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News Link • Economy - Economics USA

The Automotive Industry Is In A Major Crisis And It's Only Getting Worse


The decline of production, exports and sales has accelerated in recent months, and is having a serious knock-on impact on employment and economic activity.

The woes of the automotive industry reflect a combination of factors. Domestically, these have included a rise in taxes on luxury models implemented in November 2013, which pushed the tax rate on the most expensive models (which are imported) up to 50%, in an effort to bolster the dwindling trade surplus. January's 15% peso devaluation has also boosted automotive prices (as many cars are imported from Brazil, and the use of imported inputs in the industry is prevalent). The sharp interest-rate hike that followed January's devaluation has also reduced supply of and demand for credit and had a major dampening effect on sales, which had been boosted in recent years by easy access to credit. Externally, persistently weak growth of the economy in Brazil, the main destination of Argentina's car exports, has hit the industry's sales abroad.

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