To what extent did the interwar motor industry overcome its prewar difficulties and become one of the industrial success stories of the inter-war period?

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Freddie Lewis

Economics and Economic History

To what extent did the interwar motor industry overcome its prewar difficulties and become one of the industrial success stories of the inter-war period?

The pre-war motor industry was in its infancy and suffered from a lack of investment backing, high production costs, an over engineered end product and a saturation of small family orientated manufactures. Developments in the industry often came from pioneering engineers with components being imported off the continent for the British industry. Britain was lagging behind other European nations. The industry established itself in the inter-war period by relying on entrepreneurs and engineers, such as Herbert Austin who built the first four wheeled English car by 1900. Austin also built the first low horse-power car to substitute the motor-cycle side-car and public transport.

The pre-war industry had high production costs with poor managerial leadership with most manufacturers being family run, resulting in little asset growth within the company as profits were quickly distributed to employees or family. No attention was paid to extend asset growth within the company, increase production efficiency and strive towards obtaining economies of scale. Automobiles were still only available to a minority, the middle classes, who were prepared to pay higher prices for quality, aesthetic appeal and performance. In the inter-war period mass production was never reached (stage three on the diffusion curve) but by the end of the 1930s a large component industry had established itself which supplied parts to the motor industry on a mass scale. Production costs were also reduced by improved methods of manufacture which was greatly aided by new industrial technology and techniques used over the First World War. Advancements revealed were the standardisation of components for industry and the ability to use a semi-skilled work-force. This led to:

 ‘The advanced deployment of machinery on a line system to achieve a high degree of continuity in production for annual output levels of 10000 cars in the late 1920s.

However, by the end of the inter-war period there was still a lack of standardization and too much product differentiation, without The War these factors would have been much more dramatic. The War also highlighted the use of vehicles which increased investment interest from companies and private backers alike. Furthermore, the McKenna tariff was introduced in 1915, placing a thirty-three and third percent tax on goods, such as cars, which were heavy on shipping space (Middleton R). This tariff was not removed until 1963 to protect the home market from imports.

Only wealthy elite were able to invest in the motor industry in the pre-war and early in the 1920s, the industry was still in its first stage on the diffusion curve. During the inter-war period the industry progressed from the first stage to the second stage on the diffusion curve. Market size was increased to the middle classes as a whole but it still only had a small target market in relation to the whole population of England, roughly 25% of the population.

In not competing on the international market a gradual expansionary path evolved in Britain and resulted in complications for the post war industry.

Entrepreneurs, like Herbert Austin, grasped quickly what British consumer preferences were and designed cars specific to the home market. They saw the importance of introducing low horse-power cars with low running costs to infiltrate more widely among middle income groups Entrepreneurs were willing to take risks, innovate and saw potentials in the market.

‘The company’s post-war revival began on the basis of Austin’s own engineering and creative skills. Without his persistence and determination to secure the implementation of his personal manufacturing strategy the company’s colossal financial difficulties would almost certainly engulfed the Longbridge enterprise.

 Engineers and entrepreneurs had little commercial knowledge, their passion for technical perfection and individuality often clouded their economic decisions. They realised a high price-quality product was required for the English market but often forgot the economic importance of improving input costs. In the inter-war period the managerial roles of Austin and Morris were reduced with boards of directors, with little or no market share in the company, making decisions for the company’s evolution. Without entrepreneurs opportunities in the market may have been missed along with the potential profits created. Conversely in creating a unique product for the home market entrepreneurs were forfeiting the potential for expanding demand and profit on the international market. Britain needed to produce higher horse-power vehicles in large numbers to increase demand to such markets. Britain had the ability to capitalise from its colonies where empire preference helped boost exports. Furthermore ‘exports of the major foreign competitors, America, Canada and France failed to regain their pre-depression levels even by 1937.’ Britain had an opportunity to increase demand dramatically as its export levels recovered to its pre-depression levels by 1932 and it had much colonial advantage. In not having a high horse-power vehicle for the export market at a reasonable price the British economy was not creating the full potential of this opportunistic and a slightly fortuitist position they had found themselves in. There was only a total of ’98,500 units exported’ in comparison to ‘281,500 units sold’ on the home market in 1937.

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In the pre-war motor production costs were too high only allowing the wealthy elite to enter the market. The motor industry was in its infancy, production techniques were highly labour intensive with little standardisation and the public were indifferent about the cars practicality. The First World War had a number of effects it illustrated to the public the practicalities of motor vehicles and also introduced new technical advancements to all of Britain’s industries. It affected the motor industry by increasing standardisation of production methods:

‘Of critical importance for the post-war development was the effect of using standard jigs and tools ...

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