Automobile Industry

I

Introduction

Automobile Industry, industry that produces automobiles and other gasoline-powered vehicles, such as buses, trucks, and motorcycles. The automobile industry is one of the most important industries in the world, affecting not only the economy but also the cultures of the world. It provides jobs for millions of people, generates billions of dollars in worldwide revenues, and provides the basis for a multitude of related service and support industries. Automobiles revolutionized transportation in the 20th century, changing forever the way people live, travel, and do business.

The automobile has enabled people to travel and transport goods farther and faster, and has opened wider market areas for business and commerce. The auto industry has also reduced the overall cost of transportation by using methods such as mass production (making several products at once, rather than one at a time), mass marketing (selling products nationally rather than locally), and globalization of production (assembling products with parts made worldwide). From 1886 to 1898, about 300 automobiles were built, but there was no real established industry. A century later, with automakers and auto buyers expanding globally, automaking became the world's largest manufacturing activity, with nearly 58 million new vehicles built each year worldwide.

As a result of easier and faster transportation, the United States and world economies have become dependent on the mobility that automobiles, trucks, and buses provide. This mobility allowed remote populations to interact with one another, which increased commerce. The transportation of goods to consumers and consumers to goods has become an industry in itself. The automobile has also brought related problems, such as air pollution, the emission of greenhouse gases that contribute to global warming, congested traffic, and highway fatalities. Nevertheless, the automobile industry continues to be an important source of employment and transportation for millions of people worldwide.

II

Economic Importance

Automobile manufacturers are among the largest companies in the world. These corporations are often multinational, meaning they have subsidiaries and manufacturing plants in many different countries. These companies often share parts, use parts made in foreign factories, or assemble entire cars in foreign countries. The three major automobile manufacturers in the United States—General Motors Corporation, Ford Motor Company, and Chrysler, formerly DaimlerChrysler AG—provide much of the industry's total direct employment in the United States, but increasingly foreign automakers, such as Toyota Motor Corporation and Nissan Motor Co., Ltd., are building automobile assembly plants in the United States.

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Foreign automakers are taking advantage of tax incentives and laws that discourage union organization in the Southern United States, in particular. Eleven foreign-owned auto plants operated in the United States in 1993. By 2007 that number had grown to 28. Many of these plants were located in such states as Alabama, Mississippi, South Carolina, Tennessee, and Texas.

Automotive parts manufacturers are another large section of the U.S. auto industry, comprising about 5,000 firms, including Japanese, European, and Canadian companies. These firms supply the original equipment market (for manufacture) and the replacement parts market (for maintenance and repair). By some estimates, for every job created in the automobile assembly industry, three to four jobs are created in the automotive parts industry. Numerous other industries support the automobile industry. These include the insurance, security, petroleum, and roadway design and construction industries. Still other industries, such as motels, drive-in theaters, and fast-food restaurants, owe their existence to the mobility provided by the automobile.

A

Domestic Impact

The automobile industry directly influences the economies of the United States and other countries around the world. In a typical year, the U.S. automobile industry generates between 12 and 14 percent of manufacturers’ shipments of durable goods (products designed to last at least three years). Automobile production consumes large amounts of iron, steel, aluminum, and natural rubber. The automobile industry also consumes more copper, glass, zinc, leather, plastic, lead, and platinum than any other U.S. industry.

Rising imported car sales in the United States during the 1980s threatened the economic strength of U.S. automakers. Domestic sales rebounded in the 1990s, but as the 21st century began, foreign carmakers resumed making inroads in U.S. car sales. Ford saw its car and truck market share in North America fall to about 17 percent in 2005, returning to its percentage share in the 1980s, and General Motors saw its North American market share drop to 26 percent in 2005. In July 2007 foreign automakers outsold U.S. car companies in the United States for the first time ever, taking 51.9 percent of the market in cars and light trucks, including sport utility vehicles (SUVs). In the first quarter of 2007 Toyota overtook GM as the largest car seller worldwide.

B

Foreign Trade

Sales of U.S. motor vehicles to Americans are expected to remain near the same level in the future, with about 1 to 2 percent growth per year, while foreign markets are expanding at rates that are two, three, and even ten times faster. Because exports will be essential to expanding the auto and auto parts industries, U.S. trade officials have negotiated trade agreements such as the Memorandum of Understanding with Korea (1993), the North American Free Trade Agreement (NAFTA, 1994), and the U.S.-Japan Automotive Framework Agreement (1995). These and other agreements have increased automobile and other exports to Japan, Mexico, and Korea many times over.

In 1994 the United States successfully promoted the Uruguay Round of the General Agreement on Tariffs and Trade (GATT), which helped American auto export potential because it improved access to both major and developing markets. These initiatives have helped the U.S. automotive industry achieve the highest level of exports on record.

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