EV Investment, Reshoring & Trade in Auto Manufacturing
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In this episode of Navigating the Currents of Change, IIR’s Executive Vice President Michael Bergen and Industrial Manufacturing Research Manager Angela Hudson unpack the data behind automotive project activity, and what to watch across the next 24 months.
[Intro] (00:00):
Between policy shifts, electrification, and changing global supply chains, automakers are under pressure to fine-tune and rethink their strategies. Some big questions are still looming — what is having the biggest influence on driving capital investments, and where is the broader industry heading next?
Shaheen Chohan (00:37):
Welcome to Navigating the Currents of Change. I'm Shaheen Chohan and I head Global Analytics at Industrial Info Resources. For over 40 years, IIR has been delivering industrial project, plant and asset data that's verified and constantly updated across over a dozen of the world's most capital-intensive energy and heavy industrial sectors. Now joining me today are two leaders from our research team at Industrial Info Resources. We have Angela Hudson, North America Research Manager for Industrial Manufacturing, and Mike Bergen, Executive Vice President. Welcome to you both.
Now, both have been researching and commenting on what capital project trends are occurring across the entire automotive supply chain. And so today we will be diving into the outlook for automakers and their suppliers in this continuously evolving landscape. So welcome to you both — let's get started. Now Mike, to really start the discussion, how would you size the current US automotive market in terms of volumes, especially in the light vehicle space?
Michael Bergen (01:52):
So Shaheen, I would put it in like three categories. One would be what we see in sales — how many vehicles, what's the volume of sales that we've had. And then the other one would be: what's the production of that here in the US? So we know that sales is a mixture of what is produced here, but then what is brought from overseas. And then we also have what IIR is tracking as far as the spending. I would say that our spending is really a leading indicator into higher production volumes going into the future, because it is showing how we are adapting to and manufacturing more here in the US.
Specifically, we saw this trend with the EV market back in 2022 and 2023, where there was a lot of investment put forward by the automakers to actually build out EV capacity. And while we know that EVs are not being sold at the rate they would like them to, we've had some double-digit growth in not only production but also in sales of electric vehicles. And then most recently, we saw actually where hybrids have actually bumped up in their volume of sales in the US. So ironically, when you look at the different buckets — we have the ICE vehicles, we have hybrids, and we have electric vehicles — overall, we've grown since COVID by about a million units a year in sales as a total. If you look at the ICE numbers, ICE vehicles have actually decreased, which means that the hybrids and electric vehicles are taking market share away from it. Now this year, some of the leading automotive statistics out there will say that ICE vehicle production is going to ramp up — so we're going to produce more ICE vehicles here and sell more ICE vehicles here than we have in the past. And that's an interesting way of looking at the dynamics that are going on in the market, especially with tariffs around that.
Shaheen Chohan (03:45):
Now what do you see as some of the biggest challenges to the automakers, and what are the issues that they're facing — certainly in the current environment, which started off pretty positive at the beginning of the year but has become a little bit more uncertain, certainly at this midpoint?
Michael Bergen (04:15):
Sure. Another way to frame this up and to articulate what we're witnessing today is the way that we track the investments for those assembly plants and the suppliers. The investments that we've witnessed over the last five years have actually escalated quite a bit because of the big EV push. So we went from doing about $15 to $17 billion a year that we captured in investments, up to $50 billion in 2023. Now that's come off to about the $20 billion range. Angela could probably back me up on that one — mainly because they're starting to ramp down the build-out of the electric vehicle market. Obviously with the constraints that EVs have had in getting adoption passed through consumers, the plans that were pretty robust during the Biden administration years, that had a lot of incentive behind them, are now starting to be pulled off the table and replaced with more investments into hybrids, or even back into ICE vehicles, to shore up some of the revenue that they're losing from electric vehicle sales right now.
Shaheen Chohan (05:29):
So would you say that there are two different sets of trends between the pure EVs and the hybrids? Are we seeing two different types of trend occurring?
Michael Bergen (05:41):
Yes. So we were seeing a lot more of the electric vehicle sales when they first launched a couple of years ago, but with the lack of charging stations and the duration of those batteries that could take people on longer trips, that has shifted people into wanting to contribute to the lower carbon footprint and move towards that hybrid model. There's always been a lot of focus — I think probably over the last 24 months, and I think this has probably increased with the Trump administration coming back into office — on really trying to capitalize on domestic demand and obviously meeting that with more localized, regional production capacity.
Shaheen Chohan (06:26):
Are you starting to see some of the narrative that was certainly announced and presented by the incoming Trump administration around reshoring — is reshoring gaining any kind of meaningful traction, or really is it still just kind of political talk?
Michael Bergen (06:45):
Yeah, definitely. Reshoring is part of this conundrum that we're in right now. Because if you look at the current constraints that are out there, it started with the adoption of electric vehicles not going the way that we intended it to go. And now we're in a new environment of constraints, which is the tariffs. And so those tariffs are causing a lot of constraints within the industry when it comes to the sourcing of auto parts that come from various parts of the world — the tariffs that have been imposed on them, excluding the USMCA agreement that we have. And that has spurred several companies to come in and announce bigger projects. That said, let me pass that to Angela and let her get into the details of what we've seen so far.
Shaheen Chohan (07:32):
There's a lot of focus, obviously, on trying to capitalize on growing and still fairly strong domestic demand, and obviously meeting this with locating and having more domestic manufacturing and production capacity here directly in the US. So is reshoring actually happening? Is it actually gaining traction or is it still just sort of political talk?
Angela Hudson (07:57):
Yes, reshoring is happening — it's gaining traction. We're seeing that with Hyundai Motors investing $21 billion in the US, and this includes a $5.8 billion steel plant in Louisiana, where they're going to increase production here so they won't have to rely as much on their foreign steel. And as well, General Motors and Ford are looking at doing some more investing in reshoring for EV and battery plants as well.
Michael Bergen (08:27):
Yeah. I would say Hyundai is probably a prime example of a company that's what we would call offshoring production to the United States to manufacture the vehicle. They did open up their new facility — this is an expansion that they're going to do to that facility. But then you have the steel plant that they're investing in, so they want to control that supply chain as much as possible here and avoid the tariffs. So there are plenty of examples of companies that are coming through with reshoring plans. There's also the implementation of just bringing production back to the United States — so we saw that with Ford talking about moving production from Mexico over to the US. And a couple of other automakers are moving production of a vehicle into a facility that has the capacity to take that on. Ford is investing $700 million in their Kentucky truck plant to boost up their investments here in the US, as well as Toyota building a $13 billion battery plant in North Carolina for hybrids and EV vehicles. We also recently saw GM announce that they're going to be investing $4 billion in three of their auto plants here in Michigan, Kansas and Tennessee to boost up production for ICE vehicles — shifting more towards ICE vehicle production instead of EV because of the low EV sales. And that's a great example of Ford saying that they're going to invest another $4 or $5 billion into ICE vehicle manufacturing, and yet they're saying we're losing $4 or $5 billion for the next several years on electric vehicles. So they've got to have that ICE sales revenue to try to make shareholders happy and offset some of the loss.
Shaheen Chohan (10:20):
So Angela, as we see more reshoring, do you think that will actually have a positive impact on job creation?
Angela Hudson (10:25):
I think job creation will be limited and we'll be focused more on robotics. So with reshoring, these jobs are going to be more automated with robots and fewer people — less jobs. Even though they say they will be increasing, I think it's not going to be that many jobs being created once manufacturing increases. But also what I would like to touch on with you, Mike, because I know you have your hands in our labor analytics — if we do see more reshoring, is there the labor construction market available out there?
Michael Bergen (10:59):
Bearing in mind we have other big growth sectors — we've got chemicals that keeps building out and we've got data centers that are scaling. We have the labor supply as a big constraint still. And like Angela was saying, the South is an attractive area for reshoring manufacturing here. Building those plants will be a difficult situation because we have a lot of other stuff going on at the same time with mega projects. So that type of labor will be in short supply and will have to be managed properly. So can we see more modular build-type activity happen with that? You never know — it could actually come into play. And going back to robotics and things like that — SoftBank recently announced that they're going to spend $1 trillion in Texas to build out data centers, but also part of that is AI robotics for manufacturing. They want to establish a proving ground for manufacturing and simulating manufacturing through robotics. And so I believe that is going to be in the next decade — it's not going to be tomorrow, but it will be coming up as the next wave of generative AI in the manufacturing environment.
Shaheen Chohan (12:17):
So Mike, does this mean that we're seeing a change in the mix or the composition of market share of what were probably traditionally seen as the brands in the US? We're seeing a lot of new foreign entrants coming in — we're seeing more Toyota, more Japanese, more Korean makers. Do you think that could also change the market share in terms of not only production but ultimately sales?
Michael Bergen (12:46):
Absolutely. Yeah, I would definitely say Hyundai — going back to that example — is another company that has really made some inroads into not only improving the product, but in getting buy-in from consumers on it. But they are actually taking market share away from the big three. So who are going to be most likely to be the companies to make the biggest investments over this short to mid-term period, 3 to 5 years?
Angela Hudson (13:08):
So are you still looking at Hyundai Motors expanding, as well as Toyota? Toyota Motor Companies is expanding tremendously — $13 billion, again like we said in North Carolina. Ford and GM are still expanding. And again, Hyundai with the EV sales and the battery plans in Georgia — that's going to be your biggest boost of selling for EVs and for investments for the future over the next 3 to 5 years.
Michael Bergen (13:42):
Right. And going back to the discussion about EVs — we know that the adoption rate is not there to meet expectations currently, but they have made a lot of inroads. I mean, we've gone from back in 2000 having about 200,000 vehicles sold to over 1.4 million vehicles sold in the US, so they are continuing to gain market share in the overall light vehicle picture — which is actually reducing the amount of ICE vehicles that are being sold per year. But it's just not at that rate that they would expect right now.
Shaheen Chohan (14:17):
Angela, in terms of the types of projects — you're both indicating that yes, we're going to see scaling up, we're going to see more volume. The types of projects when you talk about adding capacity — is that coming from predominantly grassroots development, brand new facilities?
Angela Hudson (14:32):
So we're seeing a bit of both. More or less, people are building more — they're investing more by building more with reshoring, building more plants in the US, increasing production here. So a lot of them are starting with new grassroots plans, but we're also seeing some existing manufacturers here expanding in certain regions. They're changing the way they do things — redeveloping their assembly lines to handle EV production or battery plans. So they're trying to refocus on what they're manufacturing here, increasing their supply chain. It's a little bit of both. We've seen a lot of new grassroots but also expanding of existing plants that are already in the US.
Shaheen Chohan (15:25):
So I guess a few years ago, we saw many of the existing automakers retool their production lines to add EV to the mix. Now it's sort of retooling to increase expansion, to increase production volumes, mainly of the hybrids or the ICE. Is that right?
Angela Hudson (15:39):
Exactly right. But they're also focusing more on electric vehicles — so it's not just your regular engines and stuff like that. In the future, they're looking at more electric motors and batteries too.
Shaheen Chohan (15:58):
Just trying to get a handle on where this investment is expected to be located. Looking at some of the hot spots of where it is concentrated geographically — where are we seeing in particular the hot spots for electric vehicle manufacturing?
Angela Hudson (16:11):
So we're seeing a lot of these auto manufacturers looking at investing more in our southern states. So we're looking at Georgia, Tennessee — we're seeing those states with big investments happening there, as well as Michigan, which is still our big auto manufacturing hub. So increasing production of EV and battery plants are going to be in those more or less southern states, because they're focusing on going to the southern states because of their cheaper land, lower labor cost, as well as a less unionized workforce. So that's why they're moving towards the southern states for expanding these different auto manufacturers.
Shaheen Chohan (16:54):
I suppose that plays into the whole reshoring, right? You're being incentivized to reshore, but you're actually bringing a lot of production from what are traditionally cheaper markets in Asia. So there is a big cost consideration there.
Angela Hudson (17:10):
Right. And being closer to your key infrastructure areas — that's another reason why they're locating the port facilities nearby.
Shaheen Chohan (17:22):
Now Angela, with a specific focus on materials and components — what are some of the biggest challenges being seen by the automakers?
Angela Hudson (17:27):
So they're still having shortages with raw materials and dealing with metal stamping — specifically aluminum as well as some plastics. So we're seeing a lot of shortages with transportation delays and getting delivered to the US. And of course we have the whole rare earths situation that arose during the tariffs, with China imposing restrictions — really forbidding any of the rare earths coming over to US soil, Canadian soil. And so that caused a lot of assembly plants having to shut down because they couldn't get certain parts in for vehicles. And so now we know that China has opened the door back up for manufacturers and suppliers to get back in there to get that rare earths. But ultimately that's really about how do we restore that, or how do we diversify that supply chain away from China and into parts like Australia or Brazil that produce the same rare earths.
Shaheen Chohan (18:28):
Yeah, I guess we've seen this for a number of years, certainly in the upstream mining sectors, about sort of friendshoring — if you don't have those natural resources yourself, find a friend who does. But we've also seen the Trump administration trying to improve and relax the mining permits. Some of those mines are going to be focusing on producing lithium for the batteries. But also I think you do have deposits of rare earths, and some easing of what are quite strict mining permitting rules and regulations may see more of that upstream supply coming back into the market, which may alleviate some of the materials cost. And certainly Australia has been actually incentivizing that industry specifically to be another source of attraction for rare earths — and so that I think is one of the best paths for the US as it tries to build up its own supply here locally. We saw that with Ford Motor Company shutting down their Chicago plant in May for a week because of this shortage of rare earths.
I want to talk a little bit about the battery side of the electric vehicle market — clearly seeing whether the Trump administration's outlook from a policy support perspective is going to be a little less positive than what we saw with the Biden administration. Are we seeing any kind of knock-on effect or uncertainty creeping into the minds of the battery manufacturers? Are they still expanding in line with the broader auto market, or is there a little bit of uncertainty there?
Angela Hudson (20:21):
They're pulling back a little. But we're still seeing an increase in battery manufacturing. We have ten new battery manufacturing plants expected to come along by the end of this year — so that's going to double battery manufacturing capacity. Since last year and until today, over $100 billion has been spent on battery manufacturing. We expect those battery manufacturers to come online by the end of this year. Again, we don't see a slowdown with the battery manufacturers because of what's been occurring, and also because they're shifting focus. So we're seeing a lot of manufacturers — for one, particularly we've seen LG Energy is looking at redirecting what they're going to be producing at their plant. A $1.4 billion battery plant is going to come online in Michigan by the end of this year, and they're going to shift their focus from building EV battery plans to building lithium iron phosphate batteries. These are going to be using battery storage systems — and this is where the shift is going to be, driving more for battery storage systems. So that's where battery manufacturing is going to be increasing.
Michael Bergen (21:21):
Right. That's a very interesting story because back in the Biden era, there was the rule that said you couldn't source material from hostile countries — China being one, and China being a big producer of batteries. So that really spurred a lot of the battery manufacturing projects that we saw come to pass. And now that we're probably going to be getting out of some of those incentives that are related to the IRA, it's now about tariffs. Now we have to get away from the tariffs that could be coming from importing those batteries from other countries. And so that's a big driver behind it. And while EV production has started to calm down and not grow as rapidly as they wanted to, those plans for those battery plants are now being shifted to manufacturing for other sectors of the industries — specifically the power industry for battery storage. These large battery storage sites that we're tracking in the power industry are now a big attraction to the manufacturers of those.
Shaheen Chohan (22:28):
All right. I want to stick with tariffs again and trade. We can't have a conversation about the auto market without talking about the rapid growth in Chinese electric vehicles. They've made substantial inroads — they've grown market share really quite rapidly, certainly in markets like Europe and even in my backyard in Dubai and the UAE, we're seeing a lot of Chinese EVs. So whilst that growth is occurring elsewhere, there is clearly still fairly tense trade relations between the US and China. Do you think at any stage that China could actually break into the US market? Could they challenge and take some share of this market?
Michael Bergen (23:19):
Yeah. BYD has been a big force out there. I mean, they have really expanded across the world. And now within China, they're faced with competition within — and so that's become quite a war in China on pricing, really on EVs. That has caused some stir with the government in what they do. So really, in a roundabout way, China is now exploding at the seams with all this EV inventory, and they're pushing it out to the global market — their consumer base can't absorb everything they're producing. But the US has a roadblock. We won't allow those Chinese-manufactured cars to come in, which — if you're an EV manufacturer over here, you don't want them to come in, because that could really hurt this market because of how low-price they are. So we're still dealing with the high tariffs and national security concerns with China. That's why the US is trying to increase production here so they won't have to rely more on China. So I think that's still going to be an issue that we're facing here.
Angela Hudson (24:26):
Yeah. Right now they're coming up to our borders — I mean, they're down in Mexico. They're obviously doing a lot in Latin America and Brazil. We actually do have a BYD project in California that's a joint venture to manufacture — I believe it's buses. And so that's one project. I'm not sure how it got through the back door, but it is something that we're following — still an active project, so hopefully that won't open up to more manufacturing areas.
Shaheen Chohan (24:56):
Yeah. Look, coming to the close of our discussion — to both of you, what do you see as the most important signal business leaders should be looking out for over the short term, the next 12 to 18 months?
Angela Hudson (25:10):
I would say one would be inflation, and also consumer spending — which is expected to be slowing because of the tariffs and the high increase of prices in the automotive industry, EV as well as regular vehicles. So as those prices increase, you're going to see consumer sales slowing down.
Michael Bergen (25:35):
Yeah. I think that — you know, as you look across all the automakers right now, they're all saying that they're going to raise prices on vehicles to absorb the tariffs. And so there has certainly been a rush — if you look at any of the European Union countries and their GDP numbers, they all have like a trace of getting their vehicles to the US market before the tariffs hit. What's coming down the road is that they're going to be raising the price of vehicles, and they're already at a higher rate than they were before COVID. The average cost per vehicle is a lot higher than it was before COVID. So now we're going even higher, which is making it less affordable for many people. So that could have an impact on the auto market on the consumer side.
Angela Hudson (26:18):
Yeah. I mean, everybody's got a tighter belt because of inflation across many different sectors. But we know that inflation is going down, so it is stabilizing. So it could be challenging — we'll see how the last part of the year actually does pan out. Hopefully we do get some good trade deals in, and automakers don't have to impose such a big lift on prices — so that can keep that market strong, and of course them investing in vehicles moving forward and not cutting back on things for the consumer.
Shaheen Chohan (26:54):
That brings us to the conclusion of this discussion. Really fascinating stuff, guys — thank you very much. Big thanks to you both. If any of you have any further questions about any of the topics or points that we've discussed or raised today, then please do reach out to myself, or Mike or Angela on the details that you can see here. And finally, a very big thanks to all of you for joining us today. I hope we have helped you all better navigate some of the currents of change that we're seeing.
Between policy shifts, electrification, and changing global supply chains, automakers are under pressure to fine-tune and rethink their strategies. Some big questions are still looming — what is having the biggest influence on driving capital investments, and where is the broader industry heading next?
Shaheen Chohan (00:37):
Welcome to Navigating the Currents of Change. I'm Shaheen Chohan and I head Global Analytics at Industrial Info Resources. For over 40 years, IIR has been delivering industrial project, plant and asset data that's verified and constantly updated across over a dozen of the world's most capital-intensive energy and heavy industrial sectors. Now joining me today are two leaders from our research team at Industrial Info Resources. We have Angela Hudson, North America Research Manager for Industrial Manufacturing, and Mike Bergen, Executive Vice President. Welcome to you both.
Now, both have been researching and commenting on what capital project trends are occurring across the entire automotive supply chain. And so today we will be diving into the outlook for automakers and their suppliers in this continuously evolving landscape. So welcome to you both — let's get started. Now Mike, to really start the discussion, how would you size the current US automotive market in terms of volumes, especially in the light vehicle space?
Michael Bergen (01:52):
So Shaheen, I would put it in like three categories. One would be what we see in sales — how many vehicles, what's the volume of sales that we've had. And then the other one would be: what's the production of that here in the US? So we know that sales is a mixture of what is produced here, but then what is brought from overseas. And then we also have what IIR is tracking as far as the spending. I would say that our spending is really a leading indicator into higher production volumes going into the future, because it is showing how we are adapting to and manufacturing more here in the US.
Specifically, we saw this trend with the EV market back in 2022 and 2023, where there was a lot of investment put forward by the automakers to actually build out EV capacity. And while we know that EVs are not being sold at the rate they would like them to, we've had some double-digit growth in not only production but also in sales of electric vehicles. And then most recently, we saw actually where hybrids have actually bumped up in their volume of sales in the US. So ironically, when you look at the different buckets — we have the ICE vehicles, we have hybrids, and we have electric vehicles — overall, we've grown since COVID by about a million units a year in sales as a total. If you look at the ICE numbers, ICE vehicles have actually decreased, which means that the hybrids and electric vehicles are taking market share away from it. Now this year, some of the leading automotive statistics out there will say that ICE vehicle production is going to ramp up — so we're going to produce more ICE vehicles here and sell more ICE vehicles here than we have in the past. And that's an interesting way of looking at the dynamics that are going on in the market, especially with tariffs around that.
Shaheen Chohan (03:45):
Now what do you see as some of the biggest challenges to the automakers, and what are the issues that they're facing — certainly in the current environment, which started off pretty positive at the beginning of the year but has become a little bit more uncertain, certainly at this midpoint?
Michael Bergen (04:15):
Sure. Another way to frame this up and to articulate what we're witnessing today is the way that we track the investments for those assembly plants and the suppliers. The investments that we've witnessed over the last five years have actually escalated quite a bit because of the big EV push. So we went from doing about $15 to $17 billion a year that we captured in investments, up to $50 billion in 2023. Now that's come off to about the $20 billion range. Angela could probably back me up on that one — mainly because they're starting to ramp down the build-out of the electric vehicle market. Obviously with the constraints that EVs have had in getting adoption passed through consumers, the plans that were pretty robust during the Biden administration years, that had a lot of incentive behind them, are now starting to be pulled off the table and replaced with more investments into hybrids, or even back into ICE vehicles, to shore up some of the revenue that they're losing from electric vehicle sales right now.
Shaheen Chohan (05:29):
So would you say that there are two different sets of trends between the pure EVs and the hybrids? Are we seeing two different types of trend occurring?
Michael Bergen (05:41):
Yes. So we were seeing a lot more of the electric vehicle sales when they first launched a couple of years ago, but with the lack of charging stations and the duration of those batteries that could take people on longer trips, that has shifted people into wanting to contribute to the lower carbon footprint and move towards that hybrid model. There's always been a lot of focus — I think probably over the last 24 months, and I think this has probably increased with the Trump administration coming back into office — on really trying to capitalize on domestic demand and obviously meeting that with more localized, regional production capacity.
Shaheen Chohan (06:26):
Are you starting to see some of the narrative that was certainly announced and presented by the incoming Trump administration around reshoring — is reshoring gaining any kind of meaningful traction, or really is it still just kind of political talk?
Michael Bergen (06:45):
Yeah, definitely. Reshoring is part of this conundrum that we're in right now. Because if you look at the current constraints that are out there, it started with the adoption of electric vehicles not going the way that we intended it to go. And now we're in a new environment of constraints, which is the tariffs. And so those tariffs are causing a lot of constraints within the industry when it comes to the sourcing of auto parts that come from various parts of the world — the tariffs that have been imposed on them, excluding the USMCA agreement that we have. And that has spurred several companies to come in and announce bigger projects. That said, let me pass that to Angela and let her get into the details of what we've seen so far.
Shaheen Chohan (07:32):
There's a lot of focus, obviously, on trying to capitalize on growing and still fairly strong domestic demand, and obviously meeting this with locating and having more domestic manufacturing and production capacity here directly in the US. So is reshoring actually happening? Is it actually gaining traction or is it still just sort of political talk?
Angela Hudson (07:57):
Yes, reshoring is happening — it's gaining traction. We're seeing that with Hyundai Motors investing $21 billion in the US, and this includes a $5.8 billion steel plant in Louisiana, where they're going to increase production here so they won't have to rely as much on their foreign steel. And as well, General Motors and Ford are looking at doing some more investing in reshoring for EV and battery plants as well.
Michael Bergen (08:27):
Yeah. I would say Hyundai is probably a prime example of a company that's what we would call offshoring production to the United States to manufacture the vehicle. They did open up their new facility — this is an expansion that they're going to do to that facility. But then you have the steel plant that they're investing in, so they want to control that supply chain as much as possible here and avoid the tariffs. So there are plenty of examples of companies that are coming through with reshoring plans. There's also the implementation of just bringing production back to the United States — so we saw that with Ford talking about moving production from Mexico over to the US. And a couple of other automakers are moving production of a vehicle into a facility that has the capacity to take that on. Ford is investing $700 million in their Kentucky truck plant to boost up their investments here in the US, as well as Toyota building a $13 billion battery plant in North Carolina for hybrids and EV vehicles. We also recently saw GM announce that they're going to be investing $4 billion in three of their auto plants here in Michigan, Kansas and Tennessee to boost up production for ICE vehicles — shifting more towards ICE vehicle production instead of EV because of the low EV sales. And that's a great example of Ford saying that they're going to invest another $4 or $5 billion into ICE vehicle manufacturing, and yet they're saying we're losing $4 or $5 billion for the next several years on electric vehicles. So they've got to have that ICE sales revenue to try to make shareholders happy and offset some of the loss.
Shaheen Chohan (10:20):
So Angela, as we see more reshoring, do you think that will actually have a positive impact on job creation?
Angela Hudson (10:25):
I think job creation will be limited and we'll be focused more on robotics. So with reshoring, these jobs are going to be more automated with robots and fewer people — less jobs. Even though they say they will be increasing, I think it's not going to be that many jobs being created once manufacturing increases. But also what I would like to touch on with you, Mike, because I know you have your hands in our labor analytics — if we do see more reshoring, is there the labor construction market available out there?
Michael Bergen (10:59):
Bearing in mind we have other big growth sectors — we've got chemicals that keeps building out and we've got data centers that are scaling. We have the labor supply as a big constraint still. And like Angela was saying, the South is an attractive area for reshoring manufacturing here. Building those plants will be a difficult situation because we have a lot of other stuff going on at the same time with mega projects. So that type of labor will be in short supply and will have to be managed properly. So can we see more modular build-type activity happen with that? You never know — it could actually come into play. And going back to robotics and things like that — SoftBank recently announced that they're going to spend $1 trillion in Texas to build out data centers, but also part of that is AI robotics for manufacturing. They want to establish a proving ground for manufacturing and simulating manufacturing through robotics. And so I believe that is going to be in the next decade — it's not going to be tomorrow, but it will be coming up as the next wave of generative AI in the manufacturing environment.
Shaheen Chohan (12:17):
So Mike, does this mean that we're seeing a change in the mix or the composition of market share of what were probably traditionally seen as the brands in the US? We're seeing a lot of new foreign entrants coming in — we're seeing more Toyota, more Japanese, more Korean makers. Do you think that could also change the market share in terms of not only production but ultimately sales?
Michael Bergen (12:46):
Absolutely. Yeah, I would definitely say Hyundai — going back to that example — is another company that has really made some inroads into not only improving the product, but in getting buy-in from consumers on it. But they are actually taking market share away from the big three. So who are going to be most likely to be the companies to make the biggest investments over this short to mid-term period, 3 to 5 years?
Angela Hudson (13:08):
So are you still looking at Hyundai Motors expanding, as well as Toyota? Toyota Motor Companies is expanding tremendously — $13 billion, again like we said in North Carolina. Ford and GM are still expanding. And again, Hyundai with the EV sales and the battery plans in Georgia — that's going to be your biggest boost of selling for EVs and for investments for the future over the next 3 to 5 years.
Michael Bergen (13:42):
Right. And going back to the discussion about EVs — we know that the adoption rate is not there to meet expectations currently, but they have made a lot of inroads. I mean, we've gone from back in 2000 having about 200,000 vehicles sold to over 1.4 million vehicles sold in the US, so they are continuing to gain market share in the overall light vehicle picture — which is actually reducing the amount of ICE vehicles that are being sold per year. But it's just not at that rate that they would expect right now.
Shaheen Chohan (14:17):
Angela, in terms of the types of projects — you're both indicating that yes, we're going to see scaling up, we're going to see more volume. The types of projects when you talk about adding capacity — is that coming from predominantly grassroots development, brand new facilities?
Angela Hudson (14:32):
So we're seeing a bit of both. More or less, people are building more — they're investing more by building more with reshoring, building more plants in the US, increasing production here. So a lot of them are starting with new grassroots plans, but we're also seeing some existing manufacturers here expanding in certain regions. They're changing the way they do things — redeveloping their assembly lines to handle EV production or battery plans. So they're trying to refocus on what they're manufacturing here, increasing their supply chain. It's a little bit of both. We've seen a lot of new grassroots but also expanding of existing plants that are already in the US.
Shaheen Chohan (15:25):
So I guess a few years ago, we saw many of the existing automakers retool their production lines to add EV to the mix. Now it's sort of retooling to increase expansion, to increase production volumes, mainly of the hybrids or the ICE. Is that right?
Angela Hudson (15:39):
Exactly right. But they're also focusing more on electric vehicles — so it's not just your regular engines and stuff like that. In the future, they're looking at more electric motors and batteries too.
Shaheen Chohan (15:58):
Just trying to get a handle on where this investment is expected to be located. Looking at some of the hot spots of where it is concentrated geographically — where are we seeing in particular the hot spots for electric vehicle manufacturing?
Angela Hudson (16:11):
So we're seeing a lot of these auto manufacturers looking at investing more in our southern states. So we're looking at Georgia, Tennessee — we're seeing those states with big investments happening there, as well as Michigan, which is still our big auto manufacturing hub. So increasing production of EV and battery plants are going to be in those more or less southern states, because they're focusing on going to the southern states because of their cheaper land, lower labor cost, as well as a less unionized workforce. So that's why they're moving towards the southern states for expanding these different auto manufacturers.
Shaheen Chohan (16:54):
I suppose that plays into the whole reshoring, right? You're being incentivized to reshore, but you're actually bringing a lot of production from what are traditionally cheaper markets in Asia. So there is a big cost consideration there.
Angela Hudson (17:10):
Right. And being closer to your key infrastructure areas — that's another reason why they're locating the port facilities nearby.
Shaheen Chohan (17:22):
Now Angela, with a specific focus on materials and components — what are some of the biggest challenges being seen by the automakers?
Angela Hudson (17:27):
So they're still having shortages with raw materials and dealing with metal stamping — specifically aluminum as well as some plastics. So we're seeing a lot of shortages with transportation delays and getting delivered to the US. And of course we have the whole rare earths situation that arose during the tariffs, with China imposing restrictions — really forbidding any of the rare earths coming over to US soil, Canadian soil. And so that caused a lot of assembly plants having to shut down because they couldn't get certain parts in for vehicles. And so now we know that China has opened the door back up for manufacturers and suppliers to get back in there to get that rare earths. But ultimately that's really about how do we restore that, or how do we diversify that supply chain away from China and into parts like Australia or Brazil that produce the same rare earths.
Shaheen Chohan (18:28):
Yeah, I guess we've seen this for a number of years, certainly in the upstream mining sectors, about sort of friendshoring — if you don't have those natural resources yourself, find a friend who does. But we've also seen the Trump administration trying to improve and relax the mining permits. Some of those mines are going to be focusing on producing lithium for the batteries. But also I think you do have deposits of rare earths, and some easing of what are quite strict mining permitting rules and regulations may see more of that upstream supply coming back into the market, which may alleviate some of the materials cost. And certainly Australia has been actually incentivizing that industry specifically to be another source of attraction for rare earths — and so that I think is one of the best paths for the US as it tries to build up its own supply here locally. We saw that with Ford Motor Company shutting down their Chicago plant in May for a week because of this shortage of rare earths.
I want to talk a little bit about the battery side of the electric vehicle market — clearly seeing whether the Trump administration's outlook from a policy support perspective is going to be a little less positive than what we saw with the Biden administration. Are we seeing any kind of knock-on effect or uncertainty creeping into the minds of the battery manufacturers? Are they still expanding in line with the broader auto market, or is there a little bit of uncertainty there?
Angela Hudson (20:21):
They're pulling back a little. But we're still seeing an increase in battery manufacturing. We have ten new battery manufacturing plants expected to come along by the end of this year — so that's going to double battery manufacturing capacity. Since last year and until today, over $100 billion has been spent on battery manufacturing. We expect those battery manufacturers to come online by the end of this year. Again, we don't see a slowdown with the battery manufacturers because of what's been occurring, and also because they're shifting focus. So we're seeing a lot of manufacturers — for one, particularly we've seen LG Energy is looking at redirecting what they're going to be producing at their plant. A $1.4 billion battery plant is going to come online in Michigan by the end of this year, and they're going to shift their focus from building EV battery plans to building lithium iron phosphate batteries. These are going to be using battery storage systems — and this is where the shift is going to be, driving more for battery storage systems. So that's where battery manufacturing is going to be increasing.
Michael Bergen (21:21):
Right. That's a very interesting story because back in the Biden era, there was the rule that said you couldn't source material from hostile countries — China being one, and China being a big producer of batteries. So that really spurred a lot of the battery manufacturing projects that we saw come to pass. And now that we're probably going to be getting out of some of those incentives that are related to the IRA, it's now about tariffs. Now we have to get away from the tariffs that could be coming from importing those batteries from other countries. And so that's a big driver behind it. And while EV production has started to calm down and not grow as rapidly as they wanted to, those plans for those battery plants are now being shifted to manufacturing for other sectors of the industries — specifically the power industry for battery storage. These large battery storage sites that we're tracking in the power industry are now a big attraction to the manufacturers of those.
Shaheen Chohan (22:28):
All right. I want to stick with tariffs again and trade. We can't have a conversation about the auto market without talking about the rapid growth in Chinese electric vehicles. They've made substantial inroads — they've grown market share really quite rapidly, certainly in markets like Europe and even in my backyard in Dubai and the UAE, we're seeing a lot of Chinese EVs. So whilst that growth is occurring elsewhere, there is clearly still fairly tense trade relations between the US and China. Do you think at any stage that China could actually break into the US market? Could they challenge and take some share of this market?
Michael Bergen (23:19):
Yeah. BYD has been a big force out there. I mean, they have really expanded across the world. And now within China, they're faced with competition within — and so that's become quite a war in China on pricing, really on EVs. That has caused some stir with the government in what they do. So really, in a roundabout way, China is now exploding at the seams with all this EV inventory, and they're pushing it out to the global market — their consumer base can't absorb everything they're producing. But the US has a roadblock. We won't allow those Chinese-manufactured cars to come in, which — if you're an EV manufacturer over here, you don't want them to come in, because that could really hurt this market because of how low-price they are. So we're still dealing with the high tariffs and national security concerns with China. That's why the US is trying to increase production here so they won't have to rely more on China. So I think that's still going to be an issue that we're facing here.
Angela Hudson (24:26):
Yeah. Right now they're coming up to our borders — I mean, they're down in Mexico. They're obviously doing a lot in Latin America and Brazil. We actually do have a BYD project in California that's a joint venture to manufacture — I believe it's buses. And so that's one project. I'm not sure how it got through the back door, but it is something that we're following — still an active project, so hopefully that won't open up to more manufacturing areas.
Shaheen Chohan (24:56):
Yeah. Look, coming to the close of our discussion — to both of you, what do you see as the most important signal business leaders should be looking out for over the short term, the next 12 to 18 months?
Angela Hudson (25:10):
I would say one would be inflation, and also consumer spending — which is expected to be slowing because of the tariffs and the high increase of prices in the automotive industry, EV as well as regular vehicles. So as those prices increase, you're going to see consumer sales slowing down.
Michael Bergen (25:35):
Yeah. I think that — you know, as you look across all the automakers right now, they're all saying that they're going to raise prices on vehicles to absorb the tariffs. And so there has certainly been a rush — if you look at any of the European Union countries and their GDP numbers, they all have like a trace of getting their vehicles to the US market before the tariffs hit. What's coming down the road is that they're going to be raising the price of vehicles, and they're already at a higher rate than they were before COVID. The average cost per vehicle is a lot higher than it was before COVID. So now we're going even higher, which is making it less affordable for many people. So that could have an impact on the auto market on the consumer side.
Angela Hudson (26:18):
Yeah. I mean, everybody's got a tighter belt because of inflation across many different sectors. But we know that inflation is going down, so it is stabilizing. So it could be challenging — we'll see how the last part of the year actually does pan out. Hopefully we do get some good trade deals in, and automakers don't have to impose such a big lift on prices — so that can keep that market strong, and of course them investing in vehicles moving forward and not cutting back on things for the consumer.
Shaheen Chohan (26:54):
That brings us to the conclusion of this discussion. Really fascinating stuff, guys — thank you very much. Big thanks to you both. If any of you have any further questions about any of the topics or points that we've discussed or raised today, then please do reach out to myself, or Mike or Angela on the details that you can see here. And finally, a very big thanks to all of you for joining us today. I hope we have helped you all better navigate some of the currents of change that we're seeing.
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*This episode is brought to you by Industrial Info's Latin American Office in Argentina.