Academic journal article Economic Perspectives

Auto Production Footprints: Comparing Europe and North America

Academic journal article Economic Perspectives

Auto Production Footprints: Comparing Europe and North America

Article excerpt

Introduction and summary

Today's footprints of motor vehicle production (1) in Europe and North America appear at first glance to be remarkably similar: In both regions, plants producing motor vehicles are highly agglomerated, which is typical of manufacturing activities. The auto industry is a global industry: A dozen or so mass producers compete with one another around the world. Because these automakers employ similar production models in their plants, one might expect similar forces to shape their production location decisions. This article evaluates whether the same general factors explain the broad patterns seen in the auto industry's footprints in Europe and North America. This question is of particular interest because to date, little comparative analysis of this kind has been performed, especially involving Europe as a whole. In general, most auto industry analysis of Europe has focused on its individual countries instead of the entirety of the region.

We begin the article with a description of the current distribution of motor vehicle production in both North America and Europe. Then we review the principles of agglomeration and industrial location theories and discuss their applicability to auto production siting decisions. Next, we examine whether these principles adequately explain changes in the geographical distribution of auto production in North America. We outline key events in Europe around 1990 that affected the spatial distribution of auto production there. And we evaluate to what extent the principles of agglomeration and industrial location theories are sufficient to explain the changing geography of auto production in Europe. In doing so, we also illustrate the growing importance of a northwest-southeast corridor in Europe, where the auto industry has become concentrated. Furthermore, we discuss trends in auto assembly plant openings and closings--both inside and outside this European corridor of production--since 1990. Finally, we highlight the features of auto production in Europe and North America that are not consistent with agglomeration theory.

The current geography of auto production in North America and Europe

Motor vehicle production involves two types of firms: vehicle assemblers and producers of parts (or parts suppliers). Today about a dozen carmakers put together light vehicles (see note 1) at approximately 80 assembly plants in Europe and approximately 70 assembly plants in North America. The roughly 15,000 parts that go into each vehicle are produced at several thousand parts supplier plants in both regions. (2)

For the purposes of this article, Europe is defined as the 16 member countries of the European Union (EU) (3) that have produced at least 100,000 motor vehicles in any year between 1990 and 2013. The 16 countries are Austria, Belgium, Czechia, (4) France, Germany, Hungary, Italy, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom (UK). In 2013, auto production reached at least 100,000 units in 15 of these 16 countries; the exception was the Netherlands, where auto production last hit 100,000 units in 2005. In this article, Central Europe refers to Czechia, Hungary, Poland, Romania, Slovakia, and Slovenia, while Western Europe refers to the other ten auto-producing countries. Here, North America refers to Canada, Mexico, and the United States.

Motor vehicle production in North America is clustered in a north-south corridor, mostly in the United States, called "auto alley" (see figure 1). This corridor is roughly 800 miles long and 250 miles wide, (5) extending between Michigan and Alabama. The spine of auto alley is formed by the north-south interstate highways I-65 and I-75. Auto alley extends into Canada along Route 401 (Klier and Rubenstein, 2008; Klier and McMillen, 2006, 2008; and Rubenstein, 1992). Within the United States, auto alley accounted for nearly 90 percent of light vehicle production in 2013. …

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