The automotive industry in the USA began in the 1890s and grew to become one of the largest in the world, behind Japan and China. However, the industry had its lowest manufacture of about 5.7million automobiles in 2009 because of the 2008-2010 crisis. This crisis was due to high oil prices and increased competition from foreign manufacturers. Also the increased knowledge on climate change and the difficulty in accessing the credit market by consumers led to reduced purchases. The downturn that occurred negatively affected the automobile industry; consumer spending decreased because of lack of confidence in the economy and also difficult credit markets that allow them to purchase vehicles. Companies like Chrysler and GM had to file for bankruptcy while Ford had to leverage its assets. The first two have come out of bankruptcy buy the US government now owns half of GM while Fiat owns 35% of Chrysler (Davis).
The industry accounts for about 3.5% of the country’s gross domestic product. The manufacturer count currently stands at 13, inclusive of foreign manufacturing plants such as Honda, Toyota, Hyundai- Kia, Volkswagen, just to mention but a few. Many of the manufacturers have engine and transmission plants and research is constantly being done together with design development and testing (National Academy of Sciences).
The Inventory of US Greenhouse Gas Emissions and Sinks of 2010, that covers the period from 1990 to 2008, indicated that the automotive sector produced the largest emissions (over 30%) by fossil fuel combustion. The demand for rising economies with minimal impact to the environment is constantly being emphasized especially now that people see the effects of climate change caused by human activities such as burning of fossil fuels. This has caused tradeoffs in consumer purchasing of automobiles; with preference for vehicles with lower emission impacts. The tradeoffs are between cost, service and environmental performance. However it was not up until the research by ArcGIS that a balance was found among the three. Previous research allowed progress toward accounting for environmental impacts but none accounted for the tradeoffs mentioned with optimization of each (Wygonik & Goodchild 23).
Even though various models have been proposed to reduce and/or maintain emissions from the transport sector, there is still much to be done. Lack of incentives on carbon reductions through carbon or gasoline tax, coupled with lower oil prices led to a 30% decrease in real gasoline prices between 1980 and 2004 (Knittel). More people have shifted from passenger cars to light duty trucks and SUVs.
When it comes to automaker prices, the low gas prices are leading to higher demands for pickups and SUVs, leaving out hybrids and small cars. However, gas pricing is not low in every country so automakers are advised to have a wide range of automobiles, especially for the exporters so that the fuel efficient hybrid and small vehicles are available to the global market.
As for competition in the industry, America lost its market share to foreign cars that were more efficient; they had better gas mileage, were affordable and had very attractive designs. However the industry got back on its feet with the help of government loans and production of just as efficient vehicles. Also, the standards proposed or implemented to reduce emissions, such as CAFÉ have come a long way in improving the industry. The best model would be the TAX model where every emitter will be responsible for their own influence on the environment. This will help keep both the producers and consumers of the automobile industry in check.
Works Cited
Davis, Marc. “How the U.S. Automobile Industry Has Changed”. (nd).
Knittel, Christopher “Automobiles on Steroids: Product Attribute Trade-Offs and Technological Progress in the Automobile Sector,” American Economic Review 101. (2012).
National Academy of Sciences. Assessment of Fuel Economy Technologies for Light-Duty Vehicles. (2011).
Wygonik, Erica & Goodchild, Anne. Evaluating CO2 Emissions, Cost and Service Quality Trade-offs in an Urban Delivery System. (2011).
