Challenges for the Global Auto Industry
The global auto industry is one of the most important industries in the world, with over 66 million vehicles produced in 2005. The industry is an essential part of global society, contributing almost EUR2 trillion in revenue. It is also a major innovator, investing in research and development and contributing more than EUR400 billion to government revenues.
The automotive sector is highly internationalized, with a significant amount of cross-border movement of intermediate products and final products. It also involves major global investment and relocation decisions. The sector is highly focused on India, which has become an important global player but faces numerous challenges, particularly in terms of the regulatory environment.
The United States has long been the global auto industry’s king, but other countries have been gaining market share. In 2009, China overtook the United States as the world’s largest automobile market. This happened as the U.S. market slowed and Chinese automakers took advantage of a weak economy. China will likely retain its position for many years to come.
As the global economy grows, Chinese automakers are looking to expand their presence globally. Many of these companies are launching factories in emerging markets and developing countries. Chery, for example, is a large Chinese automaker that has expanded rapidly in the global auto industry. However, if a Chinese automaker wants to compete in the global market, it must build a global manufacturing footprint and a complex supply chain.
The global auto industry will face several challenges in 2023. Rising costs, heightened demand, and a snarling supply chain are hampering some automakers’ production. However, analysts do not expect the slowdown to last much longer. The ongoing war in Ukraine and the ongoing chip shortage are also affecting manufacturing. All these factors will add to the overall uncertainty in the industry.
Shanghai is a massive metropolis with a population of over 25 million. The COVID lockdown in April forced many companies to house workers on site, but the ongoing disruption has a negative impact on operations and the supply chain. As a result, the production of large automakers in Shanghai shrank by 75% in April.
While these issues are bad enough on their own, the auto industry is also facing some major challenges as it shifts away from gas-powered cars to electric ones. This shift will require a different type of supply chain for electric cars. This means that electric cars are much more vulnerable to rare earth elements and raw materials shortages. Additionally, world events are complicating this transition to electric cars.
