Question

Based on the material The Structure of American Industry, discuss in your own words the factors that explain the structure and performance of the U.S. automobile industry

Answer 1

Since the automotive industry is not solely dominated by a single company, and there are various market leaders in different parts of the world. The global automotive industry therefore has an oligopolistic structure in the broader picture, where many companies are there to share income and rivalry. Before the global crises, the US market, which was the largest buyer of light-duty vehicles, was dominated by the big three GMs, Chrysler and Ford.

In the United States about 17.5 million motor vehicles were sold in 2019. Of the main categories are small trucks and vehicles. The number of cars sold in the U.S. fell from a whopping 11.4 million units in 1973 to just over 4.7 million units in 2019, primarily because U.S. market demand moved over the past decades towards larger vehicles: U.S. light truck sales rose to over 12 million units in 2019.

The automotive industry is one of the most important US industries. It has contributed 3 – 3.5 per cent to the Gross Domestic Product (GDP) as a whole historically. The industry directly employs over 1,7 million people involved in the design, development, manufacturing, and procurement of parts and components for assembling, selling, and servicing of new vehicles. The industry is also a major purchaser of products and services from many other industries, including raw materials, manufacturing, equipment, legal, computers and semi-conductors, banking, advertisement, and healthcare.

The automotive industry has recently come down on difficult times. The U.S. market, however, is still one of the world's largest motor vehicle markets; therefore, many manufacturers are selling and producing in the U.S. Indeed, many manufacturers in North America make up the lion's share of their earnings. In order to right-size their operations and be able to adapt to this fierce rivalry on the US market, there has been a phase of restructuring by the three U.S .- based businesses. In the last restructuring, the housing bubble burst and the financial system crashed, resulting in the current era of extremely tight credit, rendering it almost impossible for companies and consumers to make investments