Economic Meltdown and its Impact on Automotive Industry

  • Published On :October 15,2012

With the recent economic crunch being faced globally, inflation has taken over all progress and each sector of the economy is facing major crisis in the name of business growth. In its definition an economic meltdown is a situation where a country’s economy experiences a sudden downfall due to financial crisis; this causes the economy to also go through a falling GDP (gross domestic product), a dry liquidity period and fluctuating rates of inflation and deflation.

An economic crisis is called a period of depression or recession for any economy that it hits. This economic meltdown is partially due to the fact that the credit situation of money is largely falling, banks have stopped loaning money to each other and hence the economy is going down. Not only does such an economic meltdown affect consumers, it also affects businesses and people in everyday life trying to make ends meet. Since money is our sole and basic need to survive in this world, with bad value and lack of it, survival of mankind starts to seem really difficult on this planet.

Like all other business that are being badly affected by an economic meltdown; the motor vehicle industry is affected somewhat badly too. In the case of Pakistan’s automobile/motor vehicle industry, it can be said that it is one of the booming industrial sectors as compared to the other sectors; this is due to a rising demand of all types of vehicles.

The reason why motor vehicles are still in demand despite the bad economic condition is because of the ease of payment that banks have made for the common man to lease cars. This rising demand of automobile is not high on a local level, but has become a global concern. The reason it is a concern is because the demand for motor vehicles is way higher and has caused the production to rise higher also in order to meet this rising demand; it should be noted that this follows for all kinds of motor vehicles, be it commercial or personal. Talking about Pakistan in specific, the motor vehicle industry is facing what is known as a ‘Development phase from 2005-2012. Import tariffs have been revised and auto manufacturing policies have been adjusted owing to this development phase, which can be called the growth of the industry.

After the oil and petroleum sector in Pakistan, the second largest tax payer is the automobile industry; this goes to show the amount of sales it makes. The fact that supports this growth is that a major percentage of manufacturing of automobiles still happens on Pakistan’s own land, even though it is still dependent upon a number of imports of various spare parts and other components. These imports are what end up increasing the prices for the entire local auto industry in Pakistan. Despite the fact that a lot of motor vehicles in Pakistan are imported from abroad, those produced locally are not being adversely affected by the economic meltdown. So the auto industry in Pakistan has received phenomenal growth, despite the economic meltdown pulling all other industries down.