Impact of Auto Industry on the World

Published: 05th June 2009
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The deadline for the decision on bankruptcy draws near on June 1. The big automotive players are keeping their fingers cross. But the effects do not end with the big three. Other car majors like Honda Motors, Volkswagen, Toyota are also a worried that bankruptcy and slowdown will have an impact on them.

Especially in United States, the citizens and government are both contemplating on the future of auto industry and its effects on their economy. North America and European experts are trying to understand the nitty-gritties of automobile industry. The enormity of the impact has been so big that the global automotive industry has witnessed unprecedented drop in sales. The ripple effect has spread across several borders and practically every car manufacturer on earth has been affected.

A few years ago it was unthinkable that an Italian car manufacturer Fiat SpA would bid for GM's big Europe brand Opel and also for world auto major Chrysler. Now that it is fact, there is panic and fear on the fact that the auto industry needs support by the government. But, the worldover, people are bewildered as to when did auto industry become important for economy. Here are some of the reasons as to why the automotive industry is so important.

The total turnover of auto manufacturing worldwide is around $2.6 trillion, that is more than the GDP of France, but slightly lower than United States, China, Germany, and Japan. The automobile manufacturing contributes 3-4 percent of the total GDP (gross domestic products) to the United States economy. According to a report by Frost and Sullivan, it contributes 6 percent of the GDP to the European Union.

Globally, the auto industry employs more than 9 million (90 lakh) jobs directly which forms nearly 5 percent of the labour force of the world. Every job created in manufacturing sector directly supports another five jobs indirectly. As such, it would be roughly 50 million (5 crore) people employed in automotive and related jobs. That means nearly 10 percent of the salaried class, of the world, are employed in making automobile and its parts. The trend has been noted in this part of the century than ever before.

In United States at least 8,50,000 people were employed in the manufacturing sector till the end of 2008. They biggest employers are General Motors, Chrysler, Ford Motors, Honda and Toyota Motors. The Asian tiger Japan managed to provide 7,25,000 jobs in the car manufacturing sector till 2008. The total Japanese workforce managed to produce 11.5 million vehicles in 2007. This was as per the figures given by the Japanese Automobile Manufacturing Association(JAMA).

There more than 7,25,000 people employed in the Russian auto manufacturing units. Russian automobile industry is closely linked to Europe rather than United States. Europe's biggest auto market Germany hires over 5 lakh people directly. It has worlds' biggest luxury car manufacturers like the Mercedes- Benz, BMW, Audi and few super luxury car manufacturers.

In the year 2009, car sales are expected to fall by 50 percent. Many more sectors like steel industry and plastics manufacturing sectors will be badly affected by the downfall of auto industry. The magnitude of the problem is hard to imagine. It will not only be loss of jobs, but loss of revenues will cut down drastically for the governments. Currently, India is the 14th largest car manufacturer in the world. As per automotive mission plan, drawn up by Society of Indian Automobile Manufacturers(SIAM), the country will be the placed on the list of big manufacturing hubs and revenue reaching a minimum of a minimum 122 billion U.S. dollars.

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