Industry Trends from Center for Automotive Research (CAR)

August 17th, 2022

Future of the Automotive Industry is Electrification

Indiana is the No. 2 state in the U.S. for automotive production and produces 1.3 million trucks and cars each year, with a total manufacturing output of approximately $102 billion. 

To remain competitive globally, Northeast Indiana must prepare for electrification flooding the automotive industry. 

Recently, Northeast Indiana’s business development team members traveled to The Center for Automotive Research (CAR) conference to understand the industry's changing landscape and identify business attraction opportunities for the region. As the expert in the industry, CAR leads cutting-edge innovations in the automotive industry, which significantly impacts the region’s economy and its competitiveness in automotive.

Below is a summary of key takeaways from the conference including trends, statistics and future implications on the vehicle industry.  

Current Challenges in the Industry

  • There are clear geopolitical tensions regarding trade policy at play globally.

  • Commodity prices have doubled and there’s an increase in energy and agricultural prices. There’s also a significant increase in cost for basic metals. 

  • There are increased climate change regulations and a rising number of natural catastrophes associated with climate change.

  • Inflation, the impending recession and the cost of capital remain a major challenge with an 8.6% inflation rate in the US and 8.8% in the EU as of May 2022.

  • Talent and labor shortages persist with the rate of wage growth is expected to double as the workforce participation rate is expected to decrease by over 1%.

The Path to Electrification

  • Although there is a major push to get to 50% EV by 2030, even by 2040 there will most likely still be some percentage of internal combustion engines (ICE)  in the market. 

  • Currently, the biggest challenges for vehicle manufacturers include: 

    • Labor shortage and lack of skillsets with the transition to EV

    • Supply chain issues include access to chips, increasing shipping costs and on-shoring

    • Change to electrification includes developing a parallel path with ICE

  • It’s estimated there will be a $515 billion investment in EVs by mid-2025.

  • Currently, there are 79 electrified models in the U.S.

  • Battery plant manufacturing capacity is expected to grow by 403% by 2025.

  • Publicly available charging stations have increased by 20% since January 2021.

Funding the Disruption

  • $221 billion in investment in 2021 mobility technology globally

  • $196 billion in investment in 2021 autonomous vehicles

  • $92 billion in investment in 2021 battery technology

  • The battery is the most expensive component of an EV. One expert said, “Battery technology investment is possibly the largest external investment on a specific technology ever in the history of automotive.”  

Shaping the Future of the Auto and Chip Supply Chains

  • About 93% of the investments in EV, AV, smart mobility and connectivity are coming from outside of the automotive industry.

  • About 20% of new EV vehicles are in Europe and China, with the U.S. representing just 6%.

  • SUVs continue to outpace sedan sales. Cars at 50% decline and SUVs at 14% increase.

  • Lead time for semiconductors is 20 weeks, which is nearly double the past 10 years.

  • Vehicles are requiring a greater volume of chips.

  • In terms of investment dollars, $250 billion is going into chip manufacturing with the majority of facilities in the southwest U.S.

  • The industry is lacking a skilled workforce with about 3,000 job openings in skilled labor projected over the next 5 years. This will impact capacity and the construction of the facilities. 

  • Experts project we will not be “out of the woods” until 2028 regarding chip supply.

Understanding key trends in the automotive industry is critical for our region’s economic reliance and to attract additional business investment. Home to industry juggernauts like General Motors and Dana Corp, Northeast Indiana has been at the forefront of vehicle manufacturing for more than a century and that momentum will continue.

If you would like to learn more about opportunities in the automotive industry in Northeast Indiana or would like to learn more about our business development strategy, please contact Senior Vice President of Business Development Chad Ruston.