Automotive industry in the United States
In the United States, the automotive industry began in the 1890s and, as a result of the size of the domestic market and the use of mass production, rapidly evolved into the largest in the world. The United States was the first country in the world to have a mass market for vehicle production and sales and is a pioneer of the automotive industry and mass market production process. During the 20th century, global competitors emerged, especially in the second half of the century primarily across European and Asian markets, such as Germany, France, Italy, Japan and South Korea.
The U.S. is currently second among the largest manufacturers in the world by volume. By value, the U.S. was the world's largest importer and fourth-largest exporter of cars in 2023.
American manufacturers produce approximately 10 million units annually. Notable exceptions were 5.7 million automobiles manufactured in 2009, and more recently 8.8 million units in 2020 due to the global COVID-19 pandemic.
Production peaked during the 1970s and early 2000s at 13–15 million units.
Starting with Duryea in 1895, at least 1,900 different companies have been formed, producing over 3,000 makes of American automobiles. World War I and the Great Depression in the United States combined to drastically reduce the number of both major and minor producers. During World War II, all the auto companies switched to making military equipment and weapons. By the end of the 1950s the remaining smaller producers disappeared or merged into amalgamated corporations. The industry was dominated by three large companies: General Motors, Ford, and Chrysler, all based in Metro Detroit. Those "Big Three" continued to prosper, and the U.S. produced three-quarters of all automobiles in the world by 1950, 8.0 million out of 10.6 million produced. In 1908, 1 percent of U.S. households owned at least one automobile, while 50 percent did in 1948 and 75 percent did in 1960. Imports from abroad were a minor factor before the 1960s.
Beginning in the 1970s, a combination of high oil prices and increased competition from foreign auto manufacturers severely affected the US companies. In the ensuing years, the US companies periodically bounced back, but by 2008 the industry was in turmoil due to the aforementioned crisis. As a result, General Motors and Chrysler filed for bankruptcy reorganization and were bailed out with loans and investments from the federal government. June 2014 seasonally adjusted annualized sales were the biggest in history, with 16.98 million vehicles and toppled the previous record of July 2006. Chrysler later merged into Fiat as Fiat Chrysler and is today a part of the multinational Stellantis group. American electric automaker Tesla emerged onto the scene in 2009 and has since grown to be one of the world's most valuable companies, producing around 1/4th of the world's fully-electric passenger cars.
Prior to the 1980s, most manufacturing facilities were owned by the Big Three and AMC. Their U.S. market share has dropped steadily as numerous foreign-owned car companies have built factories in the U.S. As of 2012, Toyota had 31,000 U.S. employees, compared to Ford's 80,000 and Chrysler's 71,100.
History
The Oldsmobile Curved Dash and the Ford Model T, both American cars, are considered the first mass-produced and mass-affordable cars, respectively. American automotive company General Motors held the title of the world's best-selling automaker from 1931 to 2008. The United States was the second-largest manufacturer of motor vehicles in 2023 and is home to Tesla, the world's most valuable car company. The United States is the world's second-largest automobile market by sales, having been overtaken by China in 2010.Production
The development of self-powered vehicles was accompanied by numerous technologies and components giving rise to numerous supplier firms and associated industries. Various types of energy sources were employed by early automobiles including steam, electric, and gasoline. Thousands of entrepreneurs were involved in developing, assembling, and marketing of early automobiles on a small and local scale. Increasing sales facilitated production on a larger scale in factories with broader market distribution. Ransom E. Olds and Thomas B. Jeffery began mass production of their automobiles. Henry Ford focused on producing an automobile that many middle class Americans could afford.A patent filed by George B. Selden on 8 May 1879 covered not only his engine but its use in a four-wheeled car. Selden filed a series of amendments to his application which stretched out the legal process, resulting in a delay of 16 years before the patent was granted on 5 November 1895. Selden licensed his patent to most major American automakers, collecting a fee on each car they produced and creating the Association of Licensed Automobile Manufacturers. The Ford Motor Company fought this patent in court, and eventually won on appeal. Henry Ford testified that the patent did more to hinder than encourage development of autos in the United States.
Originally purchased by wealthy individuals, by 1916 cars began selling at $875. Soon, the market widened with the mechanical betterment of the cars, the reduction in prices, as well as the introduction of installment sales and payment plans. During the period from 1917 to 1926, the annual rate of increase in sales was considerably less than from 1903 to 1916. In the years 1918, 1919, 1921, and 1924 there were absolute declines in automotive production. The automotive industry caused a massive shift in the industrial revolution because it accelerated growth by a rate never before seen in the U.S. economy. The combined efforts of innovation and industrialization allowed the automotive industry to take off during this period and it proved to be the backbone of United States manufacturing during the 20th century.
American road system
The practicality of the automobile was initially limited because of the lack of suitable roads. Travel between cities was mostly done by railroad, waterways, or carriages. Roads were mostly dirt and hard to travel, particularly in bad weather. The League of American Wheelmen maintained and improved roads as it was viewed as a local responsibility with limited government assistance. During this time, there was an increase in production of automobiles coupled with a swell of auto dealerships, marking their growth in popularity.State involvement
State governments began to use the corvee system to maintain roads, an implementation of required physical labor on a public project on the local citizens. Part of their motivation was the needs of farmers in rural areas attempting to transport their goods across rough, barely functioning roads.The other reason was the weight of the wartime vehicles. The materials involved altered during World War I to accommodate the heavier trucks on the road and were responsible for widespread shift to macadam highways and roadways. However, rural roads were still a problem for military vehicles, so four wheel drive was developed by automobile manufacturers to assist in powering through. As the prevalence of automobiles grew, it became clear funding would need to improve as well, and the addition of government financing reflected that change.
Federal involvement
The Federal Aid Road Act of 1916 allocated $75 million for building roads. It was also responsible for approving a refocusing of military vehicles to road maintenance equipment. It was followed by the Federal Aid Highway Act of 1921, which provided additional funding for road construction. By 1924, there were 31,000 miles of paved road in the U.S.International trade
The Big Three automakers
About 3,000 automobile companies have existed in the United States. In the early 1900s, the U.S. saw the rise of the Big Three automakers, Ford, GM, and Chrysler. The industry became centered around Detroit, in Michigan, and adjacent states and in nearby Ontario, Canada. Historian John Rae summarizes the explanations provided by historians: a central geographic location, water access, and an established industrial base with many skilled engineers. The key factor was that Detroit was the base for highly talented entrepreneurs who saw the potential of the automobile: Henry Ford, Ransom E. Olds, Roy D. Chapin, Henry Joy, William C. Durant, Howard E. Coffin, John Dodge and Horace Dodge, and Benjamin Briscoe and Frank Briscoe. From 1900 to 1915 these men transformed the fledgling industry into an international business.Henry Ford began building cars in 1896 and started his own company in 1903. The Ford Motor Company improved mass-production with the first conveyor belt-based assembly line in 1913, producing the Model T, which had been introduced in 1908. These assembly lines significantly reduced costs. The first models were priced at $850, but by 1924 had dropped to $290. The Model T sold extremely well and Ford became the largest automobile company in the U.S. By the time it was retired in 1927, more than 15 million Model Ts had been sold.
Ford introduced the Model A in 1927, after a six-month production stoppage to convert from the Model T, and produced it to 1931. While the Model A was successful, Ford lost ground to GM and eventually Chrysler, as auto buyers looked to more upscale cars and newer styling. Ford was a pioneer in establishing foreign manufacturing facilities, with production facilities created in England in 1911, and Germany and Australia in 1925. Ford purchased the luxury Lincoln automaker in 1922 and established the Mercury division in 1939.
General Motors Corporation, the company that soon became the world's largest automaker, was founded in 1908 by William Durant. Durant had previously been a carriage maker, and had taken control of Buick in 1904. In 1908, the company initially acquired Buick, Oldsmobile and Oakland. In 1909, GM acquired Cadillac, along with a number of other car companies and parts suppliers. Durant was interested in acquiring Ford, but after initial merger talks, Henry Ford decided to keep his company independent.
In 1910, Durant lost control of GM after over-extending the company with its acquisitions. A group of banks took over control of GM and ousted Durant. Durant and Louis Chevrolet founded Chevrolet in 1913 and it quickly became very successful. Durant began acquiring stock in GM and by 1915 had majority control. Chevrolet was acquired by GM in 1917 and Durant was back in charge of GM. In 1921, Durant was again forced out of the company. During the late 1920s, General Motors overtook Ford to become the largest automaker.
Under the leadership of Alfred P. Sloan, General Motors instituted decentralized management and separate divisions for each price class. They introduced annual model changes. GM became an innovator in technology under the leadership of Charles F. Kettering. GM followed Ford by expanding overseas, including purchasing England's Vauxhall Motors in 1925, Germany's Opel in 1929, and Australia's Holden in 1931. GM established GMAC, now Ally Financial, in 1919 to provide credit for buyers of its cars.
Walter Chrysler was formerly president of Buick and an executive of GM. After leaving GM in 1920, he took control of the Maxwell Motor Company, revitalized the company and, in 1925, reorganized it into Chrysler Corporation. In 1927, he acquired Dodge. The acquisition of Dodge gave Chrysler the manufacturing facilities and dealer network that it needed to significantly expand production and sales. In 1928, Chrysler introduced the Plymouth and DeSoto brands. Chrysler overtook Ford to become the second largest auto maker by the 1930s, following similar strategies as General Motors.
General Motors wanted automobiles to be not just utilitarian devices, which Ford emphasized, but status symbols that were highly visible indicators of an individual's wealth. Through offering different makes and models, they offered different levels in social status, meeting the demands of consumers needing to display wealth. Ford and General Motors each had their own impact on social status and the type of market they were targeting. Henry Ford focused on delivering one inexpensive, efficient product for the masses. Ford's offer was one car, one color, for one price. He manufactured a product for the masses, and provided a $5 daily wage so that there was a local market to buy this product. By contrast, General Motors offered a product that catered to those looking to gain status by having that sense of individualism and offering different make, models, and quality.