What are the environmental factors that affect the automobile industry?

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The term "environmental factors" refers to elements outside the industry which nonetheless are crucial to the profitability of the industry. 

First, the automobile industry is dependent on massive infrastructure, including investment in roads and the existence of a network of fuel stations. If countries decide to invest more in public transit and disinvest in road networks, then people will buy fewer cars.

Next, the most profitable cars tend to be inefficient, large luxury vehicles. Sales of these types of cars are highly dependent on fuel prices. When fuel prices skyrocket, the desire for fuel-inefficient cars decreases dramatically. 

Also, the general business environment affects car sales. Rises in interest rates or economic downturns can reduce sales. Currency fluctuations can also affect costs and sales.

Additionally, car companies have attempted to reduce the cost of labor and manufacturing through the use of global supply chains. However, these supply chains leave companies vulnerable to rising wages in the developing world, political unrest, tariffs, and fluctuations in global shipping costs.

Finally, car companies are vulnerable to lifestyle changes, including the sharing economy, which leads to people buying fewer cars. There seems to be a generational shift in progress, in which people are foregoing car ownership and are instead using forms of technologically mediated on-demand access to transportation, such as ride-sharing apps.

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It would appear that these two industries are worlds apart. However, many people would agree that in many ways one indirectly affects  the other. Consider all of the hybrid and energy efficient vehicles that are being produced by car companies. Enviromentalists have been saying for some time now that fossil fuels greatly harm the enviroment. Car manufacturers are responding to this by making vehicles that use Ethanol instead of gasoline. Manufacurers like  Honda, Toyota and General Motors have desighned hybrid vehicles that run on electricity and Ethanol.

Many individuals have decided to "go green" and trade in their Hummers and Expeditions for smaller cars that take less gas.

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