Alabama’s auto industry keeps rolling, although potholes might be forming

Alabama has become one of the top five automotive production states in the country, drawing the eyes of OEMs, auto suppliers and the United Auto Workers union

Workers at Hyundai Motor Manufacturing Alabama in Montgomery assemble one of the vehicles on the production line.

Ever since that first ML 320 SUV rolled off the assembly line at the Mercedes-Benz manufacturing plant in Vance in 1997, Alabama’s burgeoning automobile industry has primarily had its cruise control set on success. The state has added three more OEM assembly plants since then — Honda, Hyundai and Mazda Toyota — along with a major Toyota engine plant and approximately 150 Tier I suppliers and logistics companies.

Along the way, Alabama has become one of the top-five auto-production states in the country, a ranking that is expected to continue in 2024. But a bumpier ride could lie ahead, with potential challenges involving proposed worker unionization, the expansion of electric vehicles and the need for additional skilled labor in the sector.

Despite these possible potholes, most of the current numbers in the industry are as smooth as a freshly paved road.
For example:

  • Combined production capacity at the state’s auto plants is more than 1.3 million vehicles annually.
  • Direct employment in Alabama’s automotive manufacturing sector is approaching 50,000 jobs, with more than half that number (27,000) in the state’s supplier network.
  • Motor vehicles are Alabama’s top export category, at nearly $9 billion (third in the nation), while exports of Alabama-made auto parts and products are close to $500 million.
  • Honda, Hyundai and Toyota have the production capacity to build 1.9 million engines annually at their Alabama plants. Together, they have produced a total of more than 18 million engines in the state.
  • Between 2020 and 2022, companies in the automotive manufacturer sector announced plans to invest approximately $3.4 billion in projects in Alabama, creating nearly 7,000 jobs.
Ron Davis, president of the Alabama Automotive Manufacturers Association.

“The automotive industry in Alabama continues to thrive,” says Ron Davis, president of the Alabama Automotive Manufacturers Association. “Since 1997, Alabama’s OEMs have combined to invest around $15 billion in their assembly operations and have produced more than 15 million vehicles.”

As a result, many state officials are taking the approach of, “If it ain’t broke, don’t fix it,” when it comes to unionization efforts at the Alabama auto plants. The United Auto Workers has been actively campaigning to unionize Alabama’s manufacturing plants, particularly the Mercedes facility. This effort has been loudly criticized by Gov. Kay Ivey, the Alabama Department of Commerce and other state officials.

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“Alabama’s auto industry has been the primary growth engine for the state’s economy for decades, but I have a very strong concern about how unionization efforts in our state could affect those growth prospects,” Davis says. “This is a pivotal moment for Alabama’s auto industry, which directly employs around 50,000 people in good-paying jobs across the state. This was done without the presence of the UAW.

“The AAMA respects the right of the state’s autoworkers to make their own decision on this issue. However, we do not want continued growth of our auto industry hampered by unnecessary conflict and messy confrontation that could disrupt the very strong reputation we currently have in our workplace environment and the production of vehicles in Alabama.”

Former Alabama Department of Commerce Secretary Greg Canfield, second from left, is inducted into the AAMA Hall of Fame.

Another issue facing the auto industry that isn’t quite as contentious — but still could be problematic — is the transition to producing more electric vehicles. Automakers worldwide have invested billions of dollars in improving EV technology, but sales growth in electric vehicles slowed significantly in 2023.

According to data released by the automotive consulting company Motor Intelligence, year-over-year sales growth for electric vehicles in the U.S. dropped from a high of 76% in April of 2022 to 42% in November of 2023. So, while the numbers are still increasing, the enthusiasm for EVs appears to be waning among consumers.

“We are making good strides in transitioning to electric vehicles, but as we navigate this transition, the market demands may be a little different than what we originally thought,” Davis says. “In the meantime, we’re still building very good internal-combustion cars and hybrid vehicles in the state of Alabama, along with high-quality engines.”

Despite the current decrease in demand, most analysts expect EVs to continue becoming a larger portion of the overall auto-production market. Davis says Alabama is preparing for this seemingly inevitable transition through several major projects.

“Alabama is poised for a build-out of an EV supply chain, most notably with Hyundai’s announcement of a $205 million project to open an EV battery module plant in Montgomery,” Davis says. “The facility will employ 400 and supply batteries to the Hyundai plant in Alabama and a Kia plant in Georgia.

“Alabama also is contributing to sustainability solutions for EV’s Li-Cycle (lithium battery recycling) by opening a recycling facility that will help Mercedes dispose of end-of-life EV batteries. In addition, Birmingham’s Southern Research is studying ways to repurpose EV batteries that are no longer used.

“And Alabama will become home to the nation’s first graphite processing facility, providing automakers with a domestic source for material that is critical to EV production. Westwater Resources will invest a total of $202 million in the first phase of a project to open a facility in Alabama (near Alexander City).”

Huntsville Mayor Tommy Battle, second from left, recently was inducted into the AAMA Hall of Fame.

Davis says efforts also are underway to increase the number of EV charging stations in Alabama. He says AAMA is working with the Alabama Clean Fuels Coalition to create a plan for the implementation of charging stations throughout the state. “We have a cross-functional team that includes our OEMs, state leadership and Alabama Power that is proceeding aggressively on that,” Davis says.

Finally, an issue affecting a number of industries these days is the need for more skilled workers. According to a 2023 survey of auto manufacturing officials conducted by ABB Robotics in partnership with Automotive Manufacturing Solutions, 56% of the respondents listed specific-skill labor shortages as a major concern.

“We’re making progress to provide more skilled workers into our auto industry,” Davis says. “It’s a team effort that includes our OEMs, the Governor’s office, the Department of Commerce, AIDT (Alabama Industrial Training), ATN (Alabama Technology Network), the community college system and K through 12.

“We tremendously value those partnerships as we work together to address the labor concerns and needs of the industry, so we can continue to produce world-class, quality auto products in Alabama.”

Cary Estes is a Birmingham-based freelancer contributor to Business Alabama.

Look for more Alabama automotive coverage throughout the month on our website or pick up a copy of the March 2024 issue of Business Alabama.

This article appears in the March 2024 issue of Business Alabama.

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