Wilson Kia Onn Wong - Automotive Global Value Chain: The Rise of Mega Suppliers (Routledge Advances in Management and Business Studies)

Today, some suppliers have grown increasingly powerful and in certain cases, earn revenues that rival or even exceed that of their automaker clients. In the pre-globalisation period, automakers wielded absolute power over their significantly smaller suppliers. This book reveals the upending of this relationship, with the gradual shift in the balance of power from automakers to their suppliers in this era of globalisation.

The book examines how suppliers in the global tyres, seats, constant velocity joints (hereafter CVJs), braking systems and automotive semiconductor industries have evolved into powerful oligopolies through a mix of acquisition and organic growth strategies. It also highlights how joint ventures could be strategically deployed as springboards to acquisition, as they enable firms to familiarise themselves with their partners markets and operations. Moreover, the book analyses the disruption stirred by the entry of well-resourced technology titans into this industry and their inevitable clash with the traditional incumbents.

This book is an invaluable reference for anyone interested in learning more about the automakers and now their suppliers relentless quest to create market-dominating intelligent driving systems.

Wilson Kia Onn Wong completed his PhD at the Centre of Development Studies, University of Cambridge, under the supervision of Professor Peter Nolan, who holds the Chong Hua Chair in Chinese Development. His PhD research focused on the factors driving the formation of oligopolies in the global automotive components industry, specifically in the tyres, car seats, constant velocity joints, braking systems and automotive semiconductor subsectors. Moreover, his research interests span both quantitative and qualitative studies, with particular emphasis on the empirical analysis of the impact of corporate takeovers on acquirers stock returns and the economic history of the rise of key automotive manufacturers and their suppliers over the last five decades.

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71Automotive Global Value Chain

The Rise of Mega Suppliers

Wilson Kia Onn Wong

First published 2018

by Routledge

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Routledge is an imprint of the Taylor & Francis Group, an informa business

2018 Wilson Kia Onn Wong

The right of Wilson Kia Onn Wong to be identified as author of this work has been asserted by him in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988.

All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers.

Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe.

British Library Cataloguing-in-Publication Data

A catalogue record for this book is available from the British Library

Library of Congress Cataloging-in-Publication Data

Names: Wong, Wilson Kia Onn, author
Title: Automotive global value chain : the rise of mega suppliers /
by Wilson Kia Onn Wong.
Description: Abingdon, Oxon ; New York, NY : Routledge, 2018. |
Series: Routledge advances in management and business studies ; 71 |
Includes bibliographical references and index.
Identifiers: LCCN 2017015839 | ISBN 9781138237049 (hardback) |
ISBN 9781315300993 (ebook)
Subjects: LCSH: Automobile supplies industry.
Classification: LCC HD9710.3.A2 W66 2018 | DDC 338.8/
876292dc23
LC record available at https://lccn.loc.gov/2017015839

ISBN: 978-1-138-23704-9 (hbk)

ISBN: 978-1-315-30099-3 (ebk)

Typeset in Galliard

by Apex CoVantage, LLC

Since the 1980s the global business system has gone through a revolutionary transformation. The automobile industry has been at the forefront of this process. A dramatic process of cross-border mergers and acquisitions has contributed to high-speed industrial consolidation of the leading system integrator firms in both the passenger vehicle and the closely related commercial vehicle sector. A handful of firms now control almost the entire global vehicle market. The market in the high-income countries is stagnant. Vehicle ownership in developing countries is far behind that in the developed countries. In the decades ahead almost all of the growth in vehicle markets will take place in the developing countries. A small group of companies with their headquarters in the high-income countries are poised to take advantage of this huge and fast-growing market.

Alongside the greatly increased level of industrial consolidation among the system integrator firms, pressure from these firms has stimulated a revolutionary transformation of the entire supply chain. Through their vast procurement spending the system integrator firms have forced a comprehensive transformation of the industrial structure of the huge supply chain of this industry. Intense pressure from the system integrator firms has forced their leading suppliers to build just-in-time global supply chains, invest heavily in research and development, and place pressure on their own supply chains to lower costs. Every part of the supply chain of global vehicles has now become controlled by a handful of giant sub-system integrator firms. Ferocious oligopolistic competition has driven unprecedentedly rapid technological change across the entire supply chain of this vast industry.

The automobile industry is entering another era of revolutionary change, which is being driven by the penetration of the vehicle industry by information technology. Traditional assemblers and manufacturers in the vehicle supply chain face potentially severe competition from leading firms in the information technology hardware and software industry. The nature of the relationship between information technology and traditional manufacturers is still in its infancy. It remains to be seen whether the relationship will be one of deep cooperation or ferocious competition. The way in which this relationship evolves will be at the heart of institutional and technological change in this massive industry in the years ahead.