Automotive Industry in Europe

Growth in Europe

The period from 1919 to 1939 also brought significant growth in automobile manufacturing in Europe, though on a considerably smaller scale than in the United States. The European industry was moving in the same directions as the American industry, toward a mass market for motor vehicles, but it made slower progress for a variety of reasons: lower living standards with less purchasing power, smaller national markets, and more restrictions in tax and tariff policies. Still, the same trend toward concentration was discernible. British automotive production rose from 73,000 in 1922 (both private and commercial vehicles) to 239,000 in 1929, while the number of producers declined from 90 to 41. Three firms—Austin, Morris, and Singer—controlled 75 percent of the British market in 1929.

The apparent analogy to the American experience was temporary. British production had not yet reached the level at which the economies of scale gave the larger firms as commanding a lead as in the United States. There were other factors that created a somewhat different situation. During the 1930's British automotive production continued to increase steadily, in contrast to American production, and so the smaller companies were not forced to compete for a shrinking market. Output reached almost half a million in 1937, and at the end of the decade there were six major British producers instead of three: Morris, Austin, Standard, Rootes, Ford, and Vauxhall. The last two represented entry by American firms. Vauxhall had been bought by GM in 1925; Ford had been in Britain since 1911, had lost ground in the 1920s, and had later recovered. The Rootes Group, based on Hillman and Humber, was a combine formed by a family that had built a large automobile sales concern and then moved from sales to production. The replacement of Singer by Standard was simply the rise of one company and the decline of another, as evidence that open competition could still change the structure of the British automotive industry.

In France three major firms—Peugeot, Renault, and Citro?n—emerged in the 1920's. Citro?n accounted for 40 percent of French automotive production in 1925 but had reached that dominating position at the cost of financial stability. When André Citro?n died before the decade ended, his company came into the hands of Michelin Tire. A new French firm, Simca, rose to prominence in the 1930's. The German automobile industry suffered from the dislocation of World War I and Germany’s subsequent economic difficulties. The major developments of the 1920's were the merger of Daimler and Benz in 1926, after the founders of those firms had died (their bitter rivalry for the distinction of being the inventor of the gasoline automobile made any such union during their lifetimes unthinkable), and the entry of General Motors onto the German scene through the acquisition of the Adam Opelcompany in 1929. The Germans were ardent admirers of Henry Ford and his methods, which they termed Fordismus, but Ford never succeeded in becoming a power in the German automotive world. During the 1930's the Nazi regime sought to emulate Ford by undertaking mass production of a low-priced car, the Volkswagen, but the onset of war interrupted this project. Italian automobile manufacturers gained a reputation for highly engineered sports cars and racing cars, but Italy had no mass market and therefore achieved only small-scale production at that time.

The automotive industry in World War II

During World War I the productive capacity of the automotive industry first demonstrated its military value. Motor vehicles were used extensively for transport and supply. In addition, automotive plants could readily be converted into facilities for manufacturing military equipment, including tanks and aircraft. For all of the belligerents the conversion of automotive facilities was an afterthought, improvised after the beginning of hostilities, and the American industry, involved only for a short time, never fully utilized its capacity.

More preparation was made for using the resources of the various automotive industries as World War II approached. The British government built “shadow factories” adjacent to their automotive plants, equipped to go into military production (principally aircraft) when war came, with managerial and technical personnel drawn from the automotive industry. France attempted conversion, but belatedly and inefficiently. The German automotive industry, which built the military vehicles needed for blitzkrieg, was not fully converted to military production until 1943. It had been assumed that automotive facilities could be readily converted for aircraft production, but this proved more difficult than anticipated. Automobile assembly plants did not readily accommodate air-frames, nor could an automobile engine factory be converted without substantial modification. These problems were eventually resolved, and automobile companies contributed significantly to aircraft production.

Britain was better prepared to use the resources of its automotive industry, at that time the world’s second largest. The shadow factories became operative, and Austin, Morris, Standard, Daimler, Ford, and Rootes participated in filling the wartime demand for aircraft and aircraft engines. Leyland Motors and Vauxhall built tanks. Lord Nuffield made a notable contribution to the production effort by establishing a system for repairing aircraft, employing the sales and service organization of Morris Motors, and it was subsequently extended to a large number of small contractors. The automotive industries of the other belligerents were smaller in scale, and their facilities for armaments manufacture were proportionately greater than in the United States or Great Britain. Consequently, the automotive firms in these countries were concerned chiefly with meeting the insatiable demand for vehicles. The various Ford properties that came under German control, along with Volkswagen, which turned out the German equivalent of the jeep, were employed in this manner. Renault, a tank manufacturer since World War I, built tanks for France and later for Germany.

The automotive industry after 1945

After World War II there was a striking expansion of motor vehicle production. During a 35-year period the total world output increased almost 10-fold. The most significant feature of this increase was that most of it occurred outside the United States. 

Europe after World War II

In Europe motor vehicles were recognized as an export item that could help restore war-shattered economies. Britain, for example, earmarked more than half of its automotive output for export and restricted domestic purchases for several years after the war. In addition, the horsepower tax was abandoned to enable British manufacturers to build profitably for the world market. The most popular British designs (excluding specialized luxury vehicles such as the Rolls-Royce) continued to be lightweight cars, including several models with an ingenious front-wheel drive. The trend to consolidation led in 1952 to the merger of Morris and Austin to form the British Motor Corporation, Ltd., a combine that accounted for about two-fifths of Britain’s motor vehicle production. Another British combine was formed around Leyland Motors, which had grown into the country’s largest manufacturer of commercial vehicles and became a power in the passenger-car field by acquiring Standard-Triumph and Sunbeam in the 1950's. Leyland and the British Motor Corporation united in 1968 as the British Leyland Motor Corporation; this move, sanctioned by the government, was intended to forestall possible American domination of the British automobile industry. Except for Rolls-Royce, whose automobile production was only a very small part of the company’s business, British automobile output was then largely controlled by four firms: British Leyland, Ford, Vauxhall, and Rootes, which came under Chrysler control in 1967 but was sold off to France’s Peugeot-Citro?n in 1978. When British Leyland had financial difficulties in the early 1970's, it was taken over by the government.

In the 1980's the remaining parts of BL, which by then was focused on building Jaguar, Mini, and Rover cars and Land Rover sport utility vehicles and commercial trucks, became the Rover Group. Eventually Jaguar regained profitability, and the British government sold off the company through a public stock offering. The remaining Rover/Mini operations were acquired by British Aerospace Corporation. Rover then entered into a cooperative venture with Japan’s Honda in which cars of Honda design were built at Rover plants for sale in Britain and other European countries under the Rover and Honda brands. A small number also were exported to the United States under the Sterling name. Eventually Honda became dissatisfied with the venture, and British Aerospace sold the Rover/Mini operations to BMW of Germany in 1994. In 2000 BMW sold the Land Rover segment to Ford, which had acquired the stock of Jaguar in 1989, while its Rover cars segment was spun off to a British consortium and became MG Rover Group Ltd. BMW retained the profitable Mini operations. In the late 1990's Britain’s Rolls-Royce Motor Cars, then owned by Vickers PLC, became the subject of a bidding war in which Germany’s Volkswagen emerged as the owner of the company’s Bentley brand and all of its manufacturing facilities; BMW emerged as the owner of the Rolls-Royce brand with respect to cars, effective at the end of 2002.

The post-World War II revival of the German automobile industry from almost total destruction was a spectacular feat, with most emphasis centering on the Volkswagen. At the end of the war the Volkswagen factory and the city of Wolfsburg were in ruins. Restored to production, in a little more than a decade the plant was producing one-half of West Germany’s motor vehicles and had established a strong position in the world market. Breaking away from what had become standard design, the Volkswagen used a four-cylinder air-cooled engine at the rear of the car. It also dispensed with the annual model change that had become customary with other automobile manufacturers. Although the company had been founded by the German government, in the 1960's the government divested itself of 60 percent of its interest by selling stock to the public, an unusual case of denationalization in an era when nationalization of industry was far more common. In the same decade, Volkswagen acquired Auto Union, which evolved into its Audi luxury car segment. In the late 1960's BMW rose from a builder of small, oddly styled Isetta cars and motorcycles into one noted for high-priced passenger vehicles and premium motorcycles. Opel became the base for the European operations of General Motors, and by the 1990's it supplied much of the small-car engineering expertise for GM operations around the world. Prior to its merger with Chrysler Corporation in 1998, Daimler-Benz had developed diversified interests ranging from trains to aerospace products.

Fiat (Fabbrica Italiana Automobili Torino), a firm founded in 1899 but without a mass market until the 1950's, dominated Italian automotive production. The French industry was centered on Renault, Peugeot, Citro?n, and Simca. Renault was nationalized at the end of World War II, and it became a public corporation in the 1990's. Citro?n was acquired in 1976 by independently owned Peugeot to form PSA Peugeot-Citro?n. Simca became a Chrysler property in 1958 but was sold to Peugeot in the late 1970s. Although Sweden was a relatively small producer, Swedish builders Saab and Volvo became important factors in the world market during the 1960's and 1970's. Their car operations were acquired in the 1980's and 1990's by General Motors and Ford, respectively.