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.

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.

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.

The IRA Clean Vehicle Credits attempts to address many challenges regarding consumer acceptance of BEVs and other advanced propulsion technologies. One key objective of the regulation is to support President Biden’s goal of reaching 50 percent EV market share by 2030 while ensuring a strong domestic supply base for this critical technology. The U.S. has recently faced supply chain challenges causing long wait times, along with serious national security concerns due to foreign markets controlling large portions of the EV supply chain. In response, the law aims to limit the role of China and other foreign entities of concern role in the sourcing of EV critical minerals, raw materials, and battery components to the U.S. market. However, the IRA’s clean vehicle credit nuances may hinder the EV market at a time when automotive and battery manufacturers are investing billions in the industry. Manufacturers will face challenges in the coming years as they work towards building a domestic chain to meet the Clean Vehicle Credit requirements. Additionally, the complexity of the regulation could lead to confusion and frustration among potential consumers.

The project begins to identify the “white spaces” in manufacturing enabled by a transition to BEV and digital manufacturing. For this project, the research team conducted long-form interviews to support a targeted technology survey of manufacturing (operations) and information technology decision-makers at five vehicle manufacturers. CAR researchers also conducted interviews with leading labor representatives. The gathered information provides a snapshot of how the North American automotive industry is digitally converting vehicle manufacturing and the critical role of BEVs in that conversion.

CAR considered three building blocks to help place structure around the digital transformation enabled by BEV manufacturing: technology (production and digital) process (scheduling, throughput, and quality assurance) and organizational (alignment and skills). CAR researchers also investigate the role of partners in the transition.

Perhaps the most challenging aspect of the ICE to BEV transformation is the sheer breadth of changes to the production process – from new BEV-specific parts, processes, and suppliers to new technology opportunities made possible via digital technologies. Survey results identified the production of the battery cell/module/pack and the selection of suppliers as the primary challenge of the new BEV manufacturing paradigm.

A common theme from the interviews was the uncertainty of demand for BEVs. Several manufacturers are pursuing dual-mode production lines, which will require more flexibility, specifically for ICE and BEV configurations. Digital tools are being implemented to support planning. Based on the survey results, improved supply chain integration and more timely data are the most common ingredients being leveraged for process improvements in production scheduling. Respondents indicated enhanced supplier integration would be needed as EV production increases to avoid disruption and fully leverage analytics to optimize production throughput rapidly.

OEM and Organized Labor respondents agreed that the rate of change in the automotive industry is driving the need for enhanced skills. However, a recurring theme from interviewees punctuated this point by pointing out that these skills were digital transformation-related, much more than being only BEV-related. In other words, skills associated with new digital technologies (i.e., data management requirements, advanced analytics, machine learning, and automation) remain a development priority. Still, they pertain equally to both BEV and ICE vehicles.

While automakers have specified the need to develop new digital transformation and production skills internally within their organizations, they also recognize that there are focused capabilities in which partners can most definitely enhance these efforts. The research concluded that product and service partners in the areas of hardware/software supply, business process consulting, technology consulting, and IT consulting were dispersed. However, “very important” (the very best significance level) rankings did appear at least somewhat in all three business process areas surveyed and across the different partner products and services. This is not entirely surprising, given the current marketplace’s high demand for digital transformation skills.

The interviews conducted during this research stated that companies are mainly motivated by a focus on process improvement and demands communicated by their customers. The aim of this paper is to describe how digitization and transformation to new technologies can impact the quality assurance system of the manufacturers, specifically the automotive industries.

Competition amongst quality and consumer satisfaction are the most challenging factors in each industry. This project will focus on the influence of progressive technologies and ingenuity on a variety of modern, agile, and advanced processes in the automotive industry.

The research paper includes the investigation and the introduction of numerous developments and inventions in manufacturing organizations in the last few years. The paper begins by introducing the current challenges in existing processes and the impact of digital methodologies in planning and management – specifically in quality management. This qualitative research will also incorporate a summary that covers the digital transformation and the optimizations in the quality assurance sector of the automotive field.

• Industry Focus: Technology and Innovation
• Research Focus: Automotive Industries

The summary of this project will benefit educators within the advanced technology field, manufacturing stakeholders, as well as management. The research will be presented to educate the audience about introducing artificial modern technologies in order to enhance the efficiency, effectiveness, and competitiveness of the organization.