Rebuilding Place in the Urban Space

"A community’s physical form, rather than its land uses, is its most intrinsic and enduring characteristic." [Katz, EPA] This blog focuses on place and placemaking and all that makes it work--historic preservation, urban design, transportation, asset-based community development, arts & cultural development, commercial district revitalization, tourism & destination development, and quality of life advocacy--along with doses of civic engagement and good governance watchdogging.

Saturday, June 04, 2022

Quantum change in technologies can change industrial agglomeration economies, business and sector organization, location etc. | Electric vehicles

One of the things that has struck me about the introduction of the electric car is how it is transforming the automobile manufacturing industry which has been clustered in Michigan and the Midwest after the initial period of experimentation and development in the early 1900s, although some manufacturing was always distributed around the country such as in New Jersey, Maryland, Missouri, New York, California, etc.

But in the 1980s, increasingly companies, especially non-US based manufacturers, began opening plants in the South, because it is more difficult for successful labor organization of the workers at those plants, therefore generating lower labor costs.  In the 1990s, seeking even lower labor costs, firms moved more production to Mexico as well. 

Increasingly, engineering and design functions are developing in Southern locations, especially when the companies are outside of the traditional Big 3 firms ("Driving force: San Antonio picks up speed in auto industry," San Antonio Express-News).  From the article:

The shift to automotive research and development could make San Antonio a hub for high-wage jobs in zero-carbon transportation in the years ahead, city officials say. DeLorean said its San Antonio employees will earn, on average, about $140,000 annually. 

“The long-term play is to get more of the value-added work. So when you see Navistar coming here, they didn’t just bring a truck factory, they brought their engineering plant,” Marquez said. “That’s what our county strategy has been from the beginning.”

The onset of the electric car has created a similar kind of exogenous shock, with Tesla having plants in California and Texas, Rivan opening a plant in Georgia, states like Oklahoma are vying for plants ("What to know about Oklahoma's embrace of the electric vehicle industry," Daily Oklahoman), and distributing development, design, and engineering functions away from the Midwest, etc.

The Detroit News has an interesting article about GM and how its president, Mark Reuss (son of a former GM president also) remains committed to keeping Michigan and the Midwest as central locations for the production of electric vehicles, rather than moving elsewhere.  

-- "Mark Reuss kept GM investing in Michigan, Detroit to build EV future here"

Transportation costs.  An article in the New Yorker about logistics said that with the rise of the container, shipping costs dropped from almost $6 per ton to 16 cents ("When Shipping Containers Sink in the Drink").  That's why firms became free to move manufacturing overseas.

If the rise in the cost of energy and the difficulty of having enough truck drivers persists, along with other supply chain and logistics problems, it could well be that moving automobile manufacturing outside of its traditional areas could be costly in terms of sourcing parts, etc.

Political costs: legacy versus new industries | Fossil fuels versus green energy industries. Another thing is that by moving plants into Republican states, they can be subject to more criticism and opposition, which may be fomented by businesses committed to a fossil fuel based economy ("The pollution paradox," Guardian).   And what I call the intra-national "Petro State" effect, where states like Texas and Oklahoma promote pro-fossil fuel policies.

For example, Governor Kemp of Georgia has been criticized for providing tax incentives to Rivian ("Rivian electric car plant blasted by foes at Georgia meeting," AP).  (The Economist argues that such lobbying helps countries like China, who are more focused on developing new technologies and industries rather than saving old ones. See "China’s plans for the electrified, autonomous and shared future of the car.")

But what will happen to states like Texas and Oklahoma as electric vehicle related firms rise in importance?  Will the states have to be more "fair" about representing multiple sets of interests?  Probably not, fossil fuels in the short run are far more important economically to the economies of those states.

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