Understanding the Financial Impact of the Automobile Industry

Understanding the Financial Impact of the Automobile IndustryThe automobile industry is at the center of the global economy. It drives macro-economic growth around the world. When the automobile industry of a country is doing well, the entire economy of the country is strong. A good example of this is India. Currently, India is experiencing a boom in its automotive industry. In the last 10 years, India has seen a 14.4 percent growth in its car industry, according to reports published by the Society of Indian Automotive Manufacturers. This growth represents 7 to 8 percent of India’s GDP.

Of course, India’s economy is not the only one that is affected by its automobile industry. One of the reasons why the automobile industry has such an impact on the country’s economy is because it supports many other industries, both upstream and downstream. There are also adjacent industries that rely on the automobile industry for its growth.

Another reason why the automobile industry has such a powerful impact on the economy is because the research and development that is done within the automobile industry usually has an impact on other industries. For example, other industries can learn from and benefit from the research done in the creation of stronger and more durable autobody parts.

Businesses that work in mining, metal fabrication, fuel creation, electronics, rubber, glass, and plastic rely heavily on the automobile industry for a good portion of their business. They are on the upstream side of the process. The work in research they do is used to create the parts that are using passenger vehicles, commercial vehicles, and recreational vehicles.

After the vehicle has been created, other industries on the downstream side benefit financially. These include financiers, insurance companies, car rental companies, the transportation industry, advertisers, warehouses, and businesses that build aftermarket automobile parts.

Governments also benefit from the creation of new automobiles. They do this by means of tax revenues generated by selling vehicles, selling new and used parts, local taxes, and import dues.

The automobile industry is center to economic development. On average, it contributes 3 percent to the global GDP output. However, in emerging markets, such as China and India, it contributes 7 percent to the GDP output.

It is very unlikely that early automobile designers realized the impact that their creation was going to have on the world. Not only has the automobile revolutionized the way that people get from one place to another, but it has actually been the financial force behind some of the greatest empires in modern history.