During the 1920' s, the structure of the American automobile market changed from that of a simple growth market to that of a replacement market. An examination of that period has some importance to the business history of the American automobile industry. This article will point out some of the characteristics of the structure of the American automobile industry in the twenties. Model changes were regularized during this period through a transformation of the market structure. Competitiveness in market shares was achieved by big firms through improvements in the efficiency of passenger cars and through the establishment of a demand-sliding schedule. Third, the demand for automobiles was saturated after 1925 and the automobile industry was chronically in a state of oversupply, thus investment was financed exclusively from retained profits.
During the twenties, Ford and GM developed contrasting managerial policies. Ford was able to reduce the production costs significantly by a technological rationalization of assembly processes, while GM adopted a decentralized managerial scheme to deal with changes in the market structure. After 1925, GM succeeded in surpassing Ford in the production of automobiles. GM also had a superior system of financial controls, and was ready for an administered pricing system, by means of objective rates of return and standard volumes.
Finally, the twenties were a turning point for the American automobile industry. During this period, price competition was severe, preventing the establishment of a monopolistic control. New managerial techniques were adopted to develop advanced marketing and pricing policies geared to perpetual model changes. Thus the twenties may be regarded as preparatory to the oligopolistic era of the thirties.
