Sales and service organization
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Mass production implies mass consumption, which in turn requires an elaborate distributive organization to sell the cars and to develop confidence among customers that adequate service will be available. In the early days of the industry, cars were sold directly from the factory or through independent dealers, who might handle several different makes. Many bicycle manufacturers simply used their existing sales outlets when they added horseless carriages to their line. When sales in large quantities became the objective, however, more elaborate and better organized techniques of distribution became essential.
In the United States the restricted franchise dealership became the uniform and almost exclusive method of selling new cars. In this system, dealers may sell only the particular make of new car specified in their franchise, must accept a quota of cars specified by the manufacturer, and must pay cash on delivery. In return the dealers receive some guarantee of sales territory and may be assisted in various ways by the manufacturer—financing or aid in advertising, for example. Contracts also specify that dealers must maintain service facilities according to standards approved by the manufacturer.
Seemingly weighted in favour of the manufacturer, the system has been subjected to periodic dealer complaints, producing state legislation and a federal statute in 1956 to protect dealers from arbitrary actions by manufacturers. Yet dealers have never been united in these attitudes, and no effective substitute for the restricted franchise has yet been found. On the contrary, it is becoming the general practice in other parts of the world where large-scale markets for motor vehicles have developed.
Attempts by automakers in the 1990s to move away from the traditional franchised dealer network to direct selling via the Internet met strong resistance in the United States. American dealers enlisted the help of state governments in enacting prohibitions of this practice (and in blocking attempts by automakers to own dealers through subsidiary corporations). In markets outside the United States, principally in Europe and South America, manufacturers sell directly to consumers via the Internet in limited quantities.
The market in used cars is an important part of the distribution system for motor vehicles in all countries with a substantial motor vehicle industry because it affects the sale and styling of new cars. The institution of the annual model was adopted in the United States during the 1920s to promote new-car sales in the face of used-car competition. The new model must have enough changes in styling or engineering to persuade prospective buyers that it is indeed an improvement. At the same time, it must not be so radically different from its predecessors as to give the buyer doubts about its resale potential.
Like all machinery, motor vehicles wear out. Some become scrap metal to feed steel furnaces; some go to wrecking yards where usable parts are salvaged. Throughout the world, however, the disposal of discarded motor vehicles has become a problem without a completely satisfactory solution. In many areas, landscapes are disfigured by abandoned wrecks or unsightly automobile graveyards. Spurred by European legislation requiring automakers to take back all of their end-of-life-cycle vehicles beginning in 2007, manufacturers worldwide have begun engineering new products with the complete recycling of components in mind. At the same time, they have used more and different recycled material in new vehicles. For example, old bumper covers have been recycled into fender liners or battery trays for new cars.
International operations
Although the automotive industry has long been multinational in its organization and operation, beginning in the 1980s and accelerating in the late 1990s, it established a trend toward international consolidation. Larger, more financially secure firms bought controlling interest in financially troubled ones, usually because the weaker firm manufactured a highly prized product, had access to markets that the larger company did not, or both. However, the results were mixed. For example, Chrysler, as discussed above, acquired AMC in 1987 for access to AMC’s Jeep vehicles and in 1998 was itself merged with Daimler-Benz, which sought Chrysler’s expertise in high-volume manufacturing and design techniques. Recognizing its need to penetrate closed markets in Japan and South Korea, DaimlerChrysler in 2000 took a controlling 34 percent interest in Mitsubishi Motors Corporation and signed a cooperative venture in trucks with Hyundai Motor Company. Such deals failed to help the struggling DaimlerChrysler, and in 2007 Chrysler was sold to an American private equity firm. Seven years later Chrysler became a subsidiary of Fiat.
In 1989 General Motors bought a 50 percent interest in Sweden’s Saab and acquired the remainder 10 years later; in 2000 it took a 20 percent stake in Japan’s Fuji Heavy Industries (renamed Subaru in 2017) to have access to the all-wheel-drive technology used in Fuji’s Subaru vehicles. Amid financial troubles, however, Saab was sold in 2010, and it went bankrupt the following year. In addition, in 2020 Toyota reached a deal to acquire Subaru. In 1999 Ford bought the passenger car operations of Sweden’s AB Volvo, and in 2000 it bought Britain’s Land Rover operations from BMW. However, the latter was sold to the Tata Group of India in 2008, and two years later Ford sold Volvo to a Chinese firm.
The most promising markets for motor vehicles have traditionally been developed countries with the purchasing power to create a demand for automobiles; these have included North American and European countries as well as Australia, New Zealand, South Africa, and Japan. Since 1950 there has been a significant shift in market prospects, however, as less-developed countries have shown greater growth in vehicle registrations than the highly developed countries. Consequently, there has been an intensification of both assembly and distribution in parts of the world not previously important in the automotive industry.
The great bulk of this production is assembly, done in plants affiliated with and usually operated by Chinese, American, European, Japanese, or South Korean automotive firms. In order to stimulate their own automotive industries, most developing countries have tariff policies that make imported cars prohibitively expensive and, in addition, have requirements that a substantial portion of the components used in local assembly plants be of domestic origin. A certain percentage of local ownership, public or private, is also a normal requirement. The rest of the financing and most of the initial managerial and technical skill come from the parent company.
In the 1990s China attracted the attention of the world’s major automotive companies. Somewhat relaxed governmental controls on private ownership and the consequent rise of entrepreneurial enterprises provided a burgeoning market in China for automobile ownership by individuals. This potential, plus local-component requirements, led to the establishment by automakers and component manufacturers of complete manufacturing facilities in China rather than limited local assembly operations. In addition, Chinese firms—several of which were state owned—increasingly manufactured their own line of vehicles, and in the early 21st century the country’s car sales became among the highest in the world.
Economic and social significance
The automotive industry has become a vital element in the economy of the industrialized countries—motor vehicle production and sales are one of the major indexes of the state of the economy in those countries. For such countries as the United Kingdom, Japan, France, Italy, Sweden, Germany, and South Korea, motor vehicle exports are essential to the maintenance of healthy international trade balances.
The effect of motor vehicle manufacturing on other industries is very great. Almost one-fifth of American steel production and nearly three-fifths of its rubber output go to the automotive industry, which is also the largest single consumer of machine tools. Moreover, the special requirements of automotive mass production have had a profound influence on the design and development of highly specialized machine tools and have stimulated technological advances in petroleum refining, steelmaking, paint and plate-glass manufacturing, and other industrial processes.
The indirect effects are also considerable through the many auto-related businesses, such as motor freight operators and highway construction firms. In addition, truck transportation has grown steadily throughout the world.
Highway development
Before the advent of the motor vehicle, roads in most parts of the world were generally poor. The available methods of road transport were so costly and inefficient that, unless there were special considerations such as military movements, it was not worthwhile to maintain roads for other than local traffic. The general use of automobiles created a strong demand for better highways. The first response was to provide for the improvement of existing road networks. Experience subsequently demonstrated that roads for automobile traffic needed to be differentiated functionally, depending on whether they were intended for through traffic or local traffic. Main arteries are best designed as freeways (motorways, autostrade, or Autobahnen)—i.e., divided highways with complete control of access and no intersections at grade.
Social effects
A historian has said that Henry Ford freed common people from the limitations of their geography. The statement cogently summarizes the social transformations still proceeding throughout the world as a result of the motor vehicle. It has created mobility on a scale never known before, and the total effect on living habits and social customs is still incalculable.
The automobile has radically changed urban life by accelerating the outward expansion of population into the suburbs and beyond. As with other automobile-related phenomena, the trend is most conspicuous in the United States but is rapidly appearing elsewhere. The decentralizing trend is accentuated by the fact that highway transportation encourages business and industry to move outward to sites where land is cheaper, where access by car and truck is easier than in crowded cities, and where space is available for the one-story structures that permit optimum use of modern materials-handling techniques. Yet the effect on rural life has been, if anything, more pronounced than the effect on cities. In the days of horse-drawn transport, the economical limit of wagon transportation was 15–25 km (about 10–15 miles); any community or individual farm more than 25 km from a railroad or navigable waterway was isolated from the mainstream of economic and social life. Motor vehicles and paved roads have narrowed much of the gap between rural and urban life. Farmers can ship easily and economically by truck and can drive to town when convenient. In addition, such institutions as regional schools and hospitals are now accessible by bus and car.
It would be impossible to list all of the specific effects of motor vehicle production, but two are especially illustrative. First, the marketing of automobiles has stimulated a great expansion in the use of credit. Installment buying existed before the automobile but in a limited scope. The technique was introduced into the American automobile industry in 1916 by manufacturers of medium-priced cars to help meet the competition of the low-priced Model T. It became a universal practice in nearly all countries in the purchase of motor vehicles, and it accustomed people to buying other durable consumer goods in the same way. Second, there has been a striking development of businesses such as drive-in and drive-through eating establishments and of commercial developments, such as shopping malls, that are designed to be accessed primarily by car.
In both urban and rural areas after World War II, the automobile is credited with having caused drastic changes in the sexual values of young people, who found in it a privacy not formerly attainable.
Recreational travel
One of the conspicuous effects of the automobile has been to permit nearly everyone in the automotive countries to travel for recreation. The motor vehicle allows for such auxiliary devices as trailers (called caravans in Europe), campers, trailers for boats and off-road vehicles, and bicycle and ski racks, which broaden the scope of recreational opportunities.
Adverse effects
The mass use of motor vehicles was bound to have some unforeseen and undesirable consequences, of which three can be singled out: traffic congestion, air pollution, and highway accidents. The approach to each of these problems illustrates a common propensity to blame the technology, rather than the way in which the technology has been used.
City streets were congested long before the automobile existed, but the problem has been compounded enormously by the masses of motor vehicles that enter or leave cities at peak traffic hours. The constantly growing number of automobiles throughout the world adds to the difficulty of finding remedies for congestion. The heart of the problem is that few city street systems have been designed for automobile traffic. Reliable estimates are that some two-thirds of the vehicles in central business districts are only passing through and should have been routed on circumferential highways. Remedying this situation is difficult and expensive. It calls for modern highways to provide both ready access into downtown areas and ways to avoid them. Programs for this purpose encounter vigorous opposition, frequently justified, on the ground that building freeways in cities disrupts neighbourhoods and destroys scenic or historic areas.
The widespread use of automobiles for business travel has also led in many cities to a decline in public transit systems, and the need to develop and use mass transit has been much discussed. Given the trend toward dispersal of people and businesses in urban areas, it seems doubtful that mass transit will appreciably diminish motor vehicle traffic. Still, in most cities, bus systems can provide the needed capacity for public transportation and are the most economical way of doing so.
Atmospheric pollution antedates the automobile, but the concentration of many thousands of motor vehicles in large cities has given the problem a new dimension. Automobile exhaust commonly contributes half the atmospheric pollutants in large cities and even more in cities where atmospheric and topographic conditions are peculiarly conducive to smog formation. In the 1960s federal and state legislation in the United States required the installation of controls on motor vehicles to restrict the emission of pollutants (see emission-control systems). By the end of the 20th century, most scientists believed that emissions from motor vehicles, industrial processes, and power plants were leading to a buildup of carbon dioxide in the atmosphere, thus trapping additional heat and raising Earth’s temperature with potentially disastrous long-term results (see greenhouse effect). This led governments in many major automotive countries to enact legislation requiring a significant increase in motor vehicle fuel economy, thereby reducing the output of carbon dioxide. Many automobile manufacturers also have undertaken development of alternative, less-polluting power sources, such as fuel cells that convert hydrogen (derived from gasoline, natural gas, methanol, or other sources) and oxygen into electricity to power an electric motor, to enhance their competitive positions even in countries without strong requirements that they do so.
Highway accidents create a distressing toll of fatalities and injuries wherever there is widespread use of automobiles. Each year there are hundreds of thousands of motor vehicle fatalities worldwide and about 40,000 in the United States alone. The social and economic cost of such accidents is incalculable. Efforts to improve highway safety have been successful in most countries, but a reduction in the ratio of fatalities and injuries per distance traveled is often offset by increases in numbers of accidents because of the ever-growing use of motor vehicles.
Safety features such as seat belts and air bags that inflate on impact have become standard features in cars and passenger trucks since the 1960s (see vehicular safety devices). Today many vehicles are equipped with multiple air bags to protect occupants in side-impact and rollover accidents as well as frontal crashes.
The desire to reduce fatalities and to conserve fuel has led policy makers to focus on speed limits. Most countries of the world have set speed limits ranging from about 65 km (40 miles) per hour in some island nations to 120–130 km (75–80 miles) per hour in many European countries. In some parts of the world, such as areas of Germany, India, and the Philippines, speed limits traditionally are not prescribed. In the early 21st century, the United Kingdom and the European Union supported a controversial proposal to equip new cars with a speed-control device that would use global positioning satellites to track a vehicle’s location and, in conjunction with an onboard digital road map, cut off the car’s fuel supply if local speed limits were exceeded.
John Bell Rae Alan K. Binder