Automotive Engineering - April 2023 - 5

SUPPLIER EYE
The great migration of light-vehicle production
F
or years, analysts have pondered the impact
of the migration of North American
light vehicle production from its original
hub in the U.S. Midwest to locations in the
Southeast and Mexico. Electrification is adding to
that impact. The epicenter shift of vehicle output
has ramifications on supplier locations, relative
logistics and labor availability, as well as economic
development considerations.
Geography matters more than ever. With recent
logistics issues such as port strikes, lack of
trucking capacity and natural disasters tripping
up supply lines, OEMs are trying to tighten the
circle to reduce risk and cost.
Consider Jasper, Indiana. This city located 50
miles (80 km) from the bottom of Indiana was
the proverbial middle of North America's light
vehicle production in 2000, according to S&P
Global Mobility analysis. From a weighted-average
perspective, if someone asked for the 'center'
of production, Jasper was the place.
Twenty-three years ago, volume was a mix of
OEMs and jurisdictions. At that time, the Detroit
Three (then Chrysler, Ford and General Motors)
accounted for more than 75% of volume - substantially
based in the Great Lakes region.
Suppliers naturally located their operations there
to minimize logistics and be closer to the automotive-supply
ecosystem.
But a significant shift was already underway in
2000. The stream of new plant investments by
German, Japanese, and Korean OEMs in the
Southeastern U.S. and in Mexico was causing the
North American production epicenter to move.
By 2020, the town of Jenette, Arkansas had
become the new epicenter of the auto industry
on this continent. Devoid of any local light-vehicle
production, Jenette is more than 370 miles
(595 km) from Jasper, Indiana. During those two
decades, the industry's 'ground zero' had been
shifting about 19 miles (31 km) per annum in a
south/southwest direction.
Michael Robinet
Executive Director,
Consulting,
S&P Global Mobility
SAE Foundation
Trustee
michael.robinet
@spglobal.com
By 2030, the
epicenter of
North American
light vehicle
production
is forecast to
be located
in DeWitt,
Arkansas.
OEMs and suppliers migrated to jurisdictions
that offered new labor pools, locational incentives,
infrastructure buildout and lower living/
energy costs. A host of new manufacturing and
related facilities emerged. Critical to this shift
were suppliers following their customers' lead.
Several of these new/expanding OEMs
brought their home market Tier 1s along, finding
homes in these new locales. Midwest-based suppliers
were disadvantaged to compete for this
southward growth. They had originally located
there since the 1960s to service a wide variety of
OEM production locations, but by 2000 found
more of their vehicle-manufacturer customers
slowly drifting southward.
This migration is slated to slow for a host of
reasons. According to the S&P Global Mobility
Light Vehicle Production Forecast, by 2030 the
new production epicenter will be located 100
miles (161 km) further south in Arkansas, near the
city of DeWitt. But the pace is slated to moderate
by almost 50%, to 10 miles (16 km) per year.
Why the slowing movement south? One reason
is that production in Mexico will continue to
rise, but not at the heady pace of the past two
decades. Other factors include the impact of the
2018 free trade agreement; the U.S. IRA (Inflation
Reduction Act) drawing investment to the U.S.;
renewed energy by Great Lakes states and
Canadian provinces to stabilize their production
position through incentives for battery and EV
manufacturing and supply. And there is the emergence
of Tesla's volume in California and Texas.
As the industry continues to shift towards increased
electrification, supply lines will draw
closer. Battery cell assembly, battery enclosure
production as well as traditional just-in-time
supplier facilities will all need to be located
within a couple hours' drive distance or less.
With the emphasis on reducing procurement
risk, suppliers need to evaluate their location
strategies with a view to the future.
AUTOMOTIVE ENGINEERING
April 2023 5
Automotive Engineering - April 2023

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