Ford vs General Motors in the 1920s: How Chevrolet Caught the Model T

Ford's advantage at the start of the decade was enormous. The moving line had driven the Model T's price down for years (the Ford assembly line story covers how), and by 1918 half of all cars in America were Model Ts. Nobody could match Ford on cost. GM decided not to try.

Two strategies: one car versus a ladder

Ford's strategy fit in a sentence: one car, made in enormous volume, sold at a falling price. The Runabout went from $825 in 1909 to $260 in 1925. Every efficiency gain went into the sticker.

GM, under president Alfred P. Sloan, built a different model. Sloan's phrase, from GM's 1924 annual report and used in a GM advertisement the next year, was "a car for every purse and purpose." Rather than one car at one price, GM offered a range of makes and prices, with Chevrolet at the bottom of the ladder. The bet was that Model T owners would trade up for comfort, features and style once they could afford a little more.

From a market analyst's chair, that is a bet on rising incomes and on the used car. A first time buyer in 1910 wanted transportation. By the mid 1920s, many buyers already owned a car and were shopping for their second or third. They had something to trade in, and they had opinions. Ford's offer had not changed much. Chevrolet's had.

"Ford priced the Model T for the man who had never owned a car. Sloan priced Chevrolet for the man who already had a Ford in the yard. By 1926 there were more of the second man than the first."

David Mercer

Chevrolet's product, and the man who ran it

Chevrolet had a useful weapon in William S. Knudsen, a former Ford production executive who took over Chevrolet in 1923 or 1924, depending on the source, and stayed as its president until 1937. He knew how Ford built cars at scale and applied that thinking to a car with more features.

The 1927 Chevrolet Capitol Series AA shows what the buyer got. It had an overhead valve four, a three speed sliding gear transmission and steel disc wheels. It came in seven body styles priced from $525 to $745, and the best seller, the $695 two door Coach, made up about a quarter of volume. The 1926 and 1927 Model T Runabout listed at $360 and still used a two speed planetary transmission worked by pedals.

On price alone, Ford won. On what the money bought, Chevrolet won, and the market said which mattered more. Chevrolet passed half a million cars in 1926. In 1927 it outsold Ford more than two to one.

Ford vs GM in the 1920s: how the 1927 changeover widened the gap

Ford's response, the 1926 and 1927 Improved Model T, brought a new cowl, larger brakes, a lower ride and colors on closed cars. It did not change the sales trend. On May 25, 1927, Ford announced the end of the Model T, and US production stopped the next day.

What followed was a costly stretch with almost nothing to sell. Ford shut its plants for roughly six months while it tooled up for an all new car with no parts carried over from the T. Model A production at River Rouge began on October 27, 1927, but volume took time. For most of the second half of 1927, Ford had few new cars to sell while Chevrolet kept building.

That weekly figure is the cleanest illustration of the risk Ford took. A company that had built 20,000 cars in that week a year earlier was down to a few hundred, and its main rival was outproducing it more than ten to one. Ford survived it, but it handed Chevrolet a long run of momentum.

The Model A answer, and what the numbers say about it

The Model A was Ford's direct reply to everything Chevrolet had been selling: a three speed sliding gear transmission, four wheel brakes, hydraulic shock absorbers and Edsel Ford's styling. The full list of what Ford changed in 1927 reads like a response to the Capitol Series AA.

It was also priced to undercut. The 1928 Model A ran from $385 for the Roadster to $570 for the Fordor. The 1928 Chevrolet National Series AB Roadster listed at $495. Ford had returned to its old weapon, price, but this time with a competitive car attached.

The data shows it took time. TIME reported that Chevrolet production still exceeded Ford's in 1928, while the Rouge line ramped up. In 1929 Ford came back to first place, 1,507,132 cars to Chevrolet's 1,328,605. Chevrolet answered with a six cylinder engine at four cylinder prices, introduced November 17, 1928, at $525 to $725. In 1931, as Ford output fell, Chevrolet took first place again.

What the 1920s contest tells us

Taken as a market story, the decade has a clear lesson. Ford optimized for cost and assumed the buyer would stay the same. GM optimized for the buyer's next purchase and accepted a higher price. When most Americans were buying their first car, Ford's model was unbeatable. When they started buying their second, GM's was better.

My read is that Ford's real mistake was timing rather than strategy. The Model T was the right car for 1915 and still a strong one in 1923. The data was already turning by 1925 and 1926, and Ford waited until 1927 to act, then stopped production entirely instead of overlapping old and new. Chevrolet did not beat the Model T so much as take the market Ford left open. When Ford finally competed on features as well as price, it won the lead back within two years.

Sources and notes

• The Henry Ford, Benson Ford Research Center: Ford production figures (Nevins and Hill)
• Mac's Motor City Garage: the Chevrolet that defeated Henry Ford, 1927 Capitol Series AA
• Mac's Motor City Garage: the 1929 Chevrolet six
• WardsAuto flashback: Cram's Automotive Reports, November 1927
• TIME, "Business: Ford Loss", April 22, 1929
• Conceptcarz: 1928 Chevrolet National Model AB, original prices