The U.S. automotive industry and its supplier network, once entrenched in Michigan and surrounding Great Lakes states, has been migrating southward in recent decades. As foreign automakers established operations in lower cost, non-union states across the South, their supplier networks filled in around them.  In fact, the current map of existing and emerging U.S. automotive clusters extends from Michigan down to Alabama.

U.S. Automotive Clusters - Existing and Emerging [1]

The darker the shaded circle, the higher the concentration of auto-related employment. The states highlighted in red have at least one OEM assembler.

It’s no secret that OEMs (original equipment manufacturers) are the magnets driving the concentration of suppliers.

Yet while suppliers have a tendency to cluster, and in some cases are required to do so in order to meet vendor requirements of the OEMs, they do exercise latitude in their location selection.  Skills availability, tax and incentive policy, real estate availability, and other location selection factors also come into play.

Below is our analysis of automotive hot spots in the Midwest and Southeast – including employment numbers by state – as well as emerging destinations in seemingly unlikely places.‍

Hot Spots [2]

The Midwest (particularly MI, OH, IN) continues to build on its strong tradition in the automotive sector.  Specifically, this region offers access to deep pools of skilled labor and a highly advanced logistics infrastructure.  Michigan, where the U.S. automotive industry took root, remains a powerhouse despite perceptions to the contrary.  It leads the country in automotive production employment and dominates in engineering and technical employment. Ohio claims second place.  Locations like Columbus are hoping that the plastic injection molding industry will grow due to Utica and Marcellus shale deposits in the region, enabling local production of raw resins and hydrocarbons.

The Southeast (particularly KY, TN, SC, AL, MS) was the initial landing place for foreign automakers including Nissan, Mercedes, BMW, Volvo and Toyota and their suppliers. These companies have been drawn to the region’s (generally) lower operational costs, the robust transportation infrastructure (including seaports) and the relative lack of union activity.

Emerging Destinations

A “third wave” of U.S. automotive activity may be beginning to emerge in seemingly unlikely places such as California and Nevada, where trendsetting electric car manufacturer Tesla has established production capabilities.  Tesla is drawing on renowned Silicon Valley engineering and innovation, important to its mission of breaking with tradition and leading the industry into an age of electric vehicles.

We continue to monitor location trends in this vital sector and will provide further updates as significant new decisions are announced.

This is the first in a series of six short articles on location economics for automotive companies. Our next article will focus on economic development incentives, including examples of recent incentives deals throughout the United States. Future topics include Labor Costs, Infrastructure, Global Market Considerations, and Workforce Training/Skills.

[1] The map illustrates the location quotient for employment in NAICS Code 3363 – Motor Vehicle Parts Manufacturing.  Orange-shaded areas indicate industry employment in the region is more concentrated than the national average; the darker the shading, the more notable the concentration. Source: US 2012 Economic Census, Biggins Lacy Shapiro & Co.

[2] Automotive suppliers include NAICS codes 32621 (Tire Manufacturing) and 33630 (Motor Vehicle Parts Manufacturing). Source:  Bureau of Labor Statistics Occupational Employment Statistics May 2015 Estimates, Biggins Lacy Shapiro & Co.