Economic Issues Plaguing the U.S Domestic Auto Industry

Topics: Automotive industry, Renault, Volkswagen Group Pages: 7 (1268 words) Published: July 6, 2014


Economic Issues Plaguing the U.S. Domestic Auto Industry
Danika G. Brown
Lakeland College

Economic Issues Plaguing the U.S. Domestic Auto Industry
Starting in the very recent recession, the decline of the United State’s domestic auto industry is a sight to see. “The mutual market share of the United State’s “Big Three” car companies fell close to 20% in a decade, from 70% in 1998 to 53% in 2008.” (Snyder, 2012). Within the past several years, China is currently building more cars than anyone else and produces one in four cars in the world. (WorldoMeters). In addition, when compared to the output of the United States, China manufacturers over 12 million more automobiles than the U.S and produces 24% of the total global automobile manufacturing. Finally, it can be implied that the globalization of the automotive industry is due largely to the construction of vital overseas facilities and the founding of mergers between giant transnational automakers.

Since the 1990s, the key sector in China’s industrialization and modernization efforts regarding the automobile industry has been rapidly developing. In 2006, China was the world’s third-largest car market as the car sales in the country soared by nearly 40% to 4.1 million units. Soon thereafter, China took the lead and became the world’s first-largest car market; this is due to low vehicle penetration, rising incomes, greater credit availability, and decreasing car prices lifted China past those of Japan. “Since then, China has become the world’s fastest growing automotive producer; China produced well over 20 million cars in 2013” (OICA), over double the vehicle output of the United States. China’s manufacturing output and infrastructure have developed rapidly during the past 15 years, and the nation has the world’s fastest-growing large economy. Most of the global auto suppliers have identified China as a target country for tactical and low-cost sourcing.

The United States can best compete with China’s market share by continuing to offer the quality that most Americans enjoy. Several years ago, China became a major player in the global auto market and its impact on the domestic U.S industry has continued to increase. However, with China becoming a top automotive manufacturer and a major consumer in the global market, there are several concerns about the conditions that the U.S manufacturers must compete with Chinese firms in both China and the global market. These concerns have focused on issues including: “Chinese currency policy, that continues to maintain a virtually fixed exchange rate; Chinese implementation of its commitments as a member of the World Trade Organization, especially with respect to protection of non-Chinese firms’ intellectual property rights; and The extent to which Chinese firms are subsidized or otherwise supported by the government when they compete with foreign companies.” (Tang, 2009).

One additional issue that has been plaguing the domestic automobile industry of the United States is globalization. Over the years, global trade has amplified and has enabled the development in worldwide commercial distribution systems. Because of this, the international competition amongst the automobile manufacturers has also expanded. Many international automobile manufacturers have taken the U.S manufacturing model and modified it to establish groundbreaking production methods, as well as adapting and utilizing technology to enhance production and increase product competition. If the global automotive market is examined, there are a number of trends that can be identified; these trends can be divided into the following factors: “Global Market Dynamics – The largest automobile manufacturers in the world will continue to invest in the production facilities located in the emerging markets. This happens in order to reduce any production costs. United States Automakers – The “Big Three” have actually merged and forged some...

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Schuman, M. (2011, 03 10). Can China compete with American manufacturing? . Retrieved 06 30, 2014, from Time: http://business.time.com/2011/03/10/can-china-compete-with-american-manufacturing/
Snyder, M. (2012, 01 19). 17 Facts About The Decline Of The U.S. Auto Industry That Are Almost Too Crazy To Believe. Retrieved 06 29, 2014, from The Economic Collapse: http://theeconomiccollapseblog.com/archives/17-facts-about-the-decline-of-the-u-s-auto-industry-that-are-almost-too-crazy-to-believe
Tang, R. (2009, 11 16). The Rise of China’s Auto Industry and Its Impact on the U.S. Motor Vehicle Industry . Retrieved 06 27, 2014, from Federation of American Scientists: http://fas.org/sgp/crs/row/R40924.pdf
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