The Auto Industry of Today

The Auto Industry of Today

There is no industry more present in the worldwide community than the automobile industry.

The automobile has changed the lives, culture, and economy of the people and nations that

manufacture and demand them. Ever since the late 1800s when Benz and Daimler in Germany

invented the first “modern” car, the industry has grown into a billion dollar industry affecting so

many aspects of our lives. There are more than 400 million passenger cars alone on the roads

today. During the early part of the twentieth century, the United States was home to more than

90 percent of the world’s automotive industry, but has shrunk to about 20 percent in today’s

world (Tardiff 394).. This drastic change has occurred by the booming economies in such nations

as Japan, Germany, Canada, France, Italy, and other nations.

The US auto industry “sales totaled $205 billion, or 3.3 percent of the total Gross Domestic

Product” (Tardiff 394). By the end of 19th century, there were about 500 auto manufacturers, but

that number dropped sharply to 23 by 1917, and today the Big Three dominant the market. Ford,

General Motors, and Chrysler make up the Big Three, which account for 23 percent of the

world’s motor vehicle production in 1997, with the Japanese industries coming in second,

producing 21 percent. Germany produces 9 percent; Spain, France, South Korea, and Canada

each produce 5 percent of the international market in 1997. In the US alone, the auto-industry,

which includes it’s 500,000 car-related businesses, creates 12 million jobs (Broughty 290). The

automobile is clearly an oligopoly, but each company’s control of the market has gradually

diminished because of rising foreign competition.

The US has three main auto manufacturers; Japan has five major producers, as does

Germany. Each of these companies produce differentiated versions of the same product, have

control over their products’ prices, and rely heavily on non-price competition (Womack 154).

Each company produces a new line of cars for each model annually. There are many different

types of cars, like sedans, station wagons, Sport Utility Vehicles (SUVs), two-doors, and four-

doors, but by comparing models between two competing companies, you can see how great the

similarities are. The auto industry can still thrive even though their products are so similar

because the demand for cars is immense and continuous. People rely on cars for so many things

that life without one seems impossible, especially in the US which registered 141 million cars in

1988, whereas Japan, the second highest, only registered 30 million (Broughty 96)

The creation and production of a new car starts about three to four years before it is released

to the public (McBride 102). The initial planning stage begins in the company’s corporate

headquarters with ideas for the car from product planners and company officials. Automotive

designers draw prospective sketches of the new car, and once approved, model makers create

small-scale models of the car in fiberglass or clay, then forge life size models also in clay or

fiberglass. Automotive engineers then develop each part of the car, and mock-up builders create

those indigenous