Despite more than two years of the COVID-19 pandemic, a worldwide shortage of semiconductor chips and other supply chain challenges, the auto manufacturing industry — and in particular Alabama’s auto industry — is rolling right along.
Alabama manufactures 15 different passenger vehicle models. The manufacturing plants run by Mercedes, Honda and Hyundai in Alabama alone have the capacity to produce more than one million vehicles a year with the brand-new Mazda Toyota plant in Huntsville expected to assemble another 300,000 annually at full capacity, according to the state Department of Commerce.
That production capacity places Alabama fifth in the nation for the assembly of cars and light trucks and in striking distance of capturing the number two spot by 2024. This comes as the industry prepares to move from assembling gas guzzling passenger cars and SUVs to all electric vehicles.
“The health of the industry in Alabama is very strong,” says Ron Davis, president of the Alabama Automotive Manufacturers Association. “You’re going to see a transition of a lot of our industry progressing toward electric vehicles. It’s not going to be an overnight thing, but all of our OEMs are gearing up for electric vehicles to be a very important part of the future.”
And the industry is getting a major boost from recent passage of President Joe Biden’s Infrastructure Investment and Jobs Act.
The new law sets aside $5 billion to build a nationwide charging network. In addition, the legislation also provides another $2.5 billion to go to communities via a competitive grant program to, among other things, ensure charger deployment reaches rural and disadvantaged communities.
And just recently in Alabama, Gov. Kay Ivey unveiled the new Drive Electric initiative that aims, through a series of advertisements and events, to influence Alabamians to buy electrified vehicles.
“One thing can be said for certain and that is there is rapid change in both technology and therefore changes within the supply chain that are taking place today,” says Alabama Secretary of Commerce Greg Canfield. “As rapidly as technology is changing, the evolution of the automotive sector from combustion engines to electric vehicle platforms are leading that change.”
In Vance, Mercedes-Benz U.S. International (MBUSI), thanks to a $1 billion expansion effort, will produce the all-electric EQE SUV and EQS SUV this year, and has a battery pack assembly plant in Bibb County for those models.
“Suppliers will also have to make a transition,” Davis says. “If you have plants that produce engines, then as electric vehicles come on, the volume of gas-powered engines will clearly go down. Those 100% focused on traditional vehicles, their business models will have to change or they could be in jeopardy for the future if they don’t develop or produce products that support the electric vehicle transition.”
In other expansion news, Toyota is investing $288 million at Toyota Motor Manufacturing Alabama in Huntsville for new twin-turbo 4-cylinder and V6 engine lines and to expand the plant’s production capacity by an estimated 35%. The plant also produces V8 engines.
Also in Huntsville, Mazda Toyota Manufacturing U.S.A. Inc., a jointly-owned and operated plant, is assembling the all-new 2022 Toyota Corolla Cross and the Mazda CX-50.
Down south in Lincoln, Honda is producing the 2022 Honda Passport and off-road Honda Passport TrailSport, in addition to the Odyssey, Pilot and Ridgeline vehicles, while Hyundai Motor has added the 2022 Hyundai Santa Cruz truck and Tucson SUV to its lineup that includes the Sonata and Elantra sedans and the Santa Fe SUV.
Today, transportation equipment is Alabama’s number one export. In fact, Alabama ranks number four among the states for vehicle exports, according to the state Department of Commerce. China was the number one export market for vehicles produced in Alabama with nearly $1.7 billion in shipments followed by Germany, Canada, South Korea and Belgium.
In all, vehicle models produced in Alabama were shipped to 83 countries in 2020.
To support the state’s auto industry exports, a new $60 million roll-on/roll-off terminal is now complete and ready for business at the Port of Mobile. The 57-acre terminal, completed in 2021, is the closest RO/RO port terminal to Alabama’s assembly plants. AutoMOBILE International Terminal LLC will operate the RO/RO terminal under an agreement with the Alabama Port Authority.
The terminal has a vehicle storage capacity of more than 7,000 units and an annual throughput capacity of more than 150,000 units. It will also offer multimodal connectivity with direct access to five class-one railroads and direct access to interstates 10 and 65. Moreover, its automotive rail ramp consists of 10 tracks, able to accommodate 60 multi-levels at a time, Leonardo Montenegro, AIT’s COO says.
“We’re in active discussions with several auto manufacturers and ocean carriers to drive the first cars and RO/RO cargoes through the terminal,” Montenegro says.
Auto manufacturers also rely on a host of suppliers to keep assembly lines moving, and Alabama has continued attracting them to the state.
Among the suppliers making the move to Alabama are Li-Cycle Holdings Corp., a Canadian-based company that is planning a new EV battery recycling facility in Tuscaloosa, making it the company’s fourth facility in North America.
Li-Cycle announced that it expects to open its Alabama facility later this year and expects to employ 30 workers initially.
“They’re moving into the state of Alabama to capitalize on the very important question about using electric battery technology for vehicles and having an environmentally friendly, sustainable approach to human transportation in the future,” Canfield says.
Another new supplier is Madison Metal Processing, a joint venture of three companies — Toyota Tsusho America Inc., Southern Mobility Products and SteelSummit Holdings, which is a Sumitomo Corp. of Americas subsidiary.
Madison Metal Processing, a steel processing plant, will supply products to other automotive suppliers and provide steel blanks for vehicles assembled at Mazda Toyota Manufacturing in Huntsville.
MMP’s 110,000-square-foot, $40 million Alabama facility, which is set to reach full capacity this year, promises to bring 40 new jobs to the area.
“I think that they [Mazda Toyota] point to the aspect of how bringing in an automotive OEM creates this satellite universe of surrounding supply chains that come along with it,” Canfield says.
In addition, several suppliers expanded their operations in Alabama in 2021.
For example, in Mobile County, ArcelorMittal broke ground on a new $775 million steel plant as part of a joint venture with the Nippon Steel Corp. The plant will produce steel for Alabama’s automotive sector and other automotive companies around the United States, Canfield says.
In Cullman, REHAU announced in August its plans to invest $50 million, which will include new production equipment and tooling and a “significant rearrangement” inside the plant. “The multi-million-dollar expansion was prompted by a contract win to build exterior polymer-based components for Mercedes-Benz SUV models,” the company said. The REHAU expansion is expected to create 125 new jobs.
But there is no doubt that 2021 was a challenging year for carmakers and suppliers in Alabama and around the country due to the worldwide shortage of semiconductor chips resulting from increased demand.
In vehicles, chips are used to operate everything from the power steering to the sensing.
To cope with the shortage, some auto makers have had to periodically slow or briefly stop production. In fact, the consulting firm and industry watcher AlixPartners last fall estimated that the semi-conductor shortage would end up costing the auto industry globally to lose approximately $210 billion in revenues in 2021, up from its May prediction of $110 billion, and that production of about 7.7 million units would be lost that year.
Says Canfield, “We saw interruptions in the automotive sector and in the supply chain. There were specific issues relative to the semiconductor chip issues that really have had some impacts on production levels.”
Then there was the COVID-19 pandemic.
“Like everywhere else around the globe and in all 50 states, Alabama’s automotive industry had to deal with the issues of absenteeism from employees who were coming down with COVID and all of those types of impacts,” Canfield says.
“But at the end of the day, what can be said is that even with all of those challenges, the automotive sector in Alabama has proven itself to be quite resilient,” he says.
Davis says he has high hopes for 2022.
“The industry has learned how to run business in the middle of COVID challenges and is learning some wise things to do for meeting workforce challenges. I’m expecting 2022 to be a much better year.”
For a more indepth look at Alabama’s auto industry, click on the links below:
Gail Allyn Short is a Birmingham-based freelance contributor to Business Alabama.
This article appeared in the March 2022 issue of Business Alabama.