The study was primarily a quantitative and causal research. Its basic objective was to find out the nature and degree of macroeconomic factors that influence the performance of automobile industry in Pakistan from 1995 to 2010. The independent variables included per capita Gross National Income, Inflation Rate, Exchange Rate, Discount Rate, Unemployment Rate, Consumption Rate and Foreign Direct Investment. A sample of 10 firms was selected to explore the influence of macroeconomic variables on the performance of the firms and industry. The performance of the automobile industry was represented by Annual Sales, Annual Profit, Return on Assets, Return on Equity and Net Profit Margin. The impact of selected predictors was explored on five dependent variables of the industry. For this purpose, regression and correlation analysis was conducted to see the impact of macroeconomic variables on the performance of entire automobile industry. The panel data analysis revealed that Foreign Direct Investment was the most influential factor. In addition to this, Consumption rate, Discount rate and Unemployment rate also influenced the performance of automobile industry. Besides the analysis of entire industry, the impact of macroeconomic variables on the performance of individual firms was also studied. The analysis showed that the performance of all of the selected firms was influenced by one or more variables. Foreign Direct Investment appeared to be the most influential factor that helped improve the performance of firms in terms of sales and profitability. Other influential elements were Exchange rate, Consumption rate, Discount rate, Per Capita Gross National Income and Inflation rate. However, Unemployment rate appeared to be insignificant as its effect was almost negligible on the progress of individual firms. Therefore, this was concluded that the selected macroeconomic variables had significant impact on the performance of automobile industry in Pakistan from 1995 to 2010.