The automobile industry plays an important role in many countries, including developed countries like Japan, Germany, the UK and US and developing countries like Bahrain. Trade liberalisation has resulted in the reduction or removal of barriers to trade and it drives economic globalisation. Here we examine the production and trade of new and used cars, before moving on to focus upon import services in Bahrain more specifically.
Manufacturing
In the late 20th century, some car manufacturers began to relocate certain low-end labour-intensive assembly activities to low-income countries within the network of multinational corporations. For instance, some electronic components that were produced in industrial countries were assembled in South-East Asia. Other car manufacturers, on the other hand, built an assembly plant in the host countries due to high tariff protection. For example, Japan automobiles took advantage of the regional free trade liberalisation programmes among ASEAN countries by consolidating production of particular parts in Thailand and exporting them to plants in Japan in order to achieve economies of scale in production.
Some automotive manufacturers may assign the distribution task to authorised car agents abroad. These car agents provide effective and efficient import services that include joint advertising and promoting and selling the cars to customers. Automotive manufacturers use this method to increase global market share, reduce dependence on domestic markets, or sell excess production capacity.
Used Cars
International trade does not only involve production and selling of new cars. There is also growing opportunity for international trading of used cars. Most used cars are exported by high-income developed countries like Japan and the US to low-income developing countries like Bulgaria, Cyprus, and Jamaica. There are additionally opportunities for used motor vehicle parts and components. According to the OECD Observer, the used car market has been estimated to be worth about USD60-70 billion in sales worldwide. Lack of purchasing power in low-income countries is a major reason for people not wanting to purchase a new car.
Case Study: Bahrain
While Japan, Germany, the UK and US are recognised as leading car manufacturers, automotive manufacturing is also a growing business in the Kingdom of Bahrain. Built adjacent to the Khalifa Bin Salman Port and close to the Bahrain International Airport, as well as the Kind Fahd Causeway to Saudi Arabia, Salman Industry City is strategically located for international companies to invest in manufacturing or industrial operations to cater to the trillon dollar Gulf market. Bahrain is an ideal location for building your production plant or setting up your import services due to close proximity to raw materials like aluminium, lower energy costs and the availability of a well-educated and skilled workforce. Aluminium is one of the main exports of Bahrain. Aluminium Bahrain is one of the world’s largest aluminium smelters, producing more than 870,000 metric tonnes per annum. Compared to other countries in the Gulf Cooperation Council (GCC), Bahrain has a favourable business environment such as lower costs and taxes plus established financial services. If you are setting up an office to offer car import services, the Ministry of Interior Customs Affairs provides some guidelines for customs regulations and procedures relating to the import and export of goods.
The Bahraini government also actively promotes motorsports. The Bahrain International Circuit (BIC) is a world-class facility built in the desert 30 km south of Manama, the capital city. Bahrain is the first country to host the Formula One World Championship Grand Prix in the Middle East in 2004.
The rapid growth of car production and distribution networks has dramatically changed the production patterns and increased the international trade of new and used cars. In a 2011 report on recent developments in the automobile industry published by the Organisation for Economic Co-operation and Development (OECD), car sales remain strong and demand for cars will increase as recovery progresses. More importantly, the automobile industry in developing countries like Bahrain and India is opening up to foreign investors. Their governments have implemented many favourable policies and provided the infrastructure to attract foreign direct investment in the automotive sector.
