As far as economic theory is concerned, there are three main theories on how to describe the US automobile industry. The first one is called “perfect competition.” This is also the theory that describes how other industries operate. For instance, when a consumer wants to buy a car, he looks at all of the available options and tries to get the best deal. This theory also predicts that the US automobile industry will continue to grow and be very successful.
Another economic theory says: that the US automobile industry will contract because there are too many cars being produced by foreign companies. The US will become a manufacturing giant in automobile technology. The third theory, which is also called the “end of stage” theory, says that the US car industry will not have any more cars in its production line in a few years. Many car manufacturers say that they do not foresee the day when the US car industry will no longer produce cars. These manufacturers believe that the US car market will continue to expand for at least another five years. There is some truth in this prediction, even though it is extremely unlikely.
Some US car manufacturers believe: that the “end of stage” theory is correct. They believe that the US car industry will experience a permanent decline in car sales. However, this growth is only expected to continue until 2021, after which time the US car industry might experience growth again. Another popular economic theory says that the US car industry will continue to expand until 2021. This theory was once promoted by General Motors and Chrysler. However, Chrysler received a bailout from the federal government, which significantly hampered its ability to receive credit for its own auto dealers.
An interesting aspect: on how economists would describe the US automobile industry is “cyclical economics.” This theory says that the US car industry will experience a temporary slowdown in its growth rate before experiencing an expansion once again. In addition, there is also a fear that the slowdown could occur because of a worldwide recession. The contraction of the Chinese economy has caused fears that the US economy will contract as well. Therefore, analysts who study the auto industry believe that the US car industry will experience an expansion in the years to come.
An interesting aspect of: how economists would describe the US automobile industry is “financial theory.” This theory states that the car market will continue to grow until the financial crisis of the late 1990s dies down. The Great Depression led to a massive shift in consumer spending patterns throughout the US economy. Consumers would spend less money as the general spending trends changed, and they would save more money as the stock market plummeted. This eventually led to the current state of the American economy. The Great Recession did not cause the car market to contract; rather, it led to a massive shift in consumer spending habits that contributed to the current recession.
If the US automobile industry continues on its current path: which many believe is a very bright outlook, we could experience a growth rate of anywhere between five and seven percent per year. However, this growth would likely only be sustained for about two years. This is largely dependent on how the US economy performs over the next two to five years. As we move into the final few years of Obama’s term, we are very likely to witness a sharp increase in both consumer spending and a corresponding raise in interest rates.
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