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Economic overview of the auto industry
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A vehicle is one of the biggest purchases a person will ever make. Over the years, the prices of an automobile have increased due to the rise of inflation. Due to a price index, the price of an automobile changes over a certain period of time. Economists compare averages of automobiles to calculate the cost of each vehicle that presents itself on a car lot. When all of the above is calculated within the purchase of an automobile, it affects every area of making the automobile to selling the automobile. All of these factors are impacted together for the automobile industry as a whole.
In the automobile industry, there are factors that cause a shift in the supply and price elasticity of the supply and demand. These factors can cause the supply demand to reduce or raise the demand for the automobiles. One factor to consider is if the price of steel rises. Automobile manufacturers will then produce fewer automobiles at all different price levels and the supply curve will then shift. Another factor to consider is if automobile workers decide to go on strike for higher wages. The company will be forced to pay more for labor to build the same number of automobiles. The supply of these automobiles will decrease. Lastly, another factor that can curve a shift in the supply curve could be if the government imposes a new tax on car manufacturers. In all of those cases, the supply curve will move because the quantity supplied is lower at all price levels.
As the supply curve moves in the automobile industry, the equilibrium price and quantity sold will change with this shift. When the automobile manufacturers see this shift in supply, they will then raise their prices and the quantity sold will fall. Car manufacturers will also develop...
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The United States recession (which lead to a world recession), began in 1997 and significantly impacted the United States automobile industry during the recession period. The United States automobile industry is still reeling from the effects of the recession throughout the period of economic recovery that continues today. According to Chu and Su, “In this credit-driven recession, one of the hardest hit sectors was the automotive industry, along with the housing and financial markets. Chrysler and General Motors were pushed into bankruptcy; and 276,000 jobs in the automobile and parts industry were destroyed, a whopping 36 percent of the total employment in the sector”.
During the Great Depression, every work place was hit hard and many were out of work. The demand for vehicles declined, and the automotive industry took a hit. Once the Second World War began, the automotive industry was given a push in the right direction, and their vehicle production flourished...
Purchasing a car is one of the biggest and most important decisions that someone will make during their lifetime. Over the past several years, the prices of a vehicle have increased significantly due to the rise of inflation. Economists compare averages of vehicles to calculate and determine the cost of every vehicle that ends up on the car lot. To determine the cost they interpret all the above information and include everything from the cost of making the vehicle to the time of selling it. In the long run, the demand for vehicles is inelastic because they become a necessity for many people. However, in the short run, the demand is elastic because the purchase of a new vehicle can be put off for a while.
In the United States, modern car manufacturing has been historically dominated by the American companies including Ford Motor Co., Chrysler Group LLC, and General Motors Co. These three companies, known as the Detroit Three, controlled 95% of the market in the 1950’s and the dominance continued until the beginning of the 21st century. In the 1980’s Japanese auto manufacturers entered the United States, a decade later the Germans, and finally in 2000’s the Koreans. By the end of 2009, the Detroit Three only accounted for 45% of the total U.S. auto market. Another factor that had influence on this was constant fluctuations in gasoline prices and price sensitive consumers. According to the U.S. Department of Energy, gas prices hit record high averaging $3.07 per gallon in May 2007 and kept climbing up to $4.08 in July 2008. As gas prices kept increasing, consumer buying trends have been changing. In 2006 sales for SUVs, pickup trucks, and vans dropped 16%, while the market for compact cars rose by 3%. Unfortunately, the Detroit Three were not prepared for this since their...
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The automobile sector has been a robust sector that has experienced tremendous growth in the past seven to eight years. Apart from two years in particular -2008-09 & 2012-13, there is general trend of ten percent plus growth in various segments like passenger car, commercial vehicles, two and three wheelers. The following chart shows the growth rate of various years in each sectors.
As the economic integration of Europe continues, it is likely that increasing international competition will affect firms in European industries. As other countries expand and have more trade worldwide, the more the European economy will be affected. The economy will tend to buy from outside of Europe due to taste and lower prices. There would be more firms to choose from decreasing Economies of scale are significant because motor vehicle manufacturing is an industry based on growth. Since the automotive industry being discussed is in Italy, it is based primarily around one company, Fiat. The majority of sales of automobiles in Italy are acquired by Fiat. The automotive industry constitutes a substantial part in the European economy because this industry makes up 10 percent of total manufacturing output.
The history of the automobile begins with the technological advances that occurred in the USA with Henry Ford’s Model T. Since then, the automobile market has had its ups and downs, but it has no doubt flourished into an industry that is the cornerstone of many economies. The world economic collapse due to the Great Depression caused consolidation in the manufacturing market. However, after World War II, an expanding highway network fueled by economic growth as well as television advertising spurred sales for car companies in many countries. The globalization of the industry accelerated during the late 1990 's due to the establishment of overseas plants and the merging of large multinational corporations.
Picciotto, Dan and Nishit K Madlani. "The Global Auto Industry Shifts Its Focus To OVerseas And Emerging Markets." Credit Week (2013): 26. Online. 21 May 2014. .
The development of the automobile in the late 18th century transformed the structure of society in the United States. Initially, cars were meant to give someone status in society, only the rich and privileged owned a vehicle. However, in today’s society, vehicles come at all kinds of price ranges making it easier for the average American to own his or her own vehicle thus, the ban on cars would change society drastically. Economically, the automobile industry significantly defines the economy of a nation manufacturing cars. “Despite the fact that many large companies have problems with overcapacity and low profitability, the automotive industry retains very strong influence and importance. The industry also provides well-paying jobs with good benefits, has heavy linkages with supplier industries (which gives it an oversized role in economic development), and has a strong political influence,” (industryweek.com). If cars were to be banned in the United States
When a suppliers' costs changes for a given output, the supply curve shifts in the same direction. For example, assume that someone invents a better way of growing corn so that the cost of corn that can be grown for a given quantity will decrease. Basically producers will be willing to supply more corn at every price and this shifts the supply curve outward, an increase in supply. This increase in supply...
According to the diagram below, the supply curve shift from S to S1, which raises price but reduces output. When people purchase goods, not only the product itself need to be considers, but also other products that is related to it. Make instance of tea and teapot. If the price of tea rises or the output of tea decreases, the number of people who drinks tea will lessen. Except the situation of teapot collection, teapots are just accessories of tea. Now that people drink tea less, the sales volume and profits of teapots will decline. Thereby, producers will cut down the output of teapots. As the movement of supply curve a shortage occurs. Since the price rises from P to P1, a new equilibrium will appear. And the quantity will decreases from Q to
The American Automotive Industry, popularly known as the U.S. Automotive Industry is one of the most rapidly evolving industries in North America. It is generally oligopolistic with a few players who in the past have been known to avoid price competition among themselves. The industry consists of industries manufacturing vehicles, car parts, replaceable parts and those engaged in assembling parts into complete models. However, the most dominant players in this industry are the vehicle manufacturers. The players design various models, produce the various parts that each model needs and assemble them into a finished product before availing them to the market. General Motors, Chlysler and Ford motors, dominate the U.S. Automotive mobile. They are popularly referred to as “The Big Three”.
When the price of raw material will go up or down, the production coats will rise or fall. Secondly, the price of substitute products also affect the supply curve. Because the relatived products are competitive relationship, when the price of one product goes up, another will goes down. It will affect suppy. Thirdly, production technology will affect the supply curve. When the level of technology is rising or falling , the production costs will go down or up. finally, the government policies will affect the supply curve. Positive policies will make the supply go up, conversely, it will go down. For example, the govenrment limit the amount of cars which people can buy, it will caused the supply curve down. In addition, the price of product in the future and the development of product company will also affect the supply
The automobile industry is a pillar of global economy. Globally automotive contributes roughly 3 % of all GDP output. It historically has contributed 3.0 – 3.5 % to the overall GDP in the US. The share is even higher in the emerging markets, with the rates in china and India at 7 % and rising. China produces the highest number of automobiles followed by US and Japan (oica.net, 2015). The industry supports direct employment of 9 million people to build 60 million vehicles and parts that go into them (oica.net, 2015). Many other industries such as steel, iron, glass, aluminium, textiles etc. are associated with the automotive industry and resulting in more than 50 million jobs owed to the auto