Khaberni - The American automotive industry was never just an ordinary economic sector, but rather the most prominent symbol of industrial and technological supremacy of the United States throughout the twentieth century.
From "Henry Ford" assembly lines that changed the face of global manufacturing, to the skyscrapers in the heart of Detroit constructed when "Motor City" money flowed like a river, cars formed the backbone of the economy and national identity of the country.
However, this impressive scene now seems as if it belongs to a bygone era, as the American industry faces an accelerated structural decline, with its real influence gradually confined within the domestic market, while its global standing shrinks at an alarming rate.
Increasing Contraction
The decline of the American automotive industry is evident in stark quantitative indicators: after producing about three-quarters of the world's cars in the middle of the last century, it now produces only an eighth. This deterioration is not immediate, but is the culmination of decades of gradual decline that has accelerated recently.
- Market Share Contraction: The average global market share of major American companies has fallen to single digits (less than 10%), from nearly 25% in the nineties of the last century.
- Ranking of Giants: In the list of the world's largest automotive groups, Toyota leads with 11.3 million cars, followed by Volkswagen Group with 8.9 million, and then Hyundai Motor Group with 7.2 million. Conversely, General Motors has fallen to the sixth position with 4.55 million cars, and Ford seventh with 4.39 million.
- Chinese Supremacy: Chinese company BYD has surpassed General Motors globally after recording 4.60 million cars, achieving the fifth position in the world.
The Rise of Asian Competitors
The data reflects the rapid rise of Asian companies, which were marginal players in past decades:
• In the Chinese market (the largest globally): General Motors' (GM) share has nearly halved in just a decade, while Ford lost two-thirds of its share. Overall, the share of American cars in China dropped from 12.49% in 2014 to less than 6%; indeed, this share falls to just 4% for traditional Detroit companies if excluding Tesla.
• In the European market: Ford's passenger car share has decreased from 12% to about 3.3% - 4%. Meanwhile, General Motors effectively withdrew from the European continent by selling its brands Opel and Vauxhall in 2017, thus accounting for about 8% of its total revenue from outside North America.
This contraction coincides with a chronic trade deficit; the total U.S. trade deficit in the automotive sector amounted to about 3.3 trillion dollars from 1963 to 2023.
This deficit continues to broaden, recording more than $128 billion annually, primarily with Mexico, Japan, Germany, and Canada, illustrating the increasing reliance of the American economy on imports to meet domestic demand.
Structural Roots of Decline
The decline in the American automotive industry isn't just the result of a passing crisis or unexpected circumstances but is a product of structural factors that have accumulated over decades. The first evidence of these factors is the apparent stagnation before the rapid technological shifts, explained by the Information Technology and Innovation Foundation (ITIF) report—the decline stems from the industry's slow response to fundamental changes in manufacturing models.
Detroit companies took between 10 and 15 years to simply adapt to Japanese flexible production methods in the 1980s, which cost them market shares they couldn't regain.
Moreover, this scenario today is even more severe with the global shift towards electrification and embedded software, and the competitive gap for Chinese competitors, offering electric cars at 25% to 30% lower costs and taking only 18 months to develop new models, compared to about five years for American and European companies.
This gap is further widened by the financing dilemma faced by American factories, which remain hesitant between protecting traditional profits from internal combustion engines and the massive financing flows required for electrification; this has cost them losses and unrecoverable investments approaching $50 billion, directly pressurizing their capital base.
Local Retreat
This technological stumble is linked to a second factor, the gradual retreat to the domestic market, as American companies focus their strategies on the domestically high-margin market.
Analysts see Detroit companies increasingly specializing in producing large trucks and SUVs, and while these categories are attractive locally, they lack popularity in Asian and European markets due to high fuel prices and the nature of narrow roads, threatening to transform former giants into merely regional manufacturers with limited scope.
This scenario completes with a third factor related to volatile trade protection, which has proven ineffective at protecting the sector. The 25% tariffs created pressure to relocate production but also crowded out investments aimed at research and development.
As demonstrated in the seventies and eighties, political protection can delay adaptation response, but it doesn't prevent international competitors like the Japanese previously and the Chinese currently from establishing alternative manufacturing bases and steadily expanding into other world markets.
Structural Shifts in the Global Auto Industry
The global automotive sector is reshaping its structure according to profound structural shifts that transcend traditional competition to affect the foundations of competitive advantages and the entire economic geography. The first of these shifts is the growing trend toward "regionalism" and the retreat from globalization concepts; while competitors adapt flexibly by building supply chains tailored to regional markets, the American automotive industry finds itself retreating to its local production bases, bearing sharp increases in direct costs.
The second axis is represented by the accelerating shift towards electrification, a field in which American performance is noticeably slow, stabilizing at around 10% in the domestic market. Meanwhile, global electric car sales have surpassed 20 million units, with China dominating 32% of this global market, as opposed to a meager 5% share for the traditional Detroit trio.
This technological disparity steers the sector towards the third axis related to the structural crisis of identity and innovation; American companies face increasing risks of becoming "empty brands" limited to marketing, while technological capabilities are managed and developed abroad. In contrast, global competing companies are leading the development of advanced battery technologies, autonomous driving, and embedded software.
Jim Farley, CEO of Ford, encapsulated this structural shift by saying: "The era of the auto industry as a global industry is over. We used to be a global industry, but those days are gone."
Economic and Strategic Impact
The decline of the automotive sector extends beyond being a transitory trade crisis, touching the foundations of economic strength and industrial security of the United States. Economically, the auto sector contributes more than $1.2 trillion annually, representing about 5% of the gross domestic product, and supports 47,000 engineers and more than 5,600 local suppliers, making the loss of competitiveness in this sector a severe blow to other vital strategic industries, such as defense and precision automation.
This decline is accompanied by a concerning expansion in the innovation and research and development gap, as the United States invests only $1.40 in automotive sector research for every $1000 of the gross domestic product, while China injects $4.00 for the same standard, threatening to accelerate the technical gap in favor of competitors.
The impact of this downturn does not stop at economic and technical boundaries but extends to affect the social and urban fabric of cities; historic Detroit stands as a living witness to the gravity of this decline, after its population dropped from 1.8 million in 1950 to about 685,000, reaching the milestone of its famous bankruptcy in 2013 under the burden of accumulated debts exceeding $18 billion.
The American automotive industry today stands at a crucial crossroads, with data confirming that the days of absolute dominance have ended, yet this does not necessarily mean the end of the road. American companies still have a solid base in manufactured trucks and large vehicles, alongside promising opportunities in software and autonomous driving fields.
The question remains: Can Washington and its companies succeed in crafting a strategy that goes beyond protecting the past to build a competitive technological future? Decisiveness requires acknowledging that the automotive industry is no longer just a traditional commercial sector, but a strategic pillar directly linked to the national and technological strength of the country.
