Making and Selling Cars: Innovation and Change in the U.S. Automotive Industry

12. . . . To a Global Market

✺ Global leadership in the motor vehicle industry in 1900 rested in Europe, especially in Britain, France, and Germany; within a decade, the United States would move ahead to dominate production and sales of motor vehicles. Neither the Ford Motor Company nor General Motors existed in 1900; within a decade, the two would become the world’s dominant producers. Ford and General Motors remained the world’s two largest producers through the twentieth century, and the United States remained the world’s preeminent car-producing and car-consuming nation. Would the first decade of the twenty-first century bring changes on a scale not seen since the first decade of the twentieth? For most of the twentieth century the motor vehicle industry was fragmented into a collection of isolated national markets. The only large market for motor vehicles during the first half of the century was the United States, which contained 5 percent of the world’s population but in 1950 produced three-fourths of the world’s vehicles and owned two-thirds of them. Motor vehicles outnumbered households in the United States by mid-century, and outnumbered licensed drivers by century’s end. Western European countries and Japan joined the United States in the mid-twentieth century to form a collection of national markets, all with distinct traditions of production and sales. Motor vehicles did not outnumber households in Europe and Japan until the end of the century, fifty years later than in the United States. In 2000 North America, Western Eu331 The Chinese auto industry is just at the beginning stage of development, and there is no necessity to worry about some of the problems that will crop up in the future. —Ji Xuecheng, general manager, Tianjin Automotive Industry Corporation 12 . . . To a Global Market rope, and Japan, which together had 15 percent of the world’s population, produced three-fourths of the world’s vehicles and owned two-thirds of them. Several Latin American and Asian countries joined the list of distinct national markets during the late twentieth century. National motor vehicle industries were nursed in some of these countries, and by 2000 motor vehicles were common but not yet more numerous than households. The share of world production and sales of motor vehicles in less developed countries increased rapidly during the 1990s, from less than one-tenth to one-fourth. Will motor vehicle ownership become as ubiquitous in these regions during the twenty-first century as it did in North America, Western Europe, and Japan during the twentieth? If so, will mass production once again be responsible for making motor vehicles affordable for most people? The division of the world into a collection of isolated national markets was swept aside by globalization that began in the last years of the twentieth century. Barriers protecting national markets were dismantled, and surviving manufacturers crossed international borders to acquire competitors (Fig. 12.1). Selling “National” Cars In 1983 the government of Malaysia decided to create a national car, called Proton, from the name Perusdahaan Otomobil National Berhad. A government -owned conglomerate called Hicom owned 70 percent of Proton, and the Japanese car maker Mitsubishi, the other 30 percent. The first Proton model was allegedly designed by Mitsubishi officials leaning over the prime minister while he sat at his desk. With a 145 percent tariff making imported vehicles prohibitively expensive, Proton held one-half of Malaysia ’s market. Banks promoted purchase of Protons by offering ten-year loans requiring only 10 percent down payments. India also established a national car in 1983, the Maruti, made by Maruti -Udyog Ltd., a joint venture between the government of India and the Japanese car maker Suzuki. Before the development of the Maruti, India’s market had been controlled by Hindustan Motors and Premier Automobiles , which produced 1950s-era cars under license. At first the government controlled 74 percent of Maruti, although Suzuki was allowed to increase its stake to 40 percent in 1987 and 50 percent in 1992. Maruti captured more than 80 percent of the Indian market by selling a $6,000 Selling Motor Vehicles ✺ 332 . . . To a Global Market minicar with an 800-cc engine based on an old Suzuki model. The government of India effectively choked off imports by imposing duties that rose from 15 percent in 1984 to 42 percent in 1989, 52.5 percent in 1990, and 66 percent in 1991. The national car policies of Malaysia...