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To answer your question properly, first I should tell you that there are auto shows all over the country. In fact the one in Los Angeles is even bigger than the one in Detroit.
However, as a symbolic gesture, the first auto show of the year is held in Detroit. and the reason is quite simple. Back in the early 1900's Henry Ford invented the modern production line and began producing automobiles en mass right here in Detroit.
At the time there were other auto manufacturers in other parts of the country, but for many reasons, eventually they all moved to the Detroit area.
First and foremost there was an existing labor force here. Second, there is the Detroit River, and the ease of transporting parts by way of ship made the cost of manufacturing cheaper. Also, there was the beginnings of a steel industry already in place in the Detroit Area.
So, by 1925, all of the US auto manufacturing took place in Detroit.
This is why Detroit became known as the "Motor City," and it's also why the country's first auto show of the year is held in Detroit. It's the backyard of every US auto manufactuer, so to speak.