Impact of global recession on local auto industry.

Byline: Nazir Ahmed Shaikh

Through 2018-19, the global auto industry was having vociferous recession in the sales and projections are painting similar decline in the current year. This protracted shrinkage would result into massive economic threats. Economists are optimistic that this would not last as long as it has. The auto sector represented 20 percent of 2018's slowdown in GDP and roughly 30 percent of the slowdown in the global trade. Global sales of passenger cars are forecast to hit 77 million vehicles in 2019, down from a peak of 79 million in 2017.

Reasons for declining

Carmakers around the world are scuffling with an array of challenges which include:

1- Droppingin Demand

Global car sales were gone down in 2018, after years of sturdy upward growth. Experts says it was largely because of a collapse in demand in China. The ongoing trade tensions between USA and China have hit confidence in China. The Chinese slump comes as demand in two other giant car markets, Western Europe and the US, has also slowed amid waning consumer confidence.

2- The electric challenge

Though the market isn't quite ready for electric cars, still the global sales of battery electric cars surged 73 percent in 2018 to 1.3 million units, but that was still just a fraction of the 86 million cars sold.

To get their emissions levels down, carmakers are also going to need to sell a lot more electric vehicles. The main issue is the lack of charging infrastructure on roads in Europe and the US, although China is making great strides in this area.

3- Air Quality Concerns

The introduction of new tougher carbon dioxide emission standards are creating problems in Europe. The air quality concerns and taxation changes have led to a big drop-off in diesel sales, contributing to a 7 percent fall in new car registrations in 2018 in UK only. Moreover, from 2021, manufacturers will face big fines in the EU if they cross the agreed emissions limits. And it's going to be tougher and tougher. Consumers are not motivated to buy; resulting loosing consumer's confidence.

4- Driver-less Cars

In next 15 to 20 years, the driverless cars would dominate the roads. Many consumer might opt to share or rent rather than own our own vehicles.That could also slit the cost of travel per kilometer hence making ownership seem much less appealing. However, the research and development (RandD) costs a lot and so many are teaming up to spread the risk.

5- European Union

The investment in the UK car industry has fallen in the last two years, slumping 46.5 percent in 2017 alone.

The British car plants rely heavily on components imported from the EU, while most of the finished cars they produce are exported to the European mainland.

Uncertainty...