The evolution of automotive manufacturing and global distribution networks in the era of smart industry

The automobile industry is a classical industry that is both capital- and technology-intensive. Since the dawn of the automobile industry, mass production has served as the competitive weapon to maximize profits through scale economies. With transnational expansion in the 1960s to 1970s, automobile manufacturers started to coordinate global production bases across nations with diverse resource endowments, wage levels, and structural economic conditions, while suppliers were subjected to the structure and patterns of global automotive networks. However, the technological and organizational evolution of global automotive networks has drawn less attention. In the era of smart factories, automobiles have also become high-tech products equipped with multiple sensors and a host of sophisticated software. Manufacturing vehicles at the power of clicks and remotely updating the software without leaving the garage represent two aspects of the automotive industry’s digitization.

Due to the rise of advanced information technology, global value chains have been rearranging to build just-in-time, flexible production systems in line with the shift from product mass consumption to diversified production, and the organization of automobile manufacturers has divided the operations into multiple modules outsourced to suppliers. In the Internet of Things era, the automotive industry has entered another level of digitization besides global reconfigurations of value-adding activities and an organizational restructuring of supply networks.

Many automotive firms have been actively engaged in the smart construction of factories in the so-called Industry 4.0 era (BlazingCDN, 2024; IdeaUsher, 2024; Intelegain Technologies, 2024). The smart factory initiatives have focused on extending production and product networks along with the value chain in terms of new business models enabled by digital platforms and are also important for a spatial restructuring of production networks or changes in the geographical organization of the factories across nations. While the Industry 4.0 initiatives have highlighted a digital transformation of production processes, the “smart factory” envisions a new paradigm of manufacturing to reshape the factory itself as a production and service network, as well as an ecosystem to aggregate and utilize value-adding activities.