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10 ways the 1973 oil embargo changed the car industry

10 ways the 1973 oil embargo changed the car industry

on October 18 2013 | in Industry news, Latest news | by | with Comments Off

This week is the 40th anniversary of the first Arab oil embargo, which launched the Organisation of Petroleum Exporting Countries and fundamentally changed the automotive industry.

Some of the changes really kicked in after the so-called second oil crisis of 1979, but it all started 40 years ago. The US Automotive News charts 10 important changes to the US industry.

1. The rise of the Japanese and other foreign carmakers

In 1972, all import brands combined held just13 per cent of the US market. That shot up to a then-record 15.8 per cent in 1975. They never looked back. It wasn’t just the Japanese; German brands also got a boost when their small but powerful engines got a second look from shoppers.


The US government insisted that carmakers meet Corporate Average Fuel Economy standards but did nothing to encouraged people to buy the cars that carmakers had to build to meet those CAFE standards. Some carmakers had to put heavy incentives on small cars to meet the mandate; others just paid the fines.

3. Ruined reputations

Hasty, ill-planned and poorly executed forays into making small cars proved devastating to some brands’ reputations. Think Cadillac Cimarron and Lincoln Versailles.

4. Carmaker tie-ups

A desire to add a fuel-efficient car to the showroom led to a flurry of courtships. Examples include Ford and Mazda; GM and Suzuki, Isuzu, Toyota, Fiat and Daewoo; Chrysler and Mitsubishi; Daimler and Smart.

5. 55-mph (90km/h) speed limits

The much-maligned limits meant the US industry would never trumpet German-style autobahn performance.

6. The rise of pickups and SUVs

As carmakers made cars smaller to meet CAFE mandates, consumers searching for more space moved to trucks that had less-stringent CAFE targets to hit. It’s the rule of unintended consequences: The oil embargo gave birth to the Hummer.

7. The death of the muscle cars

As carmakers initially struggled to meet fuel economy targets, horsepower and performance went out the window.

8. The rise of alternative fuels

The quest for better fuel economy, lower fuel bills and so-called energy independence brought diesel and ethanol, and alternative powertrains, such as hybrids and electric vehicles.

9. Globalisation

When consumers in all markets think gasoline is expensive, then the same fuel-saving technologies appeal everywhere. Ford CEO Alan Mulally’s One Ford would never have worked without OPEC.

10. Innovation

The original round of downsizing brought a many lousy cars. But the push to trim weight and boost fuel economy brought a wave of technology innovations that continues, including turbocharging, lightweight materials, front-wheel drive, eight-speed transmissions, direct fuel injection and many others. And as innovation flourished, the shape of vehicles changed. The behemoth station wagon disappeared, replaced by the minivan.

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