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Articles are points listed are ok.  Can you read in advance the market structures?  You can include the topic to extend analysis.
- Mr Pon

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From this article, it is stated, that the Jaguar XE opens up a whole new market for us as it attracts customers as it is viewed as a luxury. It is also stated that BMW is another luxury brand which has seen its sales grow in 2016, although 2015 was an unusually low base for the German premium manufacturer. Thus if a good is considered a luxury, its demand will be more price elastic.

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Singapore

THE mass luxury car segment is in the doldrums amid the economic gloom, and it seems only new models at the right price can lure buyers into showrooms.

In 2016, when the total passenger car market is expected to surge nearly 50 per cent from 2015 to an estimated 85,000 units, sales of mass luxury brands have lagged (see table).

This is mostly due to the weak economy, with troubles in the oil-and- gas industry, as well as the soft investment banking and property sectors, reducing demand.

However, one of the better performers is Jaguar, thanks mainly to the introduction of the XE premium compact sedan at the end of last year.

"The Jaguar XE opens up a whole new market for us because it draws customers from the BMW 3 Series and Mercedes-Benz C-Class segment," said Victor Kwan, managing director of authorised Jaguar dealer Wearnes Automotive.

Along with the full impact of nine months of sales, Mr Kwan added that this year's bigger COE quota has also boosted Jaguar's volume - so much so that the British marque is expected to register record sales of 500 units by end-December.

BMW is another luxury brand which has seen its sales grow in 2016, although 2015 was an unusually low base for the German premium manufacturer.

Authorised dealer Performance Motors recently ended a two-week private viewing of the new 5 Series mid-size sports sedan.

The seventh generation of this popular model will be launched only next February or March, and the static display of the left-hand-drive car was reserved for interested parties to give their input on the features and options they would like offered.

There was no price indication and photography was not allowed, although a Performance Motors representative said the event registered strong interest even though the car is not being marketed yet.

"The 5 Series is one of our best- sellers, and many current owners are hoping to upgrade," said the representative.

One example of a new model at an attractive price is the new Porsche Panamera. Due to be launched in the first quarter of 2017, it has pre- launch orders of almost 30 units already.

"Given the current lacklustre market, this is definitely a good result, and we are confident that when we ramp up our promotions closer to the launch date, we should have double the number of orders," said Jason Lim, general manager for sales at authorised Porsche dealer Stuttgart Auto, which is part of the Eurokars Group.

The German sports car maker's Panamera range starts from S$365,888 for the rear-wheel-drive variant with a new 3.0-litre turbocharged V6 petrol engine, and goes all the way up to the all-wheel-drive Panamera Turbo at S$711,688. All prices are before options and COE.

The price of the entry-level Panamera is similar to its predecessor, which had a naturally aspirated 3.6-litre V6, and Mr Lim attributed the strong interest to "the right pricing for the right product".

"It is all about the acceptance level - what is the price that I can accept for your product?" he explained. "The total package is also important. Porsche offers a worry-free five-year warranty and five years of full maintenance."

Porsche's year-to-date numbers are down compared to a year ago, but it is confident about the full-year tally.

"We sold 532 units in 2015, and we are happy to be able to maintain, if not exceed, last year's sales," said Mr Lim.

According to VinCar managing director Vincent Tan, a new model and an attractive price may be key, but they are not as important as the prevailing economic conditions.

"The economy is the No 1 factor," said Mr Tan, who runs one of the biggest parallel importers. Market sentiment has "a big impact" on the decision to get a new car.

He added: "Of course, people still get excited when there is a new model. But nowadays, they don't rush to buy like they used to."

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Luxury car segment not keeping pace with overall market

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Singapore THE mass luxury car segment is in the doldrums amid the economic gloom, and it seems only new models at the right price can lure buyers into showrooms. In 2016, when the total passenger car market is expected to surge nearly 50 per cent from 2015 to an estimated 85,000 units, sales of mass luxury brands have lagged (see table).

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From this article,  it is stated that Ferrari and Rolls which were the best performers however, there was a -37.4 percent drop in sales for passenger cars.Thus, it can be concluded that the absolute value of price elasticity of demand is more than one which means that consumers are very responsive to the price change, and demand is price elastic.

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Right then, who's up for an experiment in the name of scientific discovery and intellectual edification? Come on.

It really is uncomplicated - all you need is a rubber band (and you can nick one of those from just about any unsuspecting schoolgirl).

Step 1: Double up the rubber band to give it some strength and stretch it till it's taut; pull it right back till it's ready to snap.

Step 2: Find a nice fleshy part of your body. A cheek or the inside of your thigh will suffice quite nicely for this experiment.

Step 3: Be strong now. Bring your loaded rubber band as close to the skin as possible. And fire.

The pain you have just felt is what an economist would call an 'elastic' response. Hurts doesn't it? Elastic responses are that way - very sensitive.

Now if you were tempted to cheat at the last moment and failed to stretch the band like I had instructed, the resulting thwack would have left you with considerably less pain. That would have been an 'inelastic' response.

Naturally I jest, but the point I want to make is rather germane to what is happening in the automobile now, and, indeed, what I see happening in the near future.

Here is the idea in a nutshell: The 'income elasticity of demand' for cars will dictate car design, the portfolio of cars that manufacturers offer, the way they are marketed and the course of technological evolution.

Now let's break it down. The 'income elasticity of demand' is a measure that essentially tells us how the demand for cars behaves when incomes change.

If it is positive it would suggest that increasing incomes lead to an increase in demand for cars. If it is positive as well as large, it would be a luxury item because people buy disproportionately more luxuries when they are wealthier.

However, the converse holds true for such items when their incomes fall. Their demand also falls disproportionately compared to the fall in income. Response to luxuries is elastic.

Let's take manufacturers (divorced from parent companies) that exclusively produce luxury cars. Maserati, Ferrari, Bentley, Lamborghini, Rolls Royce and Maybach will suffice for our example. And let's consider the US market where the recession's impact on the automobile industry is most palpable. In the year to February the recession hit these luxury manufacturers, without exception, disproportionately more than the overall segment of passenger cars.

Ferrari and Rolls were the best performers of the lot and Maybach and Lamborghini suffered the worst. But, they all suffered off-the-bottom-end-of-the-charts sales figures that outstripped the already alarming YTD -37.4 percent dip in sales for passenger cars taken as a whole.

Each one suffered the sting of a tightly wound up rubber band.

Not so with regular goods and, especially, necessities. Naturally their demand increases and decreases with income changes too, but rather more conservatively compared to luxury goods.

Let us just take manufacturers that exclusively produce cars that can be classified as largely 'necessities'. Kia and Hyundai both registered modest but, crucially, positive growth in their sales in the US bucking the negative trend.

Even Volkswagen, which admittedly hardly offers up only necessities, 'enjoyed' negative growth that was barely half the pathetic performance of the entire segment.

Now we come to the idea of the portfolio of cars manufacturers offer. This discrepancy between luxury cars and necessary ones is further exaggerated by the fact that there is a pecking order in cars and therefore every car suffers from the 'inferior good' problem.

As incomes rise and consumers buy cars higher up on their desirable cars list, sales of the ones that they abandon suffer since they are 'inferior'.

While it is true that one man's inferior car is another man's luxury, no manufacturer wants to be placing products in that blackhole where income rises see consumers buying cars that are clearly superior to their model.

Conversely when incomes are falling and consumers are moving down their list, manufacturers want to be able to cater to their more modest needs too.

This is where the portfolio of cars on offer is crucial. Porsche is a good example in this regard and it was able to do somewhat better than average in the past year in spite of its image as a luxury brand.

From the Boxster to the GT2 the range is so finely segmented (and getting increasingly more so) that sales are much less susceptible to being decimated by changes in consumer income. Especially when you consider that its 911 advertisements in magazines these days seem to be touting emissions and economy stats much more frequently than 0-60 and 400m times.

Generally, income elasticity to demand for fuel is less elastic than to cars, which means that marketing a range of cars that uses less of the stuff reduces the 'income elasticity' consumers would have to the cars as well.

Simple logic really.

I read an article recently that fawned over the brilliance of the mainstream French manufacturers in these times. It averred that they offer sensibly sized, excitingly designed, emotively inspired cars that are also efficient and economical.

I see exactly where that sentiment is coming from, but it misses the point. The reason they have done relatively well is less attributable to their philosophy and more to the simple fact that they (chiefly) populate that spectrum of the market where declines in incomes are less painful but increases in it would be.

Even Smart, after all, was the star student in the US class of 2008 - actually it was rather like Einstein would be in a classroom full of inebriated apes. It recorded a more than 80 percent growth in sales YTD where the next best was Hyundai with less than 4.5 percent.

The message is simply that income elasticity works both ways.

It is easy for any given manufacturer to look good when the income trend is such that hordes of consumers are abandoning rivals and running into its showrooms.

The real trick is to prevent them from buggering off when the trend reverses. Subcompact car offerings from Audi, BMW, Alfa, Ford, Toyota, Mitsubishi and Nissan is less simply a sign of times and more a proof that it is actually diversification that eases the pain of a rubber band that can be stretched both ways.

Source for data: Motor Intelligence
Prateek is a Lecturer at the Deakin Business School in Melbourne

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Rubber Bands And The Automobile Industry

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Right then, who's up for an experiment in the name of scientific discovery and intellectual edification? Come on. It really is uncomplicated - all you need is a rubber band (and you can nick one of those from just about any unsuspecting schoolgirl).

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Car manufacturing will cease to exist in Australia.
This will lead to decrease in supply of cars, hence, it may lead to a possible shortage in cars as there will be more demand for cars than supply. Therefore with a shortage of supply, there will be an upward pressure on car prices, causing car prices to increase. Thus, consumers will buy less in response the higher prices and producers will sell more until market equilibrium is achieved.

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The owners of the car component maker were late. They knew it. Decades spent churning out parts from factories in Sydney and Melbourne for one of the biggest suppliers for Australia's domestic car making industry had given so many good years.

It employed 30 staff and was profitable, banking about $5 million a year. But in July this year, they called to PPB Advisory's Ben Verney for help after seeing a note he'd written urging businesses linked to cars to "act now to prepare for the endgame".

For this component company, it doesn't look good.

"They confessed that they had been sitting on their hands for 12 months, and that's what we were thinking as well," Verney says.

This is the real world frontline of an issue that has absorbed political and economic theorists for decades. The shift from rhetoric to reality will come frighteningly soon for many observers.

Ford will stop making cars here in exactly one year. Holden and Toyota will go by 2017. A clear picture is emerging in the sector that many businesses are in much the same position. They are too busy staying afloat to worry about the rocks ahead.

There are warnings of an employment wipeout as up to 200,000 jobs could be ripped from the economy.

Assistance debated

Illustration: Rod Clement

Now a debate is raging about whether the government should once again stretch its financial assistance - which has already run to billions of dollars in the past two decades - to the broader industry as they struggle for survival in the void left behind.

The new Turnbull government, like the Abbott government, wants its main assistance package to the industry, the Automotive Transformation Scheme (ATS), to come to a "natural conclusion" when car making finishes in 2017 - saving at least $400 million.

But the opposition, industry experts and academics argue the funding should run until 2020/21, its original legislated end, and be broadened to give businesses within the automotive supply chain a chance to diversify.

My concern is a very large proportion of them won't be able to survive after the closure.
PPB Advisory partner Stephen Longley

They argue the cost of keeping the scheme will be outweighed by the bill to the government from job losses and public-funded redundancies.

"There will be a number of businesses who will be running hard day-to-day, just running their existing businesses and fulfilling orders," Mr Verney's colleague Stephen Longley says.

"But it must be pretty hard when you go home at night and put your head on the pillow [knowing] that end is going to come in a year or two years - what happens after that?"

Victoria wants more assistance

The Andrews' Labor government in Victoria - where about 55 per cent of Australia's automotive workers live - is concerned.

"There is a lack of sufficiently robust and detailed business planning towards transition occurring across the sector," says the Victorian government's submission to a Senate inquiry into the automotive industry.

"Industry consultation indicates that many businesses have not started planning for a transition into different sectors or new markets."

It's been two years since Ford, Holden and Toyota announced they would close their factories in Australia.

Professor Goran Roos - who has advised state and federal governments and was on former prime minister Julia Gillard's Manufacturing Leaders Group - disagrees.

On average, he says, it takes a company about seven years to build alternative income streams and a new customer base. Professor Roos acknowledges this is difficult - particularly when a business hasn't already started on a diversification plan.

He estimates about 75 per cent of industry will shut down when Ford, Holden and Toyota quit local manufacturing.

"You would have then to say 'in order to save the companies in the supply chain, we should have negotiated a seven year extraction period'," he says.

"Yes, that would have cost us some money but that money would have been easily repaid by not having a very large chunk of the supply chain keeling over. We didn't do that because we had a thoughtless approach on how to get them to leave."

Death knell sounded in 2013

The death knell for mass passenger vehicle making in Australia sounded two weeks before Christmas 2013, about six months after Ford announced it would shut its factories, when Nationals leader and the acting prime minister Warren Truss and former treasurer Joe Hockey attacked Holden in Federal Parliament.

In a seemingly calculated performance, the Treasurer said it was time for Holden to "come clean" and be "fair dinkum" with the Australian people over its future in the country.

"Either you're here or you're not," Mr Hockey said.

Mr Truss added that Holden "owe it to the workers of General Motors not to go into the Christmas period without making a clear commitment to manufacturing in this country."

For Holden management, which had been in commercial-in-confidence discussions with the government for months, it was a clear signal that the federal cabinet had turned on the company, and wanted a swift end.

Holden in turn delivered a swift reply; it would close its Australian factories by 2017.

Two months later Toyota announced it would close its factory too, given there would be not enough volume from those in the component supply chain to keep its Australian manufacturing operations continuing.

Suppliers upping pressure for support

Bosch Australia President Gavin Smith. Photo: Wayne Taylor

One major player in that supply chain is German multinational engineering and electronics company Bosch.

It produces and engineers automotive parts in Australia and has had a presence in the country since 1907.

The ATS has helped Bosch fund its local expansion plans, and the president of its Australian subsidiary, Gavin Smith, says: "it would be a shame to throw the sector under a bus and walk away from it because the three vehicle manufacturers are stopping".

Following consolidation of Bosch's global diode production in Australia, and closure of its German manufacturing plant, Bosch is planning to double its output of diodes to 180 million pieces a year. The expansion would require further investment of up to $15 million, and result in "modest" job creation, Mr Smith says.

But Mr Smith said Bosch's head office decision to consolidate diode production in Australia was approved on the basis that the ATS legislation would continue until 2020/21.

"The investments that we have made here were underpinned by the current scheme as legislated and if that scheme were to change or close early, the business case for those decisions would likely be quite different," he said,

"From a multinational subsidiary perspective, this is not a discussion that we enjoy."

Decisions harder to justify

Former Victorian premier and treasurer John Brumby. Photo: Alex Ellinghausen

This doesn't mean Bosch will shut its Australian diode factory in Melbourne's outer east. Mr Smith said production would continue, but it made the next investments more difficult to justify.

"The challenge in a multinational is that you are not just competing with your typical external competitors. You're competing for capital investment from a parent who can invest pretty much anywhere in the world.

"Australia is not at the front of mind for the group when they consider where to make investments.

"And when the board sees after a period of time that investment decisions they have made are being undermined by changes to the underpinning legislated schemes, then that makes them question is it the right place to make future investments."

Former Victorian premier and treasurer John Brumby said while the services sector - the three main industries of which are education, financial services and tourism - accounted for 90 per cent of the new jobs in the economy, Australia still needed a strong manufacturing sector.

"Every successful advanced economy around the world, still makes and creates things. So for us, the big challenge is what we are going to do in the creative and making space, and the answer is not much," Mr Brumby said.

"There is a bit of defence work and F/A-18 and maybe some submarine work but one of the mainstays has been motor vehicles."

Research funding must lift

Mr Brumby said more government assistance needed to be poured into research and development and encouraging entrepreneurship.

"We are just way underdone. University research funding has been cut, national health and medical research council funding for applicants now, they have a 15 per cent chance of success..

"We have seen CSIRO funding cut, so all of the engine rooms have had their funding substantially reduced and the biggest single driver of investment in manufacturing - the motor vehicle industry - has had its support significantly reduced.

"When you put those two waves together, it's a track that doesn't lead you to good news or good outcomes. It needs to change, and it needs to change quickly."

Job losses could be heavy

The Federation of Automotive Products Manufacturers estimates the automotive industry generates 6.5 jobs in associated supply and consumer industries for every one automotive job.

This is where were the job loss estimates from the closures of Ford, Holden and Toyota's factories become murky because its calculations are based on how far and wide you go in the supply chain.

University of Adelaide researchers, Lance Worrall and John Spoehr​, estimate the closures will trigger a net loss of just under 200,000 jobs, with about $29 billion wiped off Australia's gross domestic product - a gauge for the economy's health.

"Now is the time for robust and well resourced growth and innovation promoting policies to help counter deindustrialisation and support accelerated industry diversification into new manufacturing opportunities and value chains," the pair wrote in a submission to the Senate Economics References Committee, which is investigating the future of Australia's automotive industry.

"A repurposed ATS could make a significant contribution to this urgent challenge."

The Senate inquiry's interim report was released in August and recommended the government should keep the ATS running until 2020/21 to help businesses diversify.

It found that about $800 million under the scheme would be unspent and go back into the government's coffers unless it was changed to allow businesses to produce parts for purposes other than domestic vehicle manufacturing.

Labor sounds warning on employment

Former industry and innovation minister Kim Carr. Photo: Paul Jeffers

Labor Senator and former industry and innovation minister Kim Carr said "hundreds and thousands of Australian families are facing unemployment".

"I'm talking about people in all sorts of places," Senator Carr said.

"I was talking to a locksmith company, talking to people in the steel industry, there are people in the glass sector. These are people who aren't anywhere near the registration for ATS but dependent on the orders to come through for Australian automotive manufacturing.

"You don't have to accept this conservative ideology that you de-industrialise the country. It's just not necessary. I have recently visited plants that are looking to expand but they need assistance."

Government defends managing transition

Innovation Minister Christopher Pyne. Photo: Pat Scala

The fact is, the government has already moved on from the car industry. Treasurer Scott Morrison said international trade agreements, including the ones Australia has signed with Korea, Japan and China, as well as the 12 nation Trans-Pacific Partnership would help fuel Australia's next wave of economic prosperity.

"The government is focused on innovation and helping develop new opportunities for Australians, particularly with our free trade agreements and the Trans Pacific Partnership just concluded by [Trade Minister] Andrew Robb, that have provided further access into, particularly the growing middle classes in Asia," Mr Morrison said in a statement.

"We are working to build a more agile, competitive and innovative economy, one that is going to assist our nation address modern challenges so that Australians will be better off in a new economy with new jobs in the future."

Innovation Minister Christopher Pyne argues in a statement that keeping the ATS tied to domestic vehicle production, which is how it will come to a "natural conclusion" in 2017 was "critical to an orderly transition of the automotive manufacturing".

Mr Pyne said the government's $155 million 'growth fund', which was announced in May 2014, was helping automotive workers find new jobs.

"The government is working with the automotive industry to ensure a clear, orderly transition from passenger vehicle manufacturing by the end of 2017," he said.

"The Growth Fund is helping automotive workers from Holden and Toyota transition to new jobs; encouraging diversification by automotive supply chain firms; and accelerating new private sector business activity outside of car manufacturing in Victoria and South Australia."

The government is back by the Productivity Commission which found the ATS "imposes considerable costs on taxpayers and other parts of the economy" and should end when the car makers close their factories.

"Further, the ongoing nature of assistance provided by the ATS and its predecessor, the Automotive Competitiveness and Investment Scheme partly shields firms from competitive pressures, and may result in firms making decisions that are not based on a business case that is sound over the long term," the commission reported.

It said more than $300 million of assistance remained available to component manufacturers between 2014 and 2017, and this could be used, in part, to aid diversification efforts.

The Productivity Commission also estimated that Australian taxpayers sank $30 billion of subsidies into the local car industry between 1997 and 2012.

But there is another way of looking at the data.

Australia, at least for the time being, is one of just 13 countries with a car industry spanning design to production.

According to former manufacturing minister Kim Carr, Australian taxpayers pay $17.80 per person in automotive manufacturing subsidies to keep those jobs and that industrial capability. The same subsidy figure for the United States industry is $264 per taxpayer.

A future of spare parts?

Ford has also managed to retain 63 of its suppliers to produce spare parts for existing Falcon and Territory models, and 17 of those businesses, including MTM and Futuris, will supply Ford's global operations.

"This work will help us maintain a supply of high-quality parts for our customers for years to come," said Carl Parkin, Ford of Australia's purchasing general manager.

Nissan has also kept on 160 people at its casting plant in Melbourne marking parts, complete with a little kangaroo symbol, in its Pathfinder and Navara trucks, LEAF electric cars and Infiniti Q50.

But as PPB Advisory partner Stephen Longley crunches the numbers - 150 manufacturers which supply the car makers directly and another 1000 to 2000 businesses supplying them with parts for their components - he believes there is still a role for government.

"A lot of these business don't have the capital to be able to diversify and it's not an area that traditional financiers will go near, particularly in the current climate in terms of a known exit," Mr Longley said.

"Even those who might have the energy and the feeling they could diversify, do they have the capital to be able to do it?

"My concern is a very large proportion of them won't be able to survive after the closure."

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The Federation of Automotive Products Manufacturers

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Automotive Competitiveness and Investment Scheme

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Australia's car industry one year from closing its doors

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The owners of the car component maker were late. They knew it. Decades spent churning out parts from factories in Sydney and Melbourne for one of the biggest suppliers for Australia's domestic car making industry had given so many good years. It employed 30 staff and was profitable, banking about $5 million a year.

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Factors affecting the demand for cars:
1) Price of Related Goods (Petrol)

This article published in October 2016 tells us that oil prices are recovering steadily from the start of 2016, meaning that maintaining a car is more expensive. Hence, there will be a lower demand for cars. Hence leading to a leftward shift on the demand curve.

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The steady increase follows the rising price of global oil which has recovered from a price of around $28 a barrel in January to just below $50 a barrel in September.

RAC spokesman Simon Williams said that the higher oil price, combined with a weakening pound, is forcing up wholesale fuel prices which is driving the pump price higher.

The wholesale price of diesel is now nearly 9p higher than it was at the start of August, and petrol 7.4p higher, Mr Williams added.

In recent weeks the price of Brent crude has tipped over the $50 mark following a milestone agreement among the world's largest producers to agree to limit production in a bid to shore up market prices.

"The announcement has already caused oil prices to jump a little, but until more specific details are available it is difficult to predict what the longer term outlook on pump prices," he said.

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British road fuel prices drive towards 2016 highs

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The steady increase follows the rising price of global oil which has recovered from a price of around $28 a barrel in January to just below $50 a barrel in September. RAC spokesman Simon Williams said that the higher oil price, combined with a weakening pound, is forcing up wholesale fuel prices which is driving the pump price higher.

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Jobs are factors/resources price
Loss of jobs leads to decrease in cost of production.
Producers, in this case carmaker Volkswagon, initially faced higher cost of production. If producers incur higher cost of production and if the producers were given the same price, they will be less wiling and able to sell at all price levels. Therefore there will be a leftward shift in the supply curve.
Hence, in order to ensure their targeted profit margins are met, Volkswagon cut 30,000 jobs to reduce their cost of production.

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FRANKFURT -- Volkswagen AG reached a landmark agreement with workers to cut as many as 30,000 jobs globally and save 3.7 billion euros ($3.92 billion) in expenses as the company tries to claw back from its emissions-cheating scandal and invest in electric vehicles.

Reducing headcount by nearly 5 percent will come through attrition as the automaker agreed to refrain from forced layoffs until 2025, the German company said Friday.

After months of intense talks, labor and management agreed on a package to balance cost-cutting with investment as the auto industry shifts away from traditional combustion engines and adapts to car-sharing services and self-driving technologies.

"This is a big step forward, maybe the biggest in the company's history," VW brand chief Herbert Diess said at a press conference in Wolfsburg. "All manufacturers must rebuild themselves because of the imminent changes for the industry. We need to brace for the storm."

The labor agreement is critical to Volkswagen's efforts to accelerate restructuring at its biggest unit and emerge from the worst crisis in its history. The VW brand, which accounts for almost half of the group's sales, was struggling even before the emissions crisis erupted last year, tarnishing the carmaker's reputation and burdening the company with at least 18.2 billion euros in costs for fines and repairs.
Electric expansion
In a concession to workers, the manufacturer agreed to build two electric cars at German sites, one in Wolfsburg and one in Zwickau. The company, which employs 624,000 people globally, will add as many as 9,000 positions for future-oriented projects such as electric vehicles and digital features.

The job cuts will come through early retirement and not replacing workers that leave. The savings comprise 3 billion euros at its German factories and another 700 million euros abroad.

Weighed down by unwieldy labor contracts, a bloated lineup of vehicles and a convoluted structure, the VW brand has struggled with weak profitability. In the first nine months, the unit's operating profit margin narrowed to 1.6 percent from 2.8 percent a year earlier. The goal of the labor agreement is to reach a 4 percent profit margin by 2020.

The deal was a prerequisite for Volkswagen's plans to push ahead with investment in new models and upgrading factories. The labor talks, which started in June, went down to the wire, with the supervisory board meeting on Friday to approve the company's budget for the coming years as it pushes to sell as many as 3 million electric vehicles a year by 2025 and expand in services like ride-sharing.

Volkswagen is under pressure to reduce annual capital expenditures, which currently stand at 12 billion euros, making the company one of the biggest corporate spenders in the world.

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VW will cut 30,000 jobs to revive core brand

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VW Group will cut 30,000 jobs globally to help achieve $3.92 billion in annual savings by 2020. The automaker aims to turn around its core brand and help fund a shift to electric and self-driving cars following its emissions-cheating scandal.

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Factors affecting the demand for cars:
1) Number of Buyers
2) Price of Related Goods (Petrol)

In summary, low loan rates and low oil prices are encouraging the sale of cars in the automobile industry. Low loan rates means more people can borrow money at more affordable rates, increasing the total number of potential buyers. Likewise, low oil prices means petrol is cheaper and this makes maintainance a lot more affordable.

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The car industry