Radical Reform in the Automotive Industry · Policies in Emerging Markets

This paper focuses on the automotive industry in developing countries. It builds on the round-table discussions organized by the International Finance Corporation (IFC) in Brazil, India, Indonesia, and Hungary involving automotive industry executives from the respective regions and from multinational companies, Government policymakers, industry experts and IFC staff. The discussions covered business aspects of the industry, such as technological changes, characteristics of the market place, the changing relationship between suppliers and assemblers, and between multinational and developing country companies; and policy aspects such as macroeconomics, competition, trade regime, local content regulations, and the environment. This paper reviews the main points of the round-table discussions, the major changes that have taken place since then and the implications for developing countries. The core part of the paper reviews the impact of macroeconomic changes on business decisions; regulations governing market structure and production conditions; policy constraints on the growth of domestic demand; trade policy and measures to enhance investment.