Which trade theories can help us understand the distribution of car Essay

Which trade theories can help us understand the distribution of car production in the world economy - Essay Example Some of the characteristics of the automobile industry can be described as under. †¢ Automobile industry is highly capital and labour intensive. †¢ There are hundreds and thousands of components, which are outsourced from other ancillary industries. †¢ The big auto manufacturers do manufacture some of the parts but they cannot produce each and every part. They have to rely on other suppliers, which can give assured and quality supply consistently. †¢ Replacement of the parts is a huge and lucrative market. (The Industry Handbook: Automobiles) Current Economic Scenario World demand of the cars is now coming from the rapidly growing developing economies. The countries like China, India, and Brazil are growing at the average rate of 7-8 percent. China is registering even double digit growth rate for last several years. Such a high rate of growth creates a huge demand for automobiles in those markets. Automobile market is now driven through these new markets while the demand in the old traditional market of U.S. and Europe is more or less stagnating. (The Wall Street Journal- Auto Sales 2010) It will be pertinent to note that in 1960, companies like GM, Ford, and Chrysler sold almost 90% of the cars in the US market; currently their market share is about 47%. It can be deduced that most cars that Americans bought were not manufactured by the big three. (Manzi 2008)