6 ms·

What I think is interesting is that cars are technically complex, yet there are a lot of car companies, each making cars their own way. Usually, products that a

What I think is interesting is that cars are technically complex, yet there are a lot of car companies, each making cars their own way. Usually, products that are highly technically complex are only made by a small number of companies, since R&D is expensive. I don't really know enough to speculate on why the car industry is that way.

gydfi 10y ago
Interesting question. Partially it's that the global car market is huge so there's enough profit to go around even with a lot of companies. I think the more important reason is historical, though. The car companies of today were almost all established back in the days when shipping cars internationally was expensive, and operating a factory in a foreign country was difficult. So each major industrialised country wound up with a few manufacturers after a lot of consolidation -- in the US dozens of manufacturers got reduced down to three. Then there's three German, two French, one (major) Italian... Japan is a weird case but it is still consolidating... Only in the last few decades has the car market become really global, and as a result there's ongoing consolidation continuing, eg Fiat-Chrysler and Renault-Nissan.
- baddox 10y ago
  I don't know if it's true, but I wouldn't be surprised if many states didn't heavily subsidize their own car manufacturers early in the automobile boom.
  - dsr_ 10y ago
    To a first approximation, every nation subsidized their automotive manufacturers directly (government ownership, policies) and indirectly (contracts for building military vehicles, building highway systems and regulating the industry).
  - mtdewcmu 10y ago
    Good old-fashioned government subsidies. I guess you can't overlook the US-automaker bailout under Obama as being part of this process.
    - Arizhel 10y ago
      Yep, if it weren't for that, GM would probably be out of business now. Too bad.
dfox 10y ago
Important fact is that the whole automotive industry is built on heavy outsourcing. Typical car manufacturer only manufactures the car body, maybe engine and does the final assembly. For everything else not only the manufacturing but also R&D is outsourced.
- hkmurakami 10y ago
  Was going to write exactly this. Open the hood and you see Bosch, Denso, Delphi logos, not the OEM. The car maker makes maybe the engine, and even that is increasingly outsourced.
- jdietrich 10y ago
  Also, motor manufacturers design basic platforms that are used across many models and often across many brands. A basic chassis, engine and drivetrain package might be the basis for a dozen different cars. Developing a platform might cost hundreds of millions of dollars, but those costs can be spread across several million cars. http://www.caranddriver.com/columns/platform-sharing-for-dummies-feature http://www.caranddriver.com/columns/platform-sharing-for-dum... http://www.autonews.com/article/20140804/OEM10/308049988/carmakers-bet-on-big-global-platforms-to-cut-costs http://www.autonews.com/article/20140804/OEM10/308049988/car...
Arizhel 10y ago
No car company on the planet, that I'm aware of, makes air conditioners, as one example. Nor do they make things like brake pads, brake calipers, radiators, headlights, I could go on and on. All these things are outsourced to suppliers. There aren't that many suppliers, and the suppliers pretty much all serve multiple automakers each. So lots of Japanese makers (probably all of them) use parts from Denso, for instance. It's not that much different from laptop computer makers; there's a bunch of them, all with slightly different designs, but they all use CPUs from AMD or Intel, they all use optical drives from 2 or 3 different companies, they all use memory from a few suppliers, they all use LCD screens from a few suppliers, etc. Another thing to consider is patents: take a brand-new car apart, and compare it to one from 1996. You'll find a lot of stuff really hasn't changed much (now compare the '96 car to a '76 car, and you'll see a lot of gigantic differences). A lot of stuff in the auto industry has become very mature IMO. Obviously there's a lot of new electronics in new cars (things like lane-keeping assist, radar cruise control, blind-spot monitoring, etc.), but many things look exactly the same: suspensions are about the same, brake systems are identical, the moonroof in my '15 isn't really any different from ones in cars from 10-15 years ago, etc. Patents only last 20 years, so a lot of stuff has probably reached a "good enough" level and the patents have all run out, so companies are probably just doing a lot of things the same way because it's been found to be optimal.

gydfi 10y ago

Interesting question. Partially it's that the global car market is huge so there's enough profit to go around even with a lot of companies. I think the more important reason is historical, though. The car companies of today were almost all established back in the days when shipping cars internationally was expensive, and operating a factory in a foreign country was difficult. So each major industrialised country wound up with a few manufacturers after a lot of consolidation -- in the US dozens of manufacturers got reduced down to three. Then there's three German, two French, one (major) Italian... Japan is a weird case but it is still consolidating... Only in the last few decades has the car market become really global, and as a result there's ongoing consolidation continuing, eg Fiat-Chrysler and Renault-Nissan.

baddox 10y ago
I don't know if it's true, but I wouldn't be surprised if many states didn't heavily subsidize their own car manufacturers early in the automobile boom.
- dsr_ 10y ago
  To a first approximation, every nation subsidized their automotive manufacturers directly (government ownership, policies) and indirectly (contracts for building military vehicles, building highway systems and regulating the industry).
- mtdewcmu 10y ago
  Good old-fashioned government subsidies. I guess you can't overlook the US-automaker bailout under Obama as being part of this process.
  - Arizhel 10y ago
    Yep, if it weren't for that, GM would probably be out of business now. Too bad.

dfox 10y ago

Important fact is that the whole automotive industry is built on heavy outsourcing. Typical car manufacturer only manufactures the car body, maybe engine and does the final assembly. For everything else not only the manufacturing but also R&D is outsourced.

hkmurakami 10y ago
Was going to write exactly this. Open the hood and you see Bosch, Denso, Delphi logos, not the OEM. The car maker makes maybe the engine, and even that is increasingly outsourced.
jdietrich 10y ago
Also, motor manufacturers design basic platforms that are used across many models and often across many brands. A basic chassis, engine and drivetrain package might be the basis for a dozen different cars. Developing a platform might cost hundreds of millions of dollars, but those costs can be spread across several million cars. http://www.caranddriver.com/columns/platform-sharing-for-dummies-feature http://www.caranddriver.com/columns/platform-sharing-for-dum... http://www.autonews.com/article/20140804/OEM10/308049988/carmakers-bet-on-big-global-platforms-to-cut-costs http://www.autonews.com/article/20140804/OEM10/308049988/car...

Arizhel 10y ago

No car company on the planet, that I'm aware of, makes air conditioners, as one example. Nor do they make things like brake pads, brake calipers, radiators, headlights, I could go on and on. All these things are outsourced to suppliers. There aren't that many suppliers, and the suppliers pretty much all serve multiple automakers each. So lots of Japanese makers (probably all of them) use parts from Denso, for instance. It's not that much different from laptop computer makers; there's a bunch of them, all with slightly different designs, but they all use CPUs from AMD or Intel, they all use optical drives from 2 or 3 different companies, they all use memory from a few suppliers, they all use LCD screens from a few suppliers, etc. Another thing to consider is patents: take a brand-new car apart, and compare it to one from 1996. You'll find a lot of stuff really hasn't changed much (now compare the '96 car to a '76 car, and you'll see a lot of gigantic differences). A lot of stuff in the auto industry has become very mature IMO. Obviously there's a lot of new electronics in new cars (things like lane-keeping assist, radar cruise control, blind-spot monitoring, etc.), but many things look exactly the same: suspensions are about the same, brake systems are identical, the moonroof in my '15 isn't really any different from ones in cars from 10-15 years ago, etc. Patents only last 20 years, so a lot of stuff has probably reached a "good enough" level and the patents have all run out, so companies are probably just doing a lot of things the same way because it's been found to be optimal.