Economic Impacts of the Auto Industry

The automotive industry is a major contributor to national and global economies. From 2000 to 2009, the industry contributed an average of 3.6 percent of the U.S. Gross Domestic Product – or nearly $440 billion. In 2009, the industry employed approximately 2.3 million people in the United States at automotive manufacturers, supplier businesses and dealerships. Of this total, nearly 670,000 worked directly for automakers and suppliers. Wage and salary compensation in the industry is substantial. In the United States, for example, the average weekly earnings of automotive production workers are double the average weekly earnings for all of private hourly production workers.

Motor vehicles and auto parts represent the single-largest export sector in the United States, with an average of $106 billion worth exported from 2005 to 2009. The auto industry is a leader among U.S. manufacturing industries in research and development investment, spending approximately $16 billion to $18 billion each year on research and product development. Ford alone spent approximately $19.7 billion on engineering, research and development activities the United States from 2007 to 2009.

The influence of the automotive industry is quite broad. In the United States, 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.1 The auto industry has one of the highest multipliers of any industry in the U.S. economy, and the industry is sufficiently large that its growth or contraction can be detected by changes in the GDP.2 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.2 This same study said the loss of the domestic auto industry would also reduce personal income in the United States 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.