Automotive Manufacturing

The modern automobile can be traced back to the development of a gasoline-powered internal combustion engine in the 1880s by German automobile pioneers Karl Benz and Gottlieb Daimler. Before Benz and Daimler, inventors working independently all over the world had experimented with self-powered vehicles, mostly using steam, but these early steam-powered automobiles were noisy, dangerous, and cumbersome. The design and manufacture of gasoline-powered automobiles soon began to flourish in the United States. Charles Duryea and Frank Duryea built the first U.S. model in 1892–93.

Three main factors in early 20th-century America signaled the automobile’s success in this country: the nation’s rapid population growth, its large and expanding middle class, and its geographic vastness. American automobile manufacturers needed an efficient and affordable new method of producing their cars. Henry Ford believed that mass-produced cars could and should be affordable to the average person. He wanted to build “a car for the great multitude.” This car was the Model T. It first sold for $950 in 1908 (a price tag most middle-class Americans could not afford), but went down drastically in price as Ford’s assembly line became more efficient; it sold at $360 in 1916 and as low as $290 in 1926. In his efforts to make the Model T more affordable, Ford developed a moving conveyor belt for his assembly line. Speed and efficiency of car manufacturing was greatly improved from this point on.

Henry Ford was also a pioneer in employee management. He believed strongly that workers who were happy and successful at home could be more productive on the job. He implemented the five-dollar day (a profit-sharing plan) in 1914, a high wage for the time, and lines of men seeking jobs formed outside his factories. In order for a worker to receive his share of the profits, the company required that “he must show himself to be sober, saving, steady, industrious, and must satisfy the staff that his money will not be wasted in riotous living.” Ford also encouraged his workers to purchase Ford vehicles.

Ironically, it was Henry Ford’s good intentions that laid the groundwork for unionized labor in the auto industry. Many employees did not like the control Ford exercised over their lives and added this protest to already growing discontent over working conditions that often included long days, few breaks, and increases in assembly-line speed by management. The United Auto Workers (UAW) union was founded in Detroit in 1935. Through the years it has lobbied the industry for benefits such as pensions, unemployment for laid-off workers, and cost-of-living wage increases. The largest and longest postwar strike was from November 1945 to March 1946, by the UAW against General Motors (GM).

By the end of World War I, Ford was the dominant American automobile manufacturer. Ford’s only potential U.S. competitor at the time was General Motors. General Motors was founded in 1908 in Flint, Michigan, by carriage manufacturer William Durant. By the mid-1920s, a new major competitor to Ford and General Motors joined the market. Walter Chrysler took over the failed Maxwell Motor Company in 1925 and founded the Chrysler Corporation, thus completing the so-called Big Three of the American automobile industry.

After World War II, the world output of automobiles skyrocketed from 10 million a year in 1950 to 30 million a year in 1970. During this period, the United States lost its dominance in automobile production to the Japanese automakers, who soon became the world leaders.

In the 1970s, Japanese automobile manufacturers made the next big advancement in the industry with their implementation of highly specialized computer automation to the assembly line. It was not until the 1980s that American manufacturers began employing similar types of automation in their assembly lines.

Environmental regulations and the high price of gas in the 1970s and 1980s ushered a shift in American automobile preferences to the smaller, more fuel-efficient cars made by the Japanese and Europeans. Although the industry experienced six years of consecutive growth during the 1980s, 1989 through 1991 were dismal years for the U.S. industry. Sales finally went up in the mid- to late-1990s. Today, the automobile industry’s success fluctuates on a quarterly basis.

In the 1980s, as the global economy became more prevalent and definable, the larger automobile manufacturers became multinational corporations by opening facilities, called transplants, in other countries. Transplant operations allow foreign manufacturers to bypass costly tariffs and unpredictable fluctuations in foreign exchange rates, which are reflected in a vehicle’s price. In 2006, Toyota Motor Company surpassed Ford to become the second-largest carmaker in the United States, behind General Motors, and still retained a commanding lead in 2014. Having invested heavily in making SUVs and other larger vehicles, American car manufacturers have struggled to compete.

The Great Recession hit this industry particularly hard, with consumer new-car sales dropping drastically in the 2008–09 time period. This caused auto manufacturers to severely cut production and employment; two of the three U.S. automakers (General Motors and Chrysler) filed for bankruptcy, but have since emerged. Government intervention, through economic bailouts, a stronger economy, and slowly rebuilding consumer confidence are gradually helping this industry, but the outlook for U.S. auto manufacturing remains difficult to predict. Foreign automakers with plants in the U.S. were not immune to the uncertainty. In 2009 and 2010, a recall of many Toyota vehicle models with a faulty gas pedal damaged the company’s reputation and cost it billions of dollars spent to repair recalled vehicles and manage the crisis. Volkswagen also reported profit losses in 2015, due to a scandal over its cars that were designed to cheat on emissions tests.

In 2003, Tesla Motors was founded and became a pioneer in manufacturing electric cars. In the ensuing years, the company produced several different models of electric vehicles and helped usher in acceptance of electric vehicles and charging stations. By 2024 more than 5 million Tesla vehicles were on the road around the world, and the company held approximately 3.25% of the U.S. automotive market. In 2024 Tesla, released its newest product, the Tesla Cybertruck. While traditional auto manufacturers also produced electric vehicles, other new companies, such as Lucid Motors and Rivian, emerged in this industry space.

Several major developments occurred as the 2010s concluded. As SUVs and trucks exploded in popularity, Ford revealed plans to stop producing sedans such as the Fusion and Focus. One exception was the company's Ford Mustang muscle car. In 2018, Ford acquired Michigan Central Station, an 18-story office tower and train station in Detroit's Corktown neighborhood that would become a campus for developing and proving autonomous vehicles. In 2019, Ford and Volkswagen AG agreed to jointly develop medium-sized pickup trucks and commercial vans starting in 2022 and were exploring other potential partnerships focused on electric vehicles, autonomous vehicles, and mobility services. In 2019, General Motors was planning to introduce a ridesharing service powered by autonomous vehicles.

U.S. automakers were in cost-cutting mode during the late 2010s. Approximately $11.5 billion in marketing, sales, and engineering reductions were planned at Ford between 2019 and 2022. Additionally, in late 2018 General Motors was preparing to eliminate as many as 14,000 jobs around the world and close eight manufacturing facilities, including five in North America, as part of a $6 billion cost-cutting initiative that also included salary reductions for 15 percent of employees in North America.

The automotive manufacturing faced many serious challenges with the 2020 coronavirus pandemic and the resulting economic downturn. These challenges appeared at all levels of the manufacturing process, from limited production of vehicle parts in China to declining worker capital due to illness or social distancing restrictions to a precipitous drop in new vehicle sales. The health crisis created supply chain disruptions, including a shortage of computer chips that have become an integral part of modern vehicles. As the supply of new vehicles decreased, demand for used ones skyrocketed, creating higher prices. While conditions eventually normalized, the pandemic had a significant and unprecedented impact on the automotive industry.

Today the auto industry looks toward a future producing more fuel-efficient vehicles to comply with government's changing fuel economy standards and the need to reduce dependence on fossil fuels. Cars are also becoming increasingly computerized and offering onboard GPS and Wi-Fi capabilities. Some auto manufacturers are even experimenting with self-driving cars.