Case Study: Economic Impacts of the Auto Industry

The automotive industry is a major contributor to national and global economies. From 2000 to 2010, the industry contributed an average of 3.6 percent of the U.S. Gross Domestic Product – or nearly $444 billion. In 2010, the industry employed approximately 2.3 million people in the U.S. at automotive manufacturers, supplier businesses and dealerships. Of this total, nearly 684,000 worked directly for automakers and suppliers. Wage and salary compensation in the industry is substantial. In the U.S., for example, the average weekly earnings of automotive production workers are double the average weekly earnings for all of the private hourly production workers.

Motor vehicles and auto parts represent the single-largest export sector in the U.S., with an average of $107 billion worth exported from 2005 to 2010. The auto industry is a leader among U.S. manufacturing industries in research and development investment, spending approximately $16 to $18 billion each year on research and product development. Ford alone spent approximately $16.8 billion on engineering, research and development activities in the U.S. from 2008 to 2010.1

The influence of the automotive industry is quite broad. In the U.S., the auto industry supports jobs and economic benefits through related employment at dealers, suppliers and service shops, and through the expenditures of people employed by those industries. One recent study found that approximately 8 million private-sector jobs are impacted by U.S. auto manufacturers, suppliers and dealers, and the industry contributes more than $500 billion in compensation annually.2 The auto industry has one of the highest multipliers of any industry in the U.S. economy, and is sufficiently large that its growth or contraction can be detected by changes in the GDP. Studies have shown that, if the domestic auto industry were to fail, up to 3 million direct and indirect jobs would be lost in the first year.3 This same study said the loss of the domestic auto industry would also reduce personal income in the U.S. by more than $398 billion over three years and would cost the government more than $156.4 billion over three years, due to increased transfer payments, decline in Social Security income and decline in personal income taxes.

  1. Pre-2010 data adjusted to reflect the impact of the accounting standard on the consolidation of variable interest entities (VIEs).
  2. Hill, Kim et al. 2010. Contribution of the Automotive Industry to the Economies of All 50 States and the U.S. Available at the Center for Automotive Research website.
  3. David Cole, et al. 2008. CAR Research Memorandum: The Impact on the U.S. Economy of a Major Contraction of the Detroit Three Automakers. Available at the Center for Automotive Research website.