Please ensure Javascript is enabled for purposes of website accessibility

The Truth About American-Made Vehicles

By Daniel Miller - Updated May 14, 2018 at 8:38AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Are you one of the people who say Japanese vehicles are more American-made than our own? Listen up.

I keep hearing rumblings from consumers and investors about how Toyota (TM -0.52%) and Honda (HMC -2.48%) vehicles are more American made than those from Ford (F -1.06%), General Motors (GM 0.56%), or Chrysler. So many people seem to believe this that I had to look into it myself. A simple search turned up a "American-made index," which indeed declared that four of the top five most American made vehicles were Japanese models.

Fortunately for you readers -- and Detroit -- I was skeptical and dug deeper. The truth is that Ford, General Motors, and Chrysler are much more American made and the index is deeply flawed. Here's what you need to know about buying American-made vehicles, and why it's important for consumers and investors.

The index takes in to account whether cars are assembled here, the percentage of domestic parts used, and whether they're bought in large numbers. I scratch my head a little bit at that last factor. I understand that the point is to discount vehicles that could be 100% made here yet sell only 10 units. But in reality, there are much better factors to consider when measuring for the most American-made vehicles.

In addition, the index seems to minimize the importance of domestic parts bought. GM doesn't have a single car in the top five of the index, yet consider that GM alone buys as many U.S. parts as Toyota, Honda, Nissan, Subaru, Mitsubishi, and all other Japanese automakers combined. Surprised? Wait -- it gets better.

Another thing the index fails to recognize is where the companies are headquartered. While the Japanese automakers do have plants and offices here, they aren't headquartered where the majority of their R&D money is spent. Detroit's Big Three are all headquartered here and have eight times the numbers of workers here that Toyota, Honda, and Nissan do. Detroit spends more on R&D here in the U.S. per year than juggernaut companies such as Boeing, Intel, Google, Apple, Hewlett-Packard, and ExxonMobil -- again, combined. 

Made and sold here
While the index uses volume in its calculation, it does so in a flawed way. Wouldn't you rather calculate which vehicles that are made in the U.S. and also sold here? The data ignores that Detroit's Big Three, on average, sell one and a half times as many U.S.-made vehicles into the U.S. market as its foreign counterparts do.

At this point, I decided to scrap the index, and I found a much better study done by Prof. Frank DuBois of the Kogod School of Business at American University. This study viewed 253 cars, trucks, and SUVs to determine which had the most domestic content. It took into account labor, R&D, inventory, capital spent, engine parts, transmission parts, body, interior, chassis, electrical, and profits.

Tied at the top of this list, with a score of 88.5 out of a 100, were the Buick Enclave, Chevy Traverse, and GMC Acadia, which were all made in Michigan. Ford's F-Series -- the No. 1 truck in the U.S. -- was tied for second, with the Dodge Avenger at 87.5. Next up were two American muscle icons -- the Mustang and Corvette -- with a score of 85. You have to go down to a score of 81 to find the first foreign vehicle -- the Toyota Avalon. These results are a world away from the index, yet, in my opinion, are much more accurate.

Buy American
The best thing that could happen for Ford and GM investors is for the American public to once again back our automotive industry and actually buy American. Our auto industry supports nearly 8 million U.S. jobs and is expected to hire as many as 34,000 more workers over the next five years -- led by Ford and GM.

But while some consumers still think Japanese cars are as American-made as American cars are, others don't buy American because they think our vehicles are still poorer in quality. Consider this: Since 2010, Toyota and Honda have the most recalls of any automaker. Moreover, Toyota, previously known for its industry-leading quality, has more recalls than the No. 2 and 3 spots combined, or GM tripled.

Ford and GM aren't the same two companies that pumped out terrible vehicles and had management that ran themselves into the ground. Both are producing quality and, most importantly, American-made vehicles.

Maybe it's time to give Detroit a second chance.


Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Ford Motor Company Stock Quote
Ford Motor Company
$11.20 (-1.06%) $0.12
Honda Motor Co., Ltd. Stock Quote
Honda Motor Co., Ltd.
$23.61 (-2.48%) $0.60
Toyota Motor Corporation Stock Quote
Toyota Motor Corporation
$154.67 (-0.52%) $0.80
General Motors Company Stock Quote
General Motors Company
$32.37 (0.56%) $0.18

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.