Factors Behind International Relocation and Changes in Production Geography in the European Automobile Components Industry

TL;DR: In this article, the authors analyzed business strategies in the automobile sector to determine the key factors behind production relocation processes in automobile components suppliers and found that the search for lower labor costs, production concentration and specialization in order to obtain economies of scale and improved productivity are the main factors determining relocation in the sector.

Abstract: This article analyses business strategies in the automobile sector to determine the key factors behind production relocation processes in automobile components suppliers. These factors help explain changes in production geography in the sector not only in terms of location advantages but also from a perspective of corporate strategies and decision-making mechanisms within firms. The results obtained from an empirical study in Spain during the period 2001-2008 show how the components sector has used relocation to meet the requirements for efficiency imposed by automobile manufacturers. The search for lower labor costs, production concentration and specialization in order to obtain economies of scale and improved productivity are found to be the main factors determining relocation in the sector. These processes are facilitated by the operational flexibility of the multinational firms that dominate the sector which allows them to transfer resources internationally. Lean supply, technological requirements for production processes and the integration of production plants in the institutional environment are the main barriers to such processes of mobility, and may also determine the geographical destination of migrated production.