The Italian auto manufacturer Fiat unveiled the utilitarian Fiat “New 500” in 1957. The inexpensive sub-compact was an instant success, and several million were produced and exported.
Europe and Japan had been busy reconstructing their manufacturing capacity in the years following World War II, and their smaller, more fuel-efficient automobiles became popular with the American consumer. Volkswagen AG began importing its Beetle to the United States in the early 1950s. Sales were slow at first but steadily improved. Early Japanese imports such as the Toyopet, manufactured by Toyota Motor Corporation, and the Nissan Datsun were introduced into the United States in 1958; but sales initially suffered because there was no sound dealer network to service them. Moreover, the American public, raised on large U.S. cars, viewed the smaller autos as second-rate. As Volkswagen sales boomed during the 1960s, partly due to clever advertising, the Japanese imports also grew in popularity. Toyota and Nissan eventually passed Volkswagen in sales in the United States in 1975 and 1976.
Imported cars, with their lower price and better fuel efficiency, became very popular in the 1970s, due in part to the rising cost of gasoline. In 1973 and again in 1979, the Organization of Petroleum Exporting Countries (OPEC) cut off the supply of oil to the United States (see World Energy Supply: The Energy Crisis). In an effort to conserve energy, the U.S. government began setting fuel economy standards, but these often conflicted with the air pollution and safety standards it set in the 1970 Clean Air Act. As American automakers struggled to meet these new demands, Japanese imports skyrocketed. Japanese automakers, such as Toyota, Nissan, and the relative newcomer Honda Motor Co. Ltd., also had the advantage of better industry-government collaboration, newer factories, and a comparatively cheaper, more disciplined labor force. By the end of the 1970s, Japanese automakers were selling 2.5 million cars a year in the United States, which amounted to about one of every four units sold.
With a rear-mounted engine and rounded, buglike shape, the Volkswagen Beetle appealed to buyers seeking utilitarian good looks, easy serviceability, and fuel efficiency. The classic Beetle became the best-selling car of all time, with more than 21 million sold. In 2003 Volkswagen finally phased out the traditional Beetle, producing the last car, No. 21,529,464, at its plant in Puebla, Mexico. The company enjoyed success with its New Beetle, however, which was introduced in 1998.
U.S. automakers responded to Japanese competition by retooling their factories to build smaller cars. They adopted successful Japanese methods, known collectively as lean production. Examples of this method of production include increased automation, quality control (workers could stop the line to correct a problem, rather than marking it for future correction), and smaller, so-called just-in-time inventories (parts were delivered to workers on the line as they were needed, rather than in large, bulky quantities).
Auto companies responded to the fuel-consumption and air-quality demands by using previously developed innovations. Diesel engines, catalytic converters, electronic fuel injection, turbochargers, high-strength steels, aerodynamic bodies, front-wheel drive, and other technologies were introduced to cut operating costs.