There are many business segments within the automotive industry, both upstream and downstream, as well as adjacent industries. The result is a multiplier effect for economic growth. For instance the innovation and research and development conducted within the automobile industry can benefit other industries, such as the insurance industry. This can be beneficial to know if you plan on having your business set up in Dubai.
The automotive industry contributes to several aspects of nation building, including generating government revenue, developing the economy, developing people as well as innovation and fostering research and development.
- Generating Revenue.
The automotive sector contributes substantial tax revenues through vehicle sales, levies related to usage, personal income taxes, and business taxes. Sales and production of new and used vehicles and their parts and services are subject to excise taxes, sales taxes, value-added taxes, and import duties.
Furthermore, automakers generate foreign exchange earnings as they benefit from globalization through exports. Having a favorable current-account balance and a positive trade balance is indispensable for a country’s economic performance.
- Economic Development.
Global economic development depends on the automotive industry. Approximately 3 percent of global GDP is accounted for by the automotive industry. In emerging markets, the share is even higher.
Foreign direct investment (FDI) inflows are also closely related to automotive output, particularly in developing economies. A wider automotive ecosystem can develop as a result of automotive FDI as well as investments in related industries. It is estimated that every job in the core auto industry leads to four additional jobs in upstream and downstream industries.
There are two main areas of economic development:
- Industrial Development
Regional development is sparked by the auto industry around the world. A cluster of manufacturers formed as original equipment manufacturers (OEMs) is surrounded by component manufacturers, such as steel plants, glass factories, used car dealerships, aftermarket shops, and transportation service providers. Developing these clusters leads to new municipalities with good road infrastructure, rail and freight connections, and new housing developments.
Mobility has been revolutionized by automobiles, which have made it easier than ever to move goods and people between different geographic regions. It has been decades since developed countries witnessed how increased vehicle ownership and improved transportation infrastructure have led to counter-urbanization-the migration of people, businesses, and industry to new suburbs.
- People Development.
Mobility, comfort, and safety are some ways in which automobiles can improve quality of life. Additionally, the industry creates jobs and develops skills. The complexity of the industry requires employees to develop skills in several areas, including R&D, design, sourcing, manufacturing, supply chain, sales, and marketing. Consequently, the automotive industry provides valuable training for technical and managerial skills needed across many industries, as well as for the entire economy.
- Fostering R&D and Innovation.
Automobile manufacturers invest in R&D to increase product variety, improve performance, improve safety, meet higher emission standards, and lower costs. Despite the spread of cutting-edge manufacturing technology to other industries, the automotive industry remains at the forefront. Manufacturing processes that originated in the automotive industry are now prevalent in a wide range of industries. Automotive pioneered the use of robots as an automation solution.
A number of industries benefit from this initiative and employ robots in a similar manner from food and beverage to pharmaceuticals and communications.
Even though Dubai’s auto industry has made strides, it still has room for improvement. In order to achieve a healthy and sustainable automotive ecosystem, we must take an active and favorable policy approach, invest in infrastructure, and invest in technology and R&D. This growth will be achieved through collaboration between OEMs, the government, and other stakeholders.