has been particularly strong, surpassing the United States for the first time in 2008 as the number two auto producing country in the world. Looking at these trends and considering the pending plant closures in North America and Europe, we have to conclude that at least part of the current production decline in mature markets is likely to be permanent and that China will soon occupy the top spot and keep it for the foreseeable future.

The overall structure of the post-crisis industry is still taking shape, as many firms have yet to liquidate, fully complete their bankruptcy restructurings, or avoided bankruptcy with certainty. Only after the announced planned closures and capacity reductions have been carried out will alterations in global market share and the relative weight of the industry in different regions become apparent. The likely four market share leaders: in order, Toyota, Volkswagen, Ford, and Hyundai, will signal a remarkable break from the industry’s — even recent — past. Furthermore, the ascent of Chinese companies and India’s Tata into the top 20 is likely to have far-reaching impacts.

**Table 1: Passenger Vehicle Production Levels and Growth in Countries Producing One Million or More Units in 2008** (in thousands) *****

||**2002 **|**2007 **|**Annual growth**<br>**2002-07 (%)**|**2008**|**Annual growth**<br>**2007-08 (%)**|
|---|---|---|---|---|---|
|Spain|2,855|2,891|0.25|1,940|-32.90|
|Canada|2,629|2,602|-0.21|2,068|-20.52|
|United Kingdom|1,821|1,770|-0.57|1,450|-18.08|
|United States|12,280|10,611|-2.88|8,746|-17.58|
|Italy|1,427|1,284|-2.09|1,085|-15.47|
|Germany|5,145|6,200|3.80|5,500|-11.29|
|South Korea|3,148|4,085|5.35|3,830|-6.24|
|Mexico|1,805|2,254|4.54|2,154|-4.44|
|India|892|2,046|18.06|2,022|-1.20|
|Japan|10,258|11,596|2.48|11,564|-0.28|
|Turkey|340|1,097|26.40|1,147|4.57|
|China|3,251|8,890|22.29|9,340|5.06|
|Russia|1,220|1,654|6.28|1,776|7.40|
|Brazil|1,793|2,960|10.55|3,210|8.45|
|Thailand|540|1,178|16.88|1,400|18.85|

**Sources:** Data for 2002 and 2007 and for North American countries and Japan are taken from Automotive News.  Other information comes from various Internet sources, mostly from newspaper reports and national industry associations. ***** Two countries are missing: France (3.01 million vehicles in 2007) and Iran (1.18 million in 2007); 2008 production volumes were not available for these countries.

It is important to note that the industry’s growth in the developing world has been limited to a specific subset of countries. Political pressure to build vehicles where they are sold, discussed earlier, combined with very high minimum economies of scale for true “integrated” production means that market size dictates the potential for the industry’s growth. The impact of market size is manifest in four ways. First, even when existing vehicle designs are used as a basis, it is only profitable for lead firms to tailor final products to fit consumer tastes in very large markets (Brandt and Van Biesebroeck, 2008). This has happened in China, India, and Brazil, but in few other developing countries. In these countries lead firms have established local design, engineering, and regional headquarter facilities. Once automakers set up these local technical centers, they tend to pressure “global” suppliers (Humphrey and Memedovic, 2003; Sturgeon and Lester, 2004) to establish local engineering capabilities as well. When this happens, global suppliers can begin to source inputs locally, providing opportunities and support for local tier 2 suppliers 10