Why the World is Worried About Auto Industry?

The D date June 1 is nearing and the big auto players are keeping their fingers cross. Not only the big three but other car majors like Honda Motors, Volkswagen, Toyota are also a worried lot as, the decision is likely to have an impact on them too.

Particularly the United States people and the government are both worried about the impact of auto industry on its economy. Everyday people in North America and Europe try to understand the nitty-gritties of automobile industry. The global automotive industry has been hit hard by unprecedented drop in sales that has sparked off a crisis with far reaching effects.

An Italian car manufacturer Fiat SpA who was not doing well till six years ago is now bidding for GM's big Europe brand Opel and world auto major Chrysler. There is panic and fear that if the auto industry is not supported, their entire economies would collapse. But people wonder as to how do cars become so important for an economy. Let us find out as to why the automotive industry is so important for some economies.

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

The auto industry employs a total of 9 million(90 lakh) jobs directly which is nearly 5 percent of the world's manufacturing labour. Every job created in the marketing sector directly supports five more jobs indirectly. When calculated, this would roughly make 50 million (5 crore) people employed in automotive and related jobs. That means more people in the world are employed in making automobile and its parts, this century that ever before.

In United States at least 8,50,000 people were employed in the manufacturing sector till the end of 2008. Its Asian counterpart Japan managed to employ 725,000 jobs in the manufacturing of cars till 2008. The total workforce manages to produce 11.5 million vehicles in 2007. This is as per figures given by the Japanese Automobile Manufacturing Association(JAMA).

Russia employs around 7,55,000 people in the automobile industry. Europe's biggest market Germany also hires over 5 lakh people directly. Due to the economic downslide, car sales are expected to fall by 50 percent. It has worlds' biggest luxury car manufacturers like the Mercedes- Benz, BMW, Audi, Opel, Volkswagen and others.

Many more sectors like steel and plastics will also be affected by the downfall of auto industry. The magnitude of the problem is hard to image in terms of jobs losses across the world and loss of revenues to the government. India currently, is the 14th largest car manufacturer in the world. As per a automotive mission plan, drawn up by the government, India will be the seventh largest car manufacturer in the world earning a minimum revenue of 122 billion U.S. dollars.