The auto manufacturing footprint could remain unchanged despite the shift to battery electric vehicles

While production of internal combustion engine (ICE) vehicles are expected to decline from 12 million in 2023 to 5.2 million in 2029 and battery electric vehicles (BEVs), powered exclusively by an electric battery, would increase from 1.1 million to 7.3 million vehicles during the same period, the Federal Reserve Bank of Chicago concludes the change is unlikely to cause much change in the geographic location of automobile manufacturers, according to an Economics Perspectives paper. The paper's authors investigated what impact, if any, such a change in the number of types of vehicles produced would have on the locations where cars are manufactured. They concluded that the changeover to manufacturing electric vehicles (EVs) should not cause much disruption to the geographic location of automobile manufacturers.

In North America, auto manufacturers are clustered in "auto alley," a corridor between southwestern Ontario, Canada, and the Gulf of Mexico. There is a second cluster in central Mexico. The researchers distinguished assembly plants in the U.S. as those north of the Ohio River (home to Ford, General Motors, and Stellantis) and those located south of it (home to German, Swedish, and Japanese automakers). Total production in 2023 amounted to 4.2 million light vehicles in the northern portion and 4.1 million in the southern portion.

The researchers’ calculations using forecasts from S&P Global Mobility predict these trends in auto manufacturing between now and 2029:

• Within North America, U.S. auto alley was expected to account for the same share of overall light vehicle production in 2029 as in 2023 (53.3%).
• The northern and southern portions of auto alley were expected to increase their respective shares of the region’s BEV production; the share was forecasted to increase slightly more rapidly in auto alley south.
• North America’s BEV production was expected to be allocated almost evenly among auto alley north, auto alley south, and the rest of the United States.
• In the U.S. auto alley, the expected increase in BEV production was almost the same as the expected decrease in ICE vehicle production.

The researchers noted that “despite the expected substantial shift from ICE vehicle to BEV production, the footprint of assembly plants across North America was anticipated to remain virtually unchanged.”

They explain that according to S&P Global Mobility, the production of BEVs was projected to take place—with a few exceptions—at existing light vehicle assembly plants that were previously producing ICE vehicles. Hence, at the scale of North America as a whole, the transition from ICE vehicle to BEV production was expected to have a relatively minor impact on the industry’s vehicle assembly footprint.

This article was prepared by SSTI using Federal funds under award ED22HDQ3070129 from the Economic Development Administration, U.S. Department of Commerce. The statements, findings, conclusions, and recommendations are those of the author(s) and do not necessarily reflect the views of the Economic Development Administration or the U.S. Department of Commerce.