Almost all costs come down to wages when you look at the economy of an entire country. The car factory pays wages and materials (grossly simplified to illustrate what I mean). The supplier they buy the materials from pays wages and raw materials. The place those raw materials come from pays wages and their own raw materials. And so on. At the end there’s some guy in a mine swinging a pickaxe who’s paid, you guessed it, a wage. (again, grossly simplified for illustration. Of course they use modern machinery, of course the supply chains are networks and not straight lines…).
So when you produce in a country with a vastly lower level of wages, everything gets cheaper. The car maker doesn’t only pay less in wages, they also pay less for steel sheets, cables, cloth and leather for seats, you name it, because those suppliers pay lower wages too.
Almost all costs come down to wages when you look at the economy of an entire country. The car factory pays wages and materials (grossly simplified to illustrate what I mean). The supplier they buy the materials from pays wages and raw materials. The place those raw materials come from pays wages and their own raw materials. And so on. At the end there’s some guy in a mine swinging a pickaxe who’s paid, you guessed it, a wage. (again, grossly simplified for illustration. Of course they use modern machinery, of course the supply chains are networks and not straight lines…).
So when you produce in a country with a vastly lower level of wages, everything gets cheaper. The car maker doesn’t only pay less in wages, they also pay less for steel sheets, cables, cloth and leather for seats, you name it, because those suppliers pay lower wages too.
Yes. There is the matter of productivity somewhere in between, which is mainly linked to innovation and past capital expenses.
Not really. These are already procured externally in a globalized world where manufacturing already left to low-wage places