Economic Contribution of the U.S. Automotive Industry

An Economic Contribution Analysis of Automobile and Light Duty Motor Vehicle and Motor Vehicle Parts Manufacturing in the United States

Although it is well established that the automotive industry contributes significantly to the US economy and employs millions of people, the industry’s expanding presence nationwide highlights its ongoing evolution. In this research note, CAR examines the economic contributions of the automobile and light duty motor vehicle manufacturing and parts manufacturing industries in the US.

Results from this analysis outline the effects of industry on employment, labor income, value added, output, and tax revenue. Complementing the data observed in the CAR Book of Deals that demonstrate how capital investments are expanding across the US, this analysis reveals the regional and interconnected effects of trade and commuting. These results provide a unique snapshot of the automotive industry collaboration across regions of the US.

Affordability: The Twenty-Five Thousand Dollar Electric Vehicle

White Paper

A topic on the minds of consumers and automotive industry members alike relates to vehicle affordability. CAR explores this issue in detail in a series of round table discussions with experts and industry stakeholders with a focus on supply, demand, and policy dynamics at play to affect affordability.

In this whitepaper, CAR outlines the drivers of increasing production costs, determining how to reach economies of scale via supply, and analyzing whether a $25000 vehicle is, in fact, affordable for consumers to bolster demand. Finally, CAR examines how policies aimed at reducing greenhouse gas emissions impact vehicle manufacturing and sales. This article is a timely and useful primer on the evolving factors affecting the automotive industry.

In May of 2023, the Center for Automotive Research (CAR) produced an assessment of costs associated with the implementation of the Federal Trade Commission (FTC) notice of proposed rulemaking Motor Vehicle Dealers Trade Regulation Rule (16 C.F.R. § 463) (“Proposed Rule”), called the Assessment of Costs Associated with the Implementation of the Federal Trade Commission Notice of Proposed Rulemaking (RIN 2022-14214), CFR Part 463 (“CAR Report”). On January 4, 2024, the FTC issued the Combating Auto Retail Scams Trade Regulation Rule (“Final Rule”) and Statement of Basis and Purpose (“SBP”)1 . The Final Rule had several changes from the Proposed Rule on which the original CAR Report was based. In response to these differences, CAR, at the request of the National Automobile Dealers Association (NADA), has reassessed the costs associated with the Final Rule and reports its findings in this addendum to the original May 2023 CAR Report.

The Final Rule, while pared down from the Proposed Rule published in July 2022, is largely a subset of the notice of proposed rulemaking and would have unintended consequences for consumers and franchised lightduty vehicle dealerships across the country. According to CAR’s estimations, the Final Rule, which was published on January 4, 2024, would require an additional hour to complete the vehicle purchasing process, divided across the sales process and the review of financial disclosures and documentation required to comply with the rule.

CAR’s research continues to show that the impact on consumers goes beyond just additional time and includes financial implications. The extended purchasing process would likely result in costs passed on to consumers.

CAR also revisited the dealer compliance costs resulting from the Final Rule including updated and ongoing training, investments in IT systems, as well as planning, preparation, and compliance review. The recomputed study found that each dealership location would face median upfront compliance costs of USD 31,450 with the average recurring annual costs for dealers at approximately USD 39,862 per location, ranging from USD 14.39 to 17.24 million over a ten-year period for automobile dealers nationally.

Furthermore, CAR’s recompute of its original assessment estimates the Final Rule will generate a net cost of USD 24.1 billion over 10 years, reduced from the original CAR Report estimated net cost of USD 38.1 billion.

The Ramifications of the UAW’s Victory at Volkswagen’s Chattanooga, Tennessee Assembly Plant

White Paper

This white paper examines the implications of the UAW’s historic unionization vote at Volkswagen’s Chattanooga plant.

Here’s a glimpse of what you’ll learn:

• How the UAW victory could reshape the landscape of auto manufacturing.
• Key challenges in negotiating a labor contract that benefits both workers and Volkswagen.
• An analysis of wage disparities between the Chattanooga plant and the Detroit Three.
• The potential impact on production costs and future investment in the Chattanooga plant.

Gain valuable insights into the future of the U.S. auto industry with this analysis.

Revision note: An earlier version of the white paper discussed temporary workforce wages. According to a Volkswagen Group of America spokesperson, Volkswagen does not employ a temporary workforce. Therefore, comparing the wages of part-time/temporary workers between VW Chattanooga and the Detroit Three plants is irrelevant to the total labor cost analysis.

UAW’s Next Frontier: Mercedes-Benz in Alabama

White Paper

This white paper examines the upcoming unionization vote at the Mercedes-Benz U.S. International (MBUSI) plant in Tuscaloosa, Alabama, scheduled for May 13-17, 2024. The paper explores the significance of this vote for both the United Auto Workers (UAW) and Mercedes-Benz, considering the recent changes within the UAW and the potential impact on labor relations in the South.

Key points explored in the white paper:

• The UAW’s recent leadership changes and renewed focus on organizing.
• Mercedes-Benz’s Tuscaloosa plant as a strategic asset and its current labor practices.
• Potential benefits and challenges of unionization for both the UAW and Mercedes-Benz.
• The broader implications of the vote for the future of labor relations in the U.S. automotive industry.

Partner Whitepaper: Automotive Digital Transformation in Uncertain Times 

The automotive industry is experiencing a profound CASE (Connected, Autonomous, Shared, and Electrified) driven transformation, leading to changes in virtually every aspect of the business. In addition to this CASE-related disruption, several macro factors add to the overall uncertainty, requiring a rethinking of traditional strategies to survive and thrive during this transition.

Developing an agile, resilient organization with a focus on people, processes, and technology is key to addressing uncertainty and mitigating risk. From a people perspective, as the industry becomes more technology-centric, the demand—and competition—for digital talent will only intensify. OEMs and suppliers must become employers of choice, competing with Silicon Valley for the cream of the hi-tech talent pool.

From a process perspective, winning companies must develop the ability to anticipate and respond to an increasingly complex and disrupted ‘normal’ and, more so than ever, place the customer experience at the center of their strategies, look beyond their four walls for operational excellence, and respond to opportunities with laser-like precision and speed.

Finally, organizations must implement an information technology architecture centered on a data-driven, cloud-based digital operating platform capable of providing scalability, agility, resilience, and actionable insights to achieve competitive advantage.

It may be cliché to say that the auto industry stands at a historic crossroads—but this reality also brings an unparalleled opportunity for exponential growth while building a foundation for the next 100 years.

Impact of 2023 UAW-Detroit Three National Contracts on the U.S. Auto Industry 

Whitepaper

On October 30, 2023, General Motors (GM) and the United Auto Workers (UAW) reached a tentative agreement, bringing an end to the longest UAW strike against an automaker since 1998. Lasting 46 days from September 15 to October 30, 2023, the 2023 UAW strike saw extensive negotiations between the UAW and the three major domestic automakers—commonly referred to as the Detroit Three: Ford, GM, and Stellantis. These negotiations resulted in what are being reported as “record contracts,” poised to significantly influence the U.S. automotive industry for years to come. This whitepaper aims to encapsulate the salient components within the UAW-Detroit Three 2023 National Contracts and assess their immediate and long-term impact on the U.S. automotive sector.

In 2021, Hyundai Motor America (HMA) and Hyundai America Technical Center, Inc. (HATCI) hired 7,050 workers in Alabama, California, Texas, Georgia, Michigan, and other states in the U.S. In addition, HMA’s independent dealer network employed 54,100 workers across all fifty states. CAR estimates HMA, HATCI, and HMA’s independent dealers in 2021 contributed 190,950 jobs in the U.S. economy. Of these, HMA and HATCI’s U.S. automotive operations support 58,250 jobs, and 132,700 jobs are associated with HMA’s 835 dealers in fifty states. HMA and its dealerships added USD 20.1 billion in private earnings to the U.S. economy, including USD 3.0 billion in social welfare contribution and USD 2.8 billion in federal and state income tax revenue.

HMA’s employment multiplier is 8.3—implying 7.3 additional jobs for every employee in HMA’s U.S. automotive operations. HMA’s independent dealers have an employment multiplier of 2.5, indicating 1.5 other jobs created for every HMA dealership worker.

In 2022, Hyundai Motor Group (HMG), a multinational conglomerate that owns Hyundai Motor Company (HMC), the parent company of HMA, announced that HMG, Hyundai Mobis, and SK On will invest an additional USD 10.6 billion into new electric vehicle facilities in Georgia and Alabama, which is expected to hire 13,500 jobs in those states. CAR estimates these jobs will create or retain a total of 62,800 jobs in the United States by 2025. These jobs will generate USD 8.3 billion in private earnings, including USD 1.3 billion in government social welfare funds and USD 1.2 billion in federal and state personal income tax.

As a result, environmental, social, and governance (ESG) initiatives, such as the demand to reduce greenhouse gas (GHG) emissions to meet the Paris Agreement target of limiting global warming to 1.5°C, have become increasingly commonplace across all aspects of automotive operations. Agencies such as the International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC) seek to further guide industry reduction of CO2 emissions, reaching net-zero emissions globally by 2050. As a result, many vehicle manufacturers have carbon neutrality targets in place, commonly announced through public annual sustainability reports, showcasing their sustainability efforts and goals. Topics included in these reports range from renewable energy to human rights efforts. These announcements are critical

in signaling to investors and stakeholders public-facing organizational sustainability initiatives. Still, some companies are limited in providing actionable and measurable data and often lack consistency in reporting from one manufacturer to the next. Despite the challenges from this significant shift in the automotive industry, there are also opportunities to further align across stakeholders, make additional commitments to broader climate initiatives, and advocate for more comprehensive regulations. A coordinated effort is an important step in achieving sustainability goals now that the industry has recognized accelerated action is required to limit global automotive operations’ environmental and social impact.

CAR researchers conducted supplier roundtable sessions, and interviews with vehicle manufacturers, and assessed publicly available industry information to help gain a better understanding of industry action in this area. The vehicle manufacturer interviews were a cornerstone of the research, which were conducted to explore sustainability efforts in the automotive industry across six topic areas including (a) Corporate Goals and Commitments, (b) Carbon, (c) Social, (d) Sourcing and Suppliers, (e) Products and Materials, and (f) Moving Forward. These interviews intended to gain a more comprehensive understanding of existing sustainability goals, strategies for meeting these goals, the existing obstacles to progress, and possible pathways to resolve these obstacles.

Based on these findings, this study has identified recommendations and targeted industry action that can help the automotive industry increase collaboration and accelerate efforts to achieve 1.5°C, limiting climate change throughout the supply chain.

Estimated costs for dealer compliance and the impact on their transactions with consumers were derived from approximately 60 dealer surveys and 15 interviews, conducted from August 2022 through December 2022, with dealers, ESIGN contract technology providers, and IT developers,3 as well as regulatory training professionals. CAR’s survey focused on five key areas including: 1) prohibited misrepresentations, 2) new consumer disclosure requirements, 3) “Add-On” prohibitions and disclosures, 4) recordkeeping, and 5) consumer vehicle transactions. Importantly, dealers were asked for incremental costs, directly related to regulatory compliance only.

The Center for Automotive Research also included qualitative feedback from dealers within our study to support key survey findings, provide essential dealer feedback, and capture respondents’ viewpoints on key regulatory challenges for consideration. Additionally, CAR researchers elected to present our dealer survey findings using median values, to reduce the influence of outlier responses, and to provide the most conservative estimate of costs.

According to the analysis in this study, median upfront costs for compliance with the Federal Trade Commission Rule, if finalized as proposed, were estimated by dealers to be USD 46,950 per location. These upfront costs include updated training, IT system investment, as well as planning and preparation. This results in a total median upfront cost of USD 2,184,348,750 for automobile dealers nationally.