What is the car industries future?

As our double dip recession seems to be in stagnant form and is showing no immediate signs of recovery, the car industry can but only suffer in silence.

The average consumer has had a reduction in the amount of disposable income, which has led to higher revenue intake on public transport. Increased consumer price indexes are making the cost of living higher and pushing up the cost of necessities, leaving less money to be spent on travel.

How much do we rely on the car industry?

Well the answer to that is, a lot more than you would ever suspect. According to the SMMT (Society of Motor Manufacturers and Traders) the UK is home to a wealth of car production plants that provide thousands with income from employment. From suppliers, transport and logistics to manufacturing itself, the UK car industry is an outlet for various job roles that help contribute towards our typically impressive GDP ranking of No.7 on the IMF (International Monetary Fund’s) GDP world ranks.

For the amateur or professional economists amongst the readers, you may well understand that GDP is formulated by the aggregate demand formula of C + I + G + (X-M). The first item is C (Consumption) and therefore to understand and possibly predict what the future of the car industry is we must examine consumption levels in the market.

The UK automotive industry equates to around 3% of the UK’s total GDP and typically turns over around £50bn per year. Considering that the reason we are in a recession is because of the 2012 net public sector debt of £1022.5bn, £50bn is rather a lot and is nearly 4.9% of our debt. Therefore, it is essential that for the recovery of our deceased economy, we support and encourage the growth of the automotive industry in the UK.

It’s not all bad news…

SMMT predict that car registrations will be increased by 3.1% in 2013 compared to 2012’s predictions, meaning more people buying cars. This in turn could result in increased revenue, profit and investment opportunities. At present, the UK automotive industry invests £1bn+ per year in improving manufacturing techniques and production efficiency. By receiving increased revenue the automotive industry can afford to invest more, securing the employment of thousands and another positive step towards economy recovery.

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