Complexity explosion and capability building in the world auto industry: an application of design-based comparative advantage

Based on the framework of design-based comparative advantage, in which the dynamic fit between the organizational capabilities of manufacturing sites and the architectures of products and processes affects the competitiveness of the sites and industries, the paper describes and analyzes various issues in the world automobile industry. The current U.S. auto crisis is seen as a long-term consequence of the gap between the division-of-labor type capability and the integral-type architecture of small cars. The competitiveness of the Japanese in the small car market of the late 20th century is illustrated as the fit between the path-dependent accumulation of coordination-type organizational capability and the stricter safety-energy-environmental constraints imposed upon automobiles by the advanced nations. The possibility of commoditizing the automobiles is discussed from the modularization viewpoint, indicating the modular nature of the locally-designed Chinese vehicles and the integral nature of an Indian low-cost vehicle. The architectural differences between pure electric vehicles and hybrid vehicles are emphasized as the paper discusses the potential and the limitations of the former. Toyota’s recent recall problem is seen as the problem of product complexity overwhelming the company’s organizational capability in design.