A Quick Glimpse at the History of the US Automotive Industry

Reference to the automotive industry includes not only the car manufacturers but all other organizations involved in the production of automobile components; such as but not limited to engines, batteries, tires, car upholstery and even fuel. The automotive industry in the U.S. has a long history of survival, starting from the early automobile companies that were actually small shops that went into producing handmade cars. Subsequently, only a handful of the small shops survived when the industry shifted into mass production.

Yet today, the global automotive industry is facing a number of challenges brought on by changes and advancements in technology, shifts in international trade
Issues and changes in customer habits. In 2020, the US car manufacturing sector lost $2.5 million in sales . The following year was not kind either as $2 million more were lost. The industry is currently operating on a “car-in, car out” system, as dealers are giving priority to the long pent-up preordered demands.

How the Automotive Industry in the US Began

The US automobile business began only in the early years of the 20th century, the same time when Great Britain and Italy joined the automobile movement. The French and Germans were actually the firsts to have tinkered with car manufacturing in the late 19th century, in connection with the development of gasoline engine between 1860 and 1870.

The invention of the mass production technique paved the way for Ford’s domination of the global automotive industry. Unlike the small car shops owned and run mostly by machinery makers, Ford was founded by car makers who possessed not only engineering knowhow but also business acumen.

The Significance of the Assembly Line Technique

In the United States the assembly line technique of putting together parts and components fabricated by different manufacturers proved advantageous, especially in the financing aspect. Separate firms have different sets of investors, requiring minimal capital infusions if the company’s core business is manufacturing a specific motor vehicle component. A car manufacturer buys the parts from suppliers on credit terms and afterwards sells the whole line of automobiles in the market on a cash basis.

However, as World War I and II broke out one after another, the financial conditions of car manufacturers in the US was greatly affected.

Although the US car industry gradually recovered, it took some period of rationing before American consumers were able to get jobs. They earned salaries that allowed them to buy almost anything, including cars. However, the growing consumer demand came with the expansion of credit card use.

The financial crisis caused by the stock market crash in 1987 brought another lull in US car production as many households were experiencing bankruptcy caused by unpaid mortgages and credit card debts. Although the US government helped the major car companies by providing bail out funds, the lull in car production enabled European and Japanese car makers to penetrate the US car market.

Japanese cars were not only less expensive but also became preferred brands because they are better engineered. Moreover, Japanese brands of cars are largely popular because of their low maintenance costs and safety features. The demand was so high, the Japanese car makers set up shop in the US to make them more affordable to American consumers.

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