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The automotive industry focuses on manufacturing and selling automobiles among other retail activities, such as the sale of automobile parts and petrol at the stations. The industry has been leading global economic growth for years. According to the International Organization of Motor Vehicle Manufacturers, by 2005, the automotive industry had employed about 9 million people worldwide. These employees are either directly or indirectly related to the automobile industry. Manufacturing and service industries also take a large share, of workers as well as research and development in the industry. In short, there are about 50 million jobs that are related to the automobile industry. International Organization of Motor Vehicle Manufacturers estimates shows that the industry contributes about $ 430 billion to the various governments in only 26 countries in the world. This implies that the industry contributes a lot of income to the government.
Pike (2011) notes that automobile industries have heavily invested into the safety technology. This is aimed at minimizing accidents on the roads. Some of the technologies focus on braking systems, lighting, and stability of a car. On the same, the industry has been working towards conservation of the environment and reducing the level of air pollution. Numerous efforts have been made in order to find alternative sources of energy apart from petroleum, such as the use of electricity, clean diesel, and natural gas among others. Pike research estimates that in the near future, electrical cars will actually dominate the market. They will use Battery-powered Electricity Vehicles (BEVs). In fact, by 2017, Pike Report says that Plug-in Hybrid Electric Vehicles (PHEVs) will be the preferred ones by many countries, since they are environmental friendly, as well as able to conserve energy. These projects are aimed at reducing the rate of using fuel due to the risk of reduced oil deposits in the world markets. This has made automotive industries come up with alternatives in case an event occurs, where the world oil industries will decline steadily.
According to the Global Automakers, the U.S production and sale of automobiles account for approximately 40 percent of the total world vehicles. The leading manufacturers of automobiles in the United States are Ford, General Motors, as well as the Chrysler group. The leading producers of automobiles in Europe are Germany, France, and Italy. The industry employs about 2.3 million people in Europe directly, while more that 10.5 million work in the automobile-related activities. European Automobile Manufacturers Association shows that the continent produces more than 17 million vehicles every year. Some of the models in Europe include BMW, Volvo, Fiat, and Peugeot among others.
With the changing world economy, the automobile industry has been faced with various challenges that include rise in prices of petroleum, increased competition, and reduced market share. However, since 2012, American motor industry was doing better, as compared to the European one. In the U.S., Detroit and GM, the major car makers in the country, recorded improved performance. Their continued sustenance and growth had made them continue having a larger share of the market despite the increased competition from China and other leading manufacturers in the world. Plunkett Research (2008) established that the growth of automobile industry in Europe has been hindered by the reduced economic growth and rise in petroleum prices.
This has made most of the industries engage into economic measures, such as price cutting, in order to reduce losses and over-capacity. For instance, in Norway and Switzerland, the car sales have declined from 16.2 million in 2007, to 12.2 million in 2013. Moodys Investor Services estimated that industries such as PSA, Peugeot, Citroen, and Fiat are likely to continue making losses.
Some European car manufacturers have been reluctant to close their industries despite the continued losses due to the existing labor laws. However, PSA and Renault have been cutting the number of employees, as well as limiting their production capacity. Some countries, such as France, have closed some of their industries due to the financial crises and reduced returns. The Automotive industry crisis of 2008 to 2010 made the industries financial status weak in America. Throughout this period, the industries were undergoing economic recession, as well as financial crisis, forcing them to look for a helping hand from the federal government. The big manufacturers, which include GM, Ford, and Chrysler, have gradually recovered and there is a sign of continuous improvement.
The growth of automobile sector has also been influenced by the growth of population. In the countries such as China and India, the demand of vehicles has increased. According to Plunkett Research (2008), increased influence by China has both negative and positive effects to the world automotive industry. Due to the increasing consumer demand in China, the rate of energy consumption of fuel vehicles has become very high. A similar situation can be observed in India and other countries, where population is steadily increasing. Due to the significant growth in the automobile sector, industries have been forced to come up with the initiatives to meet these changes. Some of these changes include reduced man-hours that would make it possible to cut the cost involved in producing one car. In addition, the industries have focused on offering a wide range of models to meet needs of the customers in the world market.
Eckermann, E. (2001). World History of the Automobile. SAE Press.
Automobile industry refers to the industries involved in the production, wholesaling, retailing, as well as maintenance of vehicles. The history of the automotive industry began in Europe in the early 1800s. Efforts were made in the 19th century for mass production of vehicles by the American manufactures. Eckermann (2001) notes that World War II almost crippled the automotive manufacturing industry, but the manufacturers began with a renewed energy after the war to manufacture more vehicles. Industrialized countries expanded their roads accelerating the sale and production of more vehicles. There was increased range of car models with advancement in design, service, as well as speed of vehicles. The automobile industry started to provide personal freedom facilitating the economic growth.
Eckermann (2001) states that mass production of vehicles led to the establishment of more assembly lines creating more employment opportunities. Consecutively, the steel industry and other machine tool makers expanded their production in order to meet the increased demand in the automotive industry. There was also increased demand of other components, such as engines, and chassis among other metal fixtures. On the same, the motor industry needed batteries, headlights, and paint among other requirements. This implies that the advancement in the automotive industry led to expanding of the existing businesses, as a result, increasing the rate of economic growth. During the early years, the impact on increased production was immense with the booming economy.
According to Eckermann, (2001), in just some few years, more that 10 million cars were sold, as the American manufacturers dominated the world markets. However, this was just for a few years, since they were soon to encounter major competition from other foreign automakers, specifically Germans and Japanese. Foreign countries started producing new brands of cars leading to loss of market by the American industries. However, after several decades, the U.S market in 2012 recaptured the auto market due to a concerted effort by the government. According to the United Auto Workers Union, by 2007, the automotive industry was still on the verge of collapsing, but certain measures were put in place in order to revive the industries. Surprisingly, by 2012, the motor producers, such as Phoenix, started to rise steadily recovering from their financial problems. The industry started to record a high net profit with GM posting a net profit of more than $7.6 million.
With increased world competition and technological innovations, some analysts are still skeptical on Americans ability to continue having a larger share in the global automobile industry. However, American manufacturers are still struggling to find a dominant market in Europe due to the fact that other countries in Europe are still advancing in that sector.