A motorized vehicle whose prime purpose is the seated transportation of a small number of people, typically 1 to 7, which consists of not less than 3, typically 4, wheels that are in direct contact with a road type surface being traveled on.

The evolution of the automotive industry has been influenced by various innovations in fuels, vehicle components, societal infrastructure, and manufacturing practices, as well as changes in markets, suppliers and business structures. Some historians cite examples as early as the year 1600 of sail-mounted carriages as the first vehicles to be propelled by something other than animals or humans. However, it is believed by most historians that the key starting point for the automobile was the development of the engine. The engine was developed as a result of discovering new energy carrying mediums, such as steam in the 1700s, and new fuels, such as gas and gasoline in the 1800s. Shortly after the invention of the 4-stroke internal combustion gasoline-fueled engine in 1876, the development of the first motor vehicles and establishment of first automotive firms in Europe and America occurred. See Figures 1 and 2 in Appendix A for a timeline of the automotive industry from 1895 to 2000.

During the 1890s and early 1900s, developments of other technologies, such as the steering wheel and floor-mounted accelerator, sped up the development of the automotive industry by making vehicles easier to use. Almost simultaneously, in America, the societal infrastructure that would provide fertile ground for the proliferation of automobiles was being set. Driver’s licenses were issued, service stations were opened, and car sales with time payments were instituted. Famous vehicle models such as Ford’s Model T were developed during these times and, by 1906, car designs began abandoning the carriage look and taking on a more “motorage” appearance.

During the 1910s, the development of technologies and societal infrastructure continued in addition to new manufacturing practices and business strategies. Traffic lights started appearing in the U.S. and thousands of road signs were posted by B. F. Goodrich on over 100,000 miles of U.S. roads. Henry Ford’s famous assembly line was launched in 1913, which allowed vehicles to be mass produced and thus achieved economies of scale. Ford also introduced the concept of using interchangeable and standard parts to further enable the mass production process. Automakers also started to merge with other companies (e.g., GM acquired Chevrolet) and to expand to other markets (e.g., GM of Canada).

In the 1920s, the development of infrastructure, adoption of new manufacturing practices, and the merging of companies continued (e.g., Benz and Daimler, Chrysler and Dodge, Ford and Lincoln). In the U.S., the Bureau of Public Roads and the enactment of the Kahn-Wadsworth Bill helped facilitate road-building projects and develop a national road system. In manufacturing, mass production methods  became better established, which led to the availability of a wide range of satisfactory cars to the public. While Ford had focused on a single model, GM adopted a new production strategy for providing greater product variety, which helped the company increase their market share by 20% and reduce Ford’s by 24%.

In the 1930s, several new vehicle brands were developed (e.g., Ford Mercury, Lincoln Continental, Volkswagen) and trends in vehicle consumer preferences were established that differentiated the American and European market. In the U.S. market, consumers preferred luxurious and powerful cars, whereas in Europe consumers preferred smaller and low-priced cars. Also during this time, GM’s product variety strategy continued to give them a competitive advantage over Ford, allowing GM to continue increasing their market share while Ford kept losing theirs.

In the 1940s, during World War II (WWII), automotive factories were used to make military vehicles and weapons, thus halting civilian vehicle production. After WWII, the economies of most European and some Asian-pacific countries, such as Japan, were decimated; this required the development of new production and business strategies such as those of Toyota, which began to develop what is now known as Just in Time (JIT) manufacturing. Most of the first models produced were similar to the pre-war designs since it took some time for the plants to revamp their operations to make new designs and  models.

In the 1950s and 1960s, more technological innovations, such as fiberglass bodies and higher compression ratio fuels, allowed vehicle developers to appease the growing consumer interest for  vehicle comfort, look, and feel. Car designs were highly influenced by emerging safety and environmental regulations. Vehicle speed limits and front seat belts became standard, in addition to other features such as heating and ventilation equipment. The 1970s were marked by stricter environmental regulations and the oil embargo of the early 70s, which led to the development of low emission vehicle technologies, such as catalytic converters, and a 55-mph nationwide speed limit in the U.S. Foreign cars like the Japanese Honda Civic started appearing in the U.S. market. The Civic was marketed as a fuel efficient and low-emissions vehicle, which given the recent high oil prices and strict environmental regulations made it well-received. Despite the entrance of new competitors into the U.S. market, U.S. automakers underestimated the threat of foreign automakers to their market shares.

In the 1980s, the U.S. automotive industry began losing market share to the higher quality, affordable, and fuel efficient cars from Japanese automakers. In response to this market share loss, U.S. automakers began focusing on improving quality by adopting different Japanese manufacturing management philosophies, such as JIT. Although their adoption of JIT and other philosophies helped improve the quality of U.S. vehicles, it did not fully bridge the gap between the quality of U.S. and Japanese cars. This gap remained because U.S. automakers tried applying JIT techniques without a full understanding of the whole Japanese manufacturing system, while Japanese automakers had decades to develop, refine and master their JIT approach.

Another significant paradigm of the 1980s was the global nature of vehicle manufacturing. Automakers started assembling vehicles around the world. This trend was accelerated in the 1990s with the construction of overseas facilities and mergers between multinational automakers. This global expansion gave automakers a greater capacity to infiltrate new markets quickly and at lower costs. The increased product offerings in many markets led to consumers having a greater variety of vehicles from which to choose. To this new vehicle buffet was coupled the explosion of the internet, which made vehicle-related information readily accessible to consumers. Internet-informed and empowered consumers now wanted a vehicle that was “personalizable,” inexpensive, reliable, and quickly obtainable. Consumers desired vehicles that were less harmful to the environment, which led to the introduction of hybrid vehicles by Japanese automakers in the late 1990s.

In the current decade, the recent trend of increasing sophistication and empowerment of the consumer has led automakers to identify new and more specialized markets within saturated markets with diverse customer bases, such as that of the U.S. Another trend is to infiltrate new emerging markets such as Southeast Asia and Latin America, which has further motivated the establishment of production facilities overseas and the establishment of global alliances and commercial strategic partnerships with foreign automakers. Of these new markets, China appears to be the most promising.


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