Automotive industry - engine for economic growth

The importance of the automotive industry in any economy is perhaps beyond measure. But its significance can be estimated by the fact that engineering forms about 62 percent of the world trade, and auto engineering is about 13 percent of that. This is higher than textile and clothing that forms 6.2 percent of world trade.
The auto industry is also ranked amongst the largest employers and investors in the world - generating jobs for millions of people, generating billions of dollars in worldwide revenues, and providing the basis for a multitude of related service and support industries.
The industry that has opened wider market areas for business and commerce has also reduced the overall cost of transportation by using methods such as mass production, mass marketing, and the globalisation of production that encompasses the assembling of products with parts made worldwide.
As a result of easier and faster transportation, economies have become dependent on the mobility that automobiles, trucks, and buses provide. This mobility allowed remote populations to interact with one another, which increased commerce. The transportation of goods to consumers and consumers to goods has become an industry in itself.
MOTHER OF ALL INDUSTRIES Automobile manufacturers are among the largest companies in the world. These corporations are often multinational, which are basically engaged in research, design, development and manufacturing & assembly of vehicles meeting the requirements of the customers in accordance with the environment and safety regulations.
Automotive parts manufacturers are another large section of the industry, which supplies the original equipment market (for manufacture) and the replacement parts market (for maintenance and repair). This is where hi-tech technology and major employment capability reside, which causes a spillover of both to other industries.
Numerous other industries support the automobile industry. These include the insurance, security, petroleum, and roadway design and construction industries. Still other industries such as motels, drive-in theaters, and fast food restaurants, owe their existence to the mobility provided by the automobile sector.
Automobile production consumes large amounts of iron steel, aluminum, and natural rubber. The automobile industry also consumes more copper, glass, zinc and leather, plastic, lead and platinum than any other industry. In a nutshell the automobile industry is termed as "mother of all industries".
The automobile industry also has related problems, such as air pollution, congested traffic, and fatalities because of road accidents. The industry, along with other stakeholders, is continuously making endeavours to meet the challenges for alleviation of these problems. Nevertheless, the automobile industry continues to be an important source of employment and transportation for millions of people worldwide.
The development of the automobile came from many different people from different countries. In the year 2007, when the automobile industry peaked, the production of automobiles globally was 75 million units. More than 50 countries have automobile assembly cum manufacturing facilities.
The number of units produced varies with the state of industrial development and the growth rate of the respective economies. A segment-wise analysis shows that only four countries of the world boast 5 million plus automobiles. Eleven countries boast 1-5 million, six countries have 0.5-1 milllion automobiles, whereas 13 countries have 0.1-0.5 million automobiles.
EMPLOYMENT
In India about 1 percent of the total population is employed in the automotive and allied sector. In Malaysia, every fourth person employed is with the automotive industry, and in Germany, every seventh employed person is with the automotive industry. As is obvious, the industry has a great multiplier effect on employment because of the multifaceted sections required to support and a ratio of 1-to-12 is considered the norm.
All governments are well-aware of the well-documented non-linear relationship between economic growth and personal mobility in any industrialising nation. As per capita income rises, so does per capita car ownership - not in the straight line, but in a classic "S-curve".
Rates of vehicle ownership stay low during the first phases of economic growth, but as the level of sustained prosperity rises and as urbanisation reshapes the work patterns of a country, vehicle sales take off. Eventually, the growth rate levels off as the country becomes saturated with automobiles, but at a much higher level per capita than before.
Vehicle manufacturing is a high-profile industry that generates enormous revenue, employs millions of people, and is often a proxy for a nations manufacturing prowess and economic influence.
THE PAKISTAN EXPERIENCE The production of 500,000 units in a year by an economy is considered to be the development threshold - a launching pad that makes the industry self sustainable. The automobile industry in Pakistan, which achieved production of around 204,000 units in 2007, was at the verge of take off and geared up to cross this threshold barrier in the near future.
The key success factors for the development of the automobile industry in any country are:
SUSTAINED ECONOMIC GROWTH LONG-TERM AND CONSISTENT POLICIES OF THE GOVERNMENT Development of country wide "physical infrastructure" both inter-city and intra-city road network.
Upgradation of technology and manufacturing capacities of the OEM, vendors, and suppliers of raw materials.
HUMAN RESOURCE DEVELOPMENT THROUGH FOCUSED TRAINING Cheaper fuel costs (availability of alternate fuel like CNG, LPG and Ethanol) As is evident from the graph here, while the automobile growth was being experienced around us Pakistan remained stagnant in the nineties until industry friendly long term policies were put in place earlier in the last decade. In spite of this upsurge which only lasted for a few years, we stopped short of what is considered the take off volume in the car industry ~ 400,000 units and then the decline started.
Vehicle density in Pakistan is 12 per thousand persons, in Thailand it is 200, in Malaysia 225 etc, the world average is 120. So the potential is obvious.
If Pakistan is to make 500,000 vehicles per year it will create a wave of economic well being by increasing the total investments to Rs225 billion. Moreover, the growth in industry can also help auto sector to provide additional direct employment of 135,000 people and additional indirect employment of around 2.8 million persons.
The expansion in the local auto industry is also in favour of the government as it will increase tax revenues massively to around more than Rs200 billion. In addition, strong manufacturing base will also foster vehicle exports from Pakistan, with some estimates suggesting expected export revenue to around $400 million. In other words, the power of the automotive industry must to unleashed, to motor Pakistan into the future as an emerging giant.
Automotive industry - engine for economic growth

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Key Indices of Pakistan Automotive Industry (June 2010)

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Particular                Units

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Investment              (Rs. bn)           92

Direct Employment         (Nos)       215,000

Indirect Employment       (Nos)     1,400,000

Revenue to Government   (Rs. bn)           69     (5% of FBR collection)

F.E.saved                 ($mn)         1,500

Sales - Cars & LCVs       (Nos)       141,654     (Deletion: 55% - 70%)

Motor Cycles              (Nos)     1,300,000     (Deletion: 90%)

Trucks & Buses            (Nos)         4,934     (Deletion: 30% - 40%)

Tractor                   (Nos)        71,512     (Deletion: 90%)

Vendors involved          (Nos)          1600

Installed Capacity      (Nos) p.a     325,000     (Cars+LCVs)

TAA/JVs                   (Nos)            34

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