China and India in the international fragmentation of automobile production

We explore the relative positions of China and India in the international fragmentation of automobile production by analyzing disaggregated trade flows, while distinguishing between final and intermediate goods. The size and composition of trade has significantly moved in favor of trade of components over the last decade, but major differences exist between the two countries; China is a net car importer, while India is a net car exporter. We find evidence of the increasing importance of two-way trade in vertically differentiated goods, indicating that China and India are becoming more active participants in the vertical division of labor in automotive production.

► Increasing importance of components trade (vertical two-way trade) compared to final goods trade. ► Significant differences in the positions of China and India in the international division of labor. ► China has a significant share of auto part exports with higher unit prices than imports. ► India is consistent with quality ladder hypothesis: exports have lower unit prices than imports.