« Previous | Next »

For Car Country, Could the Mourning Become Electric?

The New York Times recently reported that in Hamamatsu, the heart of Japan’s auto parts-making region, people are worried about what they call “electric vehicle shock.” Their concern is that if electric cars begin to replace gasoline-powered cars in large numbers, they could put the makers of such components as exhaust pipes and spark plugs out of business--and deliver a fatal shock to the region’s auto parts manufacturing economy.

No one has expressed similar worries about the future of America’s auto-based manufacturing regions, which specialize heavily in components that are tied to the internal combustion engine. But anyone who cares about the future of the Great Lakes region should start worrying about electric vehicle shock. The same problem that the far-sighted manufacturers and local governments in Hamamatsu have identified could loom large for a host of mostly small and medium-sized industrial metropolitan areas in Michigan, Ohio, Indiana, Illinois, and Wisconsin.

To see this, let’s look at the extent to which auto-based Great Lakes metropolitan areas specialize in mechanical technologies--the core technologies of conventional cars and trucks--versus electrical technologies. We can measure a metro area’s specialization in mechanical technologies by whether mechanical engineers make up a large proportion of its employment. Likewise, we can measure its electrical technology specialization by whether electrical engineers are a large share of its employment. Let’s call a metro area mechanically specialized if mechanical engineers make up at least a 10 percent bigger share of its employment than they do of nationwide employment, and use a similar definition for electrically specialized metro areas.

Among the nation’s 50 metro areas that were most specialized in motor vehicle and parts manufacturing when the Great Recession began in the last quarter of 2007, 33 were in the Great Lakes region. (See the map below.) In 2008, seven of these metro areas specialized in both mechanical and electrical technologies: Ann Arbor, Dayton, Fort Wayne, Jackson (MI), Kokomo, Oshkosh, and Rockford. Detroit probably also belongs on this list, but the Bureau of Labor Statistics didn’t disclose the number of mechanical engineers there, maybe because so many of them work for Ford, GM, and Chrysler. As long as these metro areas can maintain their specializations in both technologies, they will probably remain auto hubs regardless of whether electric cars displace conventional ones.

But electric vehicle shock could be a problem for the 15 other auto-based Great Lakes metro areas that specialize in mechanical but not electrical technologies: Battle Creek, Bay City, Columbus (IN), Elkhart, Grand Rapids, Holland, Janesville, Lafayette, Mansfield (OH), Muncie, Niles, Sandusky, South Bend, Terre Haute, and Toledo. (Elkhart, the RV capital of North America, may not have to worry as much about this as the other 14 metro areas.) If electric cars become a big part of the car market, these places could lose their auto and auto parts specializations to the Great Lakes metro areas that have electrical as well as mechanical technology specializations. But they could also lose out to such electrical technology hubs as San Jose and Philadelphia.

This isn’t a far-fetched possibility. Already, startup Fisker Automotive is gearing up to build plug-in hybrids in a plant it bought from GM near Wilmington, DE (in the Philadelphia metro area), while Tesla Motors assembles electric cars and components in Silicon Valley. These are small operations but if the market for their products expands enough, other electric car and parts-makers could be attracted to these metro areas, which aren’t currently major auto production centers.

For the 10 Great Lakes auto- and parts-manufacturing centers that don’t specialize in either electrical or mechanical technologies, the impact of electric vehicle shock probably depends on what happens to car production in nearby metro areas with electrical or mechanical specializations. If nearby areas gain jobs from electric car and parts production, then those places probably will benefit, too. If nearby areas lose as a result of the move to electrification then those places probably will also lose.

Of course, electric vehicle shock isn’t inevitable for the Great Lakes region. Electric cars may never displace gasoline-powered ones, and if they ever do so, it won’t happen soon. (Hybrids could become more popular, but their blend of electrical and mechanical components makes it more likely that they and their components will continue to be made in the auto hubs of the Great Lakes and South.) Existing automakers and larger suppliers might decide to make electric cars and parts in the same places where they now make conventional cars and parts, bringing electrical engineering talent with them or recruiting it from elsewhere.

But if electric cars become a big part of America’s automotive future, and if startups get the edge over established companies in making them, then they could deliver a future shock to a large swath of the Great Lakes region. To prevent that shock from being fatal, state and local governments, educational institutions, Manufacturing Extension Partnership centers, and companies should work together, as they’re doing in Japan, to develop the electrical technology expertise that they’ll need to prosper in a more electrified auto market. They should also work to help existing suppliers that don’t want to or can’t move toward greater electrification diversify into other products that rely more on mechanical technologies, such as medical devices.

Consider this a wake-up jolt.

  • Howard Wial is executive director of the Center for Urban Economic Development at the University of Illinois, Chicago, where he is also an associate research professor. He is a nonresident senior fellow of the Brookings Institution’s Metropolitan Policy Program. His work focuses on manufacturing and urban and regional economic development. He is also an expert on labor and employment policy, workforce development, innovation, productivity, and competitiveness.