IRS Logo
Print - Click this link to Print this page

Motor Vehicle Industry Overview - History of Industry - June 2004

Affected IRM:  X.XX.X

"This document is not an official pronouncement of the law or the position of the Service and cannot be used, or cited, or relied upon as such."

History of Industry



Charles and Frank Duryea built the first “motorized wagon” with a two-piston, one- cylinder, two-stroke gasoline engine.


A Chicago to Milwaukee contest for horseless carriages inspired a generation of entrepreneurs.
Sponsored by the Chicago Times-Herald, the race was judged on style, technical merit, and practicality, rather than speed.

  • By 1898, 200 companies had been organized to manufacture cars.


Ransom Olds forms Olds Motor Vehicle Co., the first company organized in Michigan solely to build autos.


William Metzger opens the first new car dealership in Detroit, MI. 

  • Early dealerships operated as retailers of cars, bicycles, gasoline, and served as machinists making replacement parts. 


The first franchised auto dealerships, called “agents,” emerged.


Manufacturers appointed distributors who then appointed “sub-dealers” to provide the manufacturer with greater coverage in their assigned territories.  (The practice of appointing distributors and sub-dealers ceased in the 1950s.)


Henry Ford’s newly formed Ford Motor Co. sold 1,708 “Model A” cars (selling price - $850) for a profit of $98,851.


Ford Motor Company established the first assembly line manufacturing plant. 


The U.S. automotive industry ground to a halt as U.S automakers and suppliers produced over $30 billion worth of military hardware in support of the war effort.


Independent distributors began the import revolution.

  • In the early years, “import” meant European 
  • In 1965, Japan’s Datsun began to crack Europe’s hold on U.S. imports.

By 1996, the import manufacturer distribution system had evolved to a franchise system similar to the domestic vehicles and only five independent distributors remained.


Middle East unrest and the oil embargo spurred manufacturers to design smaller, high-mileage vehicles manufactured from new and lightweight materials.
Small imported vehicles grabbed a larger part of the automotive industry and domestic dealers were forced to add import franchises.


Volkswagen began producing the “Rabbit” in Westmoreland County Pennsylvania, the first  high volume foreign manufacturing operation in the U.S.


Honda built the first Japanese assembly plant in the U.S.


General Motors unveils the EVI – the first electric vehicle.


A wave of mergers overtakes the automotive supplier industry.

  • Automakers’ demands for price cuts, additional involvement in product design, and global production forces suppliers to grow quickly.


The “year of the used car”

  • Used car superstores CarMax, AutoNation USA , and Driver’s Mart began to stake their claim to the market.


Some independent new car dealerships unite into “mega” dealerships offering “one stop” shopping and “no-haggle” pricing.

  • Some mega dealerships test the waters of public ownership.

Republic Enterprises attempts to establish a new and used car dealership “brand” with AutoNation superstores.

  • Many manufacturers strenuously oppose AutoNation and other consolidators and attempt to limit the number of franchises available.


Internet becomes the “buzz word” of the auto industry.
Auto dealers begin to see the Internet as a way to lower marketing costs and generate new business.

  • NADA estimates 30 percent of all dealerships have an Internet presence and report an average of 43 leads each month via the web.
  •  Internet buying services offer dealers pre-screened sales leads for a price.  

Parts makers join the on-line revolution allowing manufacturers, dealers, and individuals to purchase parts through the Internet. 


  Chrysler Corporation and German auto company Daimler-Benz merge.

  • Ford and GM also form strategic alliances with foreign counterparts.


Auto manufacturers roll out web-based supply network that will allow “business to business” purchases over the Internet.


Ford celebrates it’s 100th Year anniversary


General Motors discontinues the Oldsmobile line


China equal US in production plant investment dollars

Chapter 1 | Table of Contents | Chapter 3

Page Last Reviewed or Updated: 27-Nov-2013