Olds and Ford
In his book "American Automobile Manufacturers: The First Forty Years," author John B. Rae distinguishes between "the men whose approach to automobile manufacturing was from the engine to the vehicle rather than from the vehicle to the engine." While many early automakers came from the manufacture of bicycles, horse-drawn carriages and other non-automated industries, some of the important early innovators began as machine shop and factory owners with the equipment and mechanical know-how to build engines for automobiles. Such legendary auto pioneers as Ransom Eli Olds and Henry Ford were machinists by trade.
In fact, the development of an automobile sturdy, reliable and inexpensive enough for the mass market is more a story of parts than of design and assembly. The background of those men who were machinists and mechanics led to a critical decision to go with the internal combustion engine as a power plant for automobiles. It's largely due to their influence that cars now run on gasoline, rather than the electric power favored by early automobile leaders such as Pope and Studebaker. Conversely, the background of former carriage makers led to wood being the dominant body material for cars until the Teens, when metal began to overtake it.
In the earliest days, before the development of mass production and the network of suppliers and outlets that necessitate intensive capital expenditures, the barriers to entry in the automotive business were fairly low. The pioneers were all tinkering with different ways to put the same parts together; auto manufacturing was an assembly process. Parts manufacturers generally sold their wares on credit, and were reimbursed by carmakers who were paid in cash for their finished autos.
The Role of Rubber
The rubber industry was one of the first to cash in on the automotive market by making major innovations to its product. Its development of the straight-sided tire, which was much more practical and durable for autos than the clincher tire used on bicycles, was a critical step in automotive development.
Auto supply firms flourished in the following years, as the auto industry thrived and the aftermarket business exploded. Even as carmakers themselves consolidated into a handful of major companies, the number of parts suppliers in the US grew into the thousands by the postwar years.
The major trends in the business since the early 1990s, though, have been consolidation and increased outsourcing by the major auto manufacturers. The two go hand in hand: As carmakers seek to control costs and streamline operations through outsourcing, they have looked to large companies that can provide entire, ready-to-install "modules" rather than just bits and pieces that must be assembled at the carmaker's plant.