin America often are less than a tenth of what workers earn in developed markets. That more than offsets the added costs of shipping key parts to the remote factories and bringing the completed cars back. Adding plants in developing countries to its global production network “will dramatically increase our competitiveness,” says Honda Chief Executive Hiroyuki Yoshino.
This is an interesting trend. It ensures that the developing markets get access to the best technology and products, and makes them more tightly integrated into the global supply chains.