Automobiles are the neurons of the economy. They drive all types of resources, whether human or earthly, to their desired destination. Every stakeholder in automotive manufacturing is well aware of how the dynamics of localization and globalization impact the industry.
These past couple of years have presented growing challenges to manufacturers on the edge of the two choices.
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Discover the ongoing fight for automotive manufacturing between local and global approaches.
It primarily depends on the efficiency and cost-effectiveness of the manufacturing center.
Rise of Global Automotive Manufacturing
Globalization has been a transformative element in supporting and boosting the automotive industry. It has enabled manufacturers to gain access to global markets filled with diverse talent pools and cost-effective measures.
For example, many automakers set up their production facilities in countries where there are lower labor costs to lower manufacturing costs.
Additionally, a globalized manufacturing approach allows firms to streamline their supply chain by sourcing materials from regions specializing in extracting them.
Taiwan is a hub for semiconductor manufacturing; thus, it is the go-to supplier for many automakers. Similarly, South Korea supplies batteries. In this manner, firms can leverage expertise from across the world.
Although manufacturing globally comes with its own set of challenges. A recent example is the COVID-19 pandemic that halted almost all supply chains. Similarly, other geographical disruptions can lead to delays and increased costs.
Vocal for Locals: Shift towards Domestic Manufacturing
Localized manufacturing is gaining traction as firms focus on business adaptability and business resilience. If automotive manufacturing occurs closer to customers, then lead time and transportation costs.
Vocal for local aligns with the rising emphasis on ensuring a business operates with sustainable procedures. It lowers the total carbon footprint of firms, particularly those related to logistics and shipping.
Governments of countries are playing a critical role in supporting local manufacturers. Many have introduced heavy subsidies, loan assistance, and other protectionist policies.
Localization boosts job creation and industrial growth, thereby supporting economic growth. However, it can lead to higher production costs, particularly in areas with stringent regulations and higher wages.
Along with this, the talent pool is limited to that of the nation (maybe even the state).
Balancing Local and Global Approaches
The fight for automotive manufacturing continues as local and global manufacturers look for new ways to attract firms. Companies can undertake a balanced approach to avail themselves of the benefits of both.
For example, global manufacturers can be selected for critical component sourcing and local manufacturers for serving regional hubs.
