As can be seen by the figures above, the capacity and production of the motor industry during the inter-war period drastically increased. Therefore, it can be argued they adapted to the changes in the market successfully. The slump only caused a brief recession in this industry. Production only dropped slightly, and soon after it recovered.
This could be attributed to the strength of the industry. However, as many historians argue, it is more likely that the protection the government provided for the motor industry was responsible for their good fortune.The thirty three and a third per cent tariff on imported cars which was introduced in 1915 continued well after the end of the war and became a “major factor ensuring the growth of the infant industry”3 after the war. However, from an economic perspective this tariff encouraged inefficiency in the market as it hides the industry’s shortcomings on the supply side. Regardless of this, the tariff led to an increase in output in the British motor industry. The rising output in the market led to greater economies of scale.
This was an advantage to larger companies.However, they chose to produce more variety of vehicles and introduced more frequent changes of model. There was a major shift in demand during this period to smaller engine cars. This change in the market environment was due to the heavier taxation on larger cars as a result of the depression. In 1928 a quarter of all cars sold were 10 h. p.
or under4. Critics of the British motor industry compare the scale of production within Britain to that of the United States. The levels being achieved by the British firms were significantly below those in the USA. For example, US labour productivity was.1 times that of the British in 19355.
Although they made different cars for different markets, there was a great deal of competition between the British and American firms. This encouraged the spread of mechanised production line systems in Britain to combat the increasing rates of productivity in the United States. However, the profitability of British autos was competitive with United States figures. Britain was now second in the production and export league behind the United States. By 1933 car exports were double what they had been in 1930, and by 1937 three times as great.
However, the strategies of Austin and Morris were clearly not aiming for long-run profit maximisation. They chose to benefit in the short-run, as opposed to invest for the long run. This can be seen in the downturn and collapse of the British motor industry in the 1960s- 80s. The reasons for success are also important to assess.
Many historians have attributed the success of the motor industry in the inter-war period to growing real incomes of the middle classes. The increase of disposable income and the growing popularity of the auto industry led to a sustained high levels of home sales.The depreciation of the pound sterling also effected the market. This made British exports relatively less expensive. By the law of demand, by reducing prices, demand should increase.
Indeed, the British industry did see an increase in demand for their vehicles. This can also be rooted in the desire by Dominion customers for more economic motoring than could be offered by the American’s. The increase in variety of models in the British industry also led to an increase in demand.
However, this demand caused an increase of imports which at the beginning of the period meant firms found itdifficult to quickly adapt plants to peacetime production. Overall it is clear that the changes in the market environment benefited the motor industry. The war conditions had actually restricted the demand for cars at a time when Morris was ready to enter mass production. With the skills learnt from war production and the new equipment now available to them, it would be expected that Morris would have flourished after the war. However, they had serious financial difficulties and had great difficulty to restore themselves to their pre-war profit levels. Despite this, later in the decade Morris’production was experiencing a rapid increase in production.
Later their problem became not in profitability or progress, but one of lagging design. This illustrates how Morris adapted to the immediate market environment they were faced with after the war, but later found difficulty. This trend of initial recovery but later suffering can be seen in other large motor companies of the time. Therefore, it can be concluded that although the motor industry adapted to the market environment changes effectively in the short term, they lacked the long term investment programs that would avoid the collapse of the industry in the long run.