Analysing Automobile Industry Supply Chains

Analysing the automobile sector is important for understanding the evolution of many economies in the EU. This is because of the sector’s direct importance in terms of GDP and employment, its sensitivity to the economic cycle, as well as its extended role in the economy through supply chains. While our analysis covers all EU Member States, we focus particularly on France and Germany. The aim of this study is to evaluate recent trends in the automobile and related sectors using a global value chain (GVC) approach. Building on these results, we evaluate the potential impact across countries and sectors of a hypothetical negative demand shock for cars. We conclude the analysis by studying the current position of the automobile sector across countries in light of the transition towards electric vehicles. Our main finding confirms that carmakers in France and Germany have chosen different production strategies. While French carmakers have traditionally relied much more on offshoring final production, German car makers seems to have retained much more assembly at home, while offshoring intermediates to neighbouring countries. Moreover, we find that a hypothetical shock of 10% to the final demand for cars by EU consumers could lead to a 0.2% drop in total employment demand in France, placing it at the European average. Germany, however, would suffer from a greater loss of 0.7% in total employment demand. In view of the upcoming shift towards electric car technologies and autonomous driving, we find evidence suggesting that countries in the EU are lagging behind China and the US when it comes to the production of electric parts used in the car sector.