When economists talk about the USA one shall expect a definite boom in the US car making industry since the unemployment rate is at lowest also the gasoline has become more affordable. Even after such good condition, the car manufacturing industry in the US is facing lots of problems since many car producing companies in Detroit, and other cities are getting shut down. There are tons of companies in this industry which from last few years have completely shut down due to which many workers in this industry are now jobless. Such kind of problem states that the industry is going through a recession and no one’s giving that much attention to this problem. The demand in Detroit for the traditional family cars have reached low, and now many people are buying sport utility vehicles.
The demand for traditional cars like Honda Accord and Ford Fusion has been dropped by more than 30 percent. According to some researchers at LMC they think that most of the companies in Detroit have a massive capacity for making cars, but due to the lower demand from customers, many of them are getting bankrupt. One can classify this type of situation as recession since there is growth opportunity left in the traditional car making industry and that’s why many companies are shifting towards the electric vehicles. However, some people are optimistic regarding this industry since General Motors predicted profit in upcoming quarters. If we dig into the numbers, then most of the GMs estimated profits comes as a result of closing down their five factories in North America.
The primary reason why the auto industry is facing a recession is that of the overcapacity of producing vehicles and lower demand from domestic customers. However, issues like trade war have also impacted badly on ar making business, but the actual problem is more significant than what anybody expected.