The Decline of U.S. Car Production
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The Decline of U.S. Car Production

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decline in u.s. car production chart

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The Briefing

  • U.S. auto manufacturing has been in a downward trend since the 1970s
  • Overseas competitors have gradually eroded the market share of America’s Big Three
  • Recent events like the global chip shortage present further setbacks

U.S. Car Production Falls to a New Low

Germany may have been the birthplace of the automobile, but it was America that developed the methods for mass production.

Created in 1913, Henry Ford’s assembly line greatly reduced the time it took to build a car. This also made cars more affordable, and America’s automotive industry quickly became the largest in the world. As we can see in the chart above, this dominance wouldn’t last forever.

From a high of nearly 10 million cars per month in the 1970s, the U.S. produced just 1.4 million in June 2021. Here are some reasons for why the country produces a fraction of the cars it used to.

Global Competition

America’s Big Three (Ford, GM, and Chrysler*) have been unable to defend their market share from overseas competitors. The following table shows how Honda and Toyota were able to break into the U.S. market over a span of just five decades.

YearFordGMChryslerBig Three
Total Market Share
HondaToyota
196029.3%45.7%10.4%85.4%--
197028.3%38.9%14.9%82.1%-2.0%
198020.5%44.2%9.1%73.8%3.3%6.2%
199023.8%35.2%12.0%71.0%6.0%7.6%
200022.6%28.0%13.0%63.6%6.5%9.1%
201016.4%18.8%9.2%44.4%10.5%15.0%

*Chrysler is now a part of Stellantis N.V., a multinational corporation.
Source: WardsAuto

The 1970s presented an incredible opportunity for Honda and Toyota, which at the time were known for producing smaller, more fuel-efficient cars.

First was the Clean Air Act of 1970, which imposed limits on the amount of emissions a car could produce. Then came the 1973 oil crisis, which caused a massive spike in gasoline prices.

As consumers switched to smaller cars, American brands struggled to compete. For example, the flawed design of the Ford Pinto (Ford’s first subcompact car) was exposed in 1972 after one exploded in a rear-end collision. The ensuing lawsuit, Grimshaw v. Ford Motor Company, undoubtedly left a stain on the automaker’s reputation.

Production Moves to Mexico

2018 was a controversial year for GM as it came under fire by the Trump administration for closing four of its U.S. plants. That same year, GM became Mexico’s biggest automaker.

The decision to outsource is well-founded from a business standpoint. Mexico offers cheaper labor, lower taxes, and close proximity for logistics. Altogether, these benefits add up to roughly $1,200 in savings per car.

It’s important to note that GM isn’t alone in this decision. BMW, Ford, and many others have also invested in Mexico to produce cars destined for the United States.

Shifts in the Market

There are other, less obvious factors to consider too.

Modern cars are much more reliable, meaning Americans don’t need to purchase a new one as often. 2020 marks four consecutive years of increase for the average vehicle age in the U.S., which now sits at 12 years old.

“In the mid-’90s, 100,000 miles was about all you would get out of a vehicle. Now, at a 100,000 miles a vehicle is just getting broken in.”
– Todd Campau, Associate Director, IHS Markit

Rising car prices could also be playing a part. The average price of a new car was $41,000 as of July 2021, up from around $35,700 in May 2018.

Can U.S. Car Production Make a Comeback?

Recent events are a grim reminder of the direction U.S. car production is heading.

As part of its plant closures, GM shuttered its Lordstown facility in 2019. This broke a 2008 agreement in which GM pledged to keep 3,700 employees at the location through 2028. The company had received over $60 million in tax credits as part of this deal, and $28 million was ordered to be paid back.

COVID-19 has presented further issues, such as the ongoing chip shortage which has impacted the production of more than 1 million U.S.-made vehicles.

Not all hope is lost, however.

Tesla now employs over 70,000 Americans across its production facilities in California, Nevada, New York, and soon, Texas. The company is joined by Lucid Motors and Rivian, two entrants into the EV industry that have both opened U.S. plants in 2021.

Where does this data come from?

Source: Trading Economics

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How People Around the World Feel About Their Economic Prospects

In many of the world’s largest economies, including the U.S., Germany, and China, optimism around economic prospects sits at an all-time low.

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economic prospects of people around the world

The Briefing

  • Economic prospects are at an all-time low in nine countries, including the U.S., Canada, Germany, Japan, and China
  • China and the U.S. experienced the biggest year-over-year drops, at -8 p.p. and -6 p.p., respectively

How Countries Feel About Their Economic Prospects

Each year, the Edelman Trust Barometer report helps gauge the level of trust people place in various systems of power.

The report is also a useful tool to gauge the general mood in countries around the world—and when it comes to how people in developed economies feel about the near future, there’s a very clear answer: pessimistic. In fact, optimism about respondents’ economic prospects fell in the majority of countries surveyed.

Here’s a full look how many respondents in 28 countries feel they and their families will be doing better over the next five years. Or, put more simply, what percentage of people are optimistic about their economic circumstances?

Country% who are optimisticAll-time low?Change from 2021 (p.p.)
🇯🇵 Japan15%-1
🇫🇷 France18%-1
🇩🇪 Germany22%-2
🇮🇹 Italy27%0
🇳🇱 Netherlands29%-1
🇬🇧 UK30%+2
🇷🇺 Russia31%+1
🇨🇦 Canada34%-1
🇪🇸 Spain36%+1
🇰🇷 South Korea39%+6
🇺🇸 U.S.40%-6
🇦🇺 Australia41%-2
🇮🇪 Ireland42%-1
🇸🇬 Singapore43%-1
🌐 Global51%0
🇲🇾 Malaysia55%0
🇦🇷 Argentina60%-2
🇹🇭 Thailand60%-2
🇨🇳 China64%-8
🇿🇦 South Africa66%-2
🇲🇽 Mexico68%-1
🇧🇷 Brazil73%0
🇸🇦 Saudi Arabia73%0
🇦🇪 UAE78%+6
🇮🇳 India80%0
🇮🇩 Indonesia81%+11
🇨🇴 Colombia83%-1
🇳🇬 Nigeria87%n/a
🇰🇪 Kenya91%-2

Interestingly, nine countries (those with checkmarks above) are polling at all-time lows for economic optimism in survey history.

Whose Glass is Half Empty?

Japanese respondents were the most pessimistic, with only 15% seeing positive economic prospects in the near term. Only 18% of French respondents were economically optimistic.

While most developed economies were slightly more optimistic than Japan and France, all are still well below the global average.

As tensions between China and the U.S. continue to heat up in 2022, there is one thing that can unite citizens in the two countries—a general feeling that economic prospects are souring. As the U.S. heads into midterm elections and China’s 20th National Party Congress takes place, leaders in both countries will surely have the economy on their minds.

Whose Glass is Half Full?

Of course, the mood isn’t all doom and gloom everywhere. The United Arab Emirates saw a 6 percentage point (p.p.) jump in their population’s economic prospects.

Indonesia saw an 11 p.p. increase, and in big developing economies like Brazil and India, the general level of optimism is still quite high.

In some ways, it’s no surprise that people in developing economies are more optimistic about their economic prospects. Living standards are generally rising in many of these countries, and more opportunities open up as the economy grows. Even in the most pessimistic African country surveyed, South Africa, the majority of people still see improving circumstances in their near future. In Kenya and Nigeria, an overwhelming majority are optimistic.

Diverging Outcomes

One major prediction that experts agreed on for the year ahead is that economic outcomes will begin to diverge between countries with differing levels of vaccine access.

While this doesn’t seem to have affected attitudes towards economic optimism yet, it remains to be seen how this will play out as the year progresses.

Where does this data come from?

Source: 2022 Edelman Trust Barometer

Data notes: This data is derived from Edelman’s annual Trust Barometer survey, which includes 30,000+ respondents in countries around the world.

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The Accelerating Frequency of Extreme Weather

Extreme weather events, like droughts and heatwaves, have become more common over the years. But things are expected to get worse.

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Extreme Weather Events

The Briefing

  • We’re already seeing the impact of climate change—today, droughts, heatwaves, and extreme rainstorms are 2x more frequent than they were a century ago
  • In less than a decade, Earth’s climate is expected to warm another 0.5°C
  • If this happens, heatwaves will be 4.1x more frequent than they were in the 1850-1900s

The Accelerating Frequency of Extreme Weather

The world is already witnessing the effects of climate change.

A few months ago, the western U.S. experienced one of the worst droughts it’s seen in the last 20 years. At the same time, southern Europe roasted in an extreme heatwave, with temperatures reaching 45°C in some parts.

But things are only expected to get worse in the near future. Here’s a look at how much extreme climate events have changed over the last 200 years, and what’s to come if global temperatures keep rising.

A Century of Warming

The global surface temperature has increased by about 1°C since the 1850s. And according to the IPCC, this warming has been indisputably caused by human influence.

As the global temperatures have risen, the frequency of extreme weather events have increased along with it. Heatwaves, droughts and extreme rainstorms used to happen once in a decade on average, but now:

  • Heatwaves are 2.8x more frequent
  • Droughts are 1.7x more frequent
  • Extreme rainstorms are 1.3x more frequent

By 2030, the global surface temperature is expected to rise 1.5°C above the Earth’s baseline temperature, which means that:

  • Heatwaves would be 4.1x more frequent
  • Droughts would be 2x more frequent
  • Extreme rainstorms would be 1.5x more frequent

The Ripple Effects of Extreme Weather

Extreme weather events have far-reaching impacts on communities, especially when they cause critical system failures.

Mass infrastructure breakdowns during Hurricane Ida this year caused widespread power outages in the state of Louisiana that lasted for several days. In 2020, wildfires in Syria devastated hundreds of villages and injured dozens of civilians with skin burns and breathing complications.

As extreme weather events continue to increase in frequency, and communities become increasingly more at risk, sound infrastructure is becoming more important than ever.

Where does this data come from?

Source: IPCC
Details: The data used in this graphic is from the IPCC’s Sixth Assessment Report, which provides a high-level summary of the state of the climate, how it’s changing, and the role of human influence.

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