Auto Industry

Abstract

Peter Drucker christened the automobile industry ?the industry of industries? in 1946, and there are good enduring reasons for this label. In short, it has been at the forefront of thinking about how things are made and how we work. Automobile manufacturing is the world?s largest manufacturing activity, with just over 50 million new vehicles produced each year. One in every seven people is employed through the industry, either directly or indirectly. The indirect part is due to the need for a retail distribution network and the generation of demand for intermediate inputs (in the form of components and raw materials like steel and rubber). Governments have therefore looked to the industry as a major opportunity for national economic development, international trade and foreign direct investment. The automobile is also the second largest expenditure item for households after housing. Many own a car, visit dealers, and are aware of the variety that exist in car models and options that reflect consumer preferences and lifestyles. The technological advances associated with the automobile transformed our idea about mobility, and will continue to do so with the advent of telematics and the Internet. Throughout the twentieth century, the automobile industry has also been a significant source of innovative management thinking, transforming ideas about how best to make things. In the 1910s, Ford Motor Company?s moving assembly line and standardised work replaced craft production. In the 1970s, Taiichi Ohno?s Toyota Production System, and later, lean production techniques, were important managerial innovations with significance well beyond the automobile sector. This entry will start by tracking the fundamental changes in manufacturing methods that enabled the automobile industry to become a massive generator of economic wealth. It will then provide explanations of changes in industry structure over time. Lastly, the future shape of the industry will be discussed with reference to telematics, e-business, and other technological developments.