“Stunning” is how Thomas Klier, a former senior economist and economic advisor at the Chicago Fed, described the findings of his latest research into how the auto industry’s shift to electric vehicles may or may not be reshaping production footprints in North America.
Klier told Tech Brew that the latest report he co-wrote serves as a “bookend” to previous research from the Chicago Fed that suggested that the transition to EVs won’t result in significant changes to the current footprint, contrary to some assumptions. While that report looked to the end of the decade, Klier’s latest research dove into the recent past––2016 to 2023.
“Every day we hear about how electrification is the way the industry is moving toward,” Klier said. “But the piece that very few people are talking about represents still the vast majority of the industry––and that’s the whole system that’s based around the internal combustion engine.”
Digging into the data: Klier and co-author James Rubenstein used data from S&P Global Mobility to analyze trends around engine sourcing in North America. Their analysis found what Klier described as “a rather remarkable reduction in the variety of engines that were put into those vehicles” between 2016 and 2023.
They found a 19% decrease in the assembly of vehicles with engines, but “virtually no change” in the number of plants building vehicles with engines. They identified a 15% decline in engine production and “much more substantive decline in engine configurations.” Their research also found that engine supply chains in North America were reconfigured between those years, with fewer imports coming from overseas and fewer engines crossing borders within North America.
Per the report, light-vehicle assembly plants in North America sourced 60 unique engine models in 2016. By 2023, that number fell to 35.
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“We interpret this as an outcome of carmakers’ efforts to manage the transition toward electrification while maintaining profitability of their portfolio of vehicles featuring internal combustion engines,” the researchers concluded.
Looking for efficiencies: The context underlying this analysis, Klier noted, is that as legacy automakers invest billions of dollars into developing and building EVs, they are having to find cost savings in their profitable but shrinking ICE businesses.
Though he was surprised by the degree to which this trend of engine simplification appeared across the board, “it makes a lot of sense,” he said, “because the pressures are immense for the legacy carmakers to walk that tightrope to get from the old, profitable world to the new, extremely costly and not yet profitable world. So they can’t really leave any stone unturned.”
Still, the researchers found few changes to the geography of engine production in North America. One factor helping to keep the production footprint stable could be the growing popularity of hybrid vehicles, which have fewer emissions than pure ICE vehicles but still have engines.
The shift to EVs has stoked concerns among stakeholders like the United Auto Workers about potential job losses, in part because EVs have fewer parts than ICE vehicles and because the industry’s investments in EVs have not always flowed to the same states and regions that traditionally have been auto production hubs.
Of course, there’s one factor that could prompt changes to North America’s auto production footprint in ways that are still to be determined: the Trump administration’s tariff policies. The administration claims that new 25% tariffs on all vehicles imported into the US are aimed at spurring more domestic production, though experts have said that such moves would take years of consistent policy to create significant change.