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America’s Knowledge Deficit - Building Cars in America is Only Part of the Answer [1]
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Date: 2025-03-30
The President complains that building cars overseas is a serious economic problem and moving their construction here will create jobs and help with the trade deficit. However, he is ignoring a significant piece of the economic puzzle.
American automotive designers and engineers are locked in a race competing against German, Korean, Japanese, Chinese, and now Vietnamese automotive engineers.
Building foreign-designed cars here does not address the very significant issue of American manufacturers improving their manufacturing and design skills and developing the best knowledge base to build attractive, efficient cars that are reliable.
Buying a foreign manufacturer’s car built in the US may help local economies but it subsidizes and strengthens the foreign county’s automotive engineering skills while weakening engineering skills the US. And as the reader can see from the above factory photograph, foreign manufacturers can actually increase the trade deficit by buying expensive robotic and other equipment from their home countries while employing relatively few local workers in their highly automated factories.
While the design of a car is estimated to involve only 15 to 20% of its total cost, designing and building autos is a knowledge-intensive industry. Encouraging better design and manufacturing techniques by buying a domestically designed car is significant since each new design builds on the knowledge accumulated from previous designs.
The often-repeated claim that cars parts come from all over the globe and therefore it does not matter which car you buy is false when looked at from an engineering perspective. From the perspective of the US automotive engineers, the US economy, and US automobile manufactures, this is mostly false.
If the overall design of the car and the parts integration and testing is done by US manufacturers, it makes a big difference for the future of the domestic auto industry.
With the automobile market estimated to be 20% of the overall economy, where a car is designed becomes very important for the future of the US economy. As an example, the fact that the world-wide GM market share has declined from 12.3% in 2013 to 8.3% in 2024 is a very big challenge for the future of US automotive design and manufacturing.
If people want to help make America great and improve the future of the American economy, one suggestion is that they buy a car that is not only built in the United States but is also designed by US automotive companies and engineers.
I know this approach is likely to annoy those who claim that foreign cars are so much better and even that American care companies deserve to go out of business (Mitt Romney famously said,”Let GM go bankrupt” in a New York Times OP-ED). But most of these critics have not owned a car from a domestic manufacturer in years or would not even consider buying one today.
Other countries are generally very supportive of their domestic manufacturers. In Japan, the 11 top selling cars in 2024 were designed and manufactured in Japan.
Perhaps the people of Japan know something that Americans do not know – that supporting native industries and workers benefits everyone.
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