When the first M-Class sport utility vehicles rolled down the brand-new assembly line at Mercedes-Benz’s factory in Tuscaloosa County in February 1997, few could imagine the milestones that Alabama’s auto industry would reach. In less than a generation, Alabama has become a major auto production center, making vehicles shipped to countries around the world. Starting with that first M-Class,
Alabama automakers have combined to build 9.3 million vehicles through the end of 2015. Their output for 2015 barreled through the 1 million mark for the first time
The state’s all-time production total will cross the 10 million milestone sometime in 2016.
he journey has been a profitable one for Alabama, which scarcely possessed an auto sector two decades ago. Between them, Mercedes, Honda, Hyundai and Toyota have invested or announced plans to invest more than $10 billion in the state. The high-speed growth has made Alabama a Top 5 state for auto production and a top auto-exporting state.
“The auto industry has been a main driver of growth in Alabama, generating tens of thousands of jobs and drawing significant new investment into communities across the state,” said Ken Novak, head of economic and community development for Alabama Power. “In addition, it has put Alabama on the map in an industry that has a global scope.”
Despite its youthful status, the economic impact of Alabama’s auto cluster is hard to ignore. The Michigan-based Center for Automotive Research calculated that 3.7 of Alabama’s labor force worked in auto-related jobs in 2014, the sixth highest percentage among the states.
Motor vehicles and parts have become the state’s single biggest export, with shipments valued at $7.3 billion in 2014, according to data from the Alabama Department of Commerce. Exports of Alabama-made vehicles have surged 450 percent since 2009 on increasing shipments to countries such as China, South Korea, Mexico and Russia.
Investment in the sector, meanwhile, shows no signs of hitting the brakes. Based on announced projects, new capital investment in Alabama’s auto industry should top $2 billion in 2015, creating thousands of new jobs. Investments tied to auto industry projects started in Alabama between 2012 and 2014 were expected to create 16,000 direct jobs.
The state’s auto assembly factories cast massive economic ripples. A 2015 study by Auburn University at Montgomery researcher Keivan Deravi found that the Hyundai assembly plant alone is responsible for $4.82 billion in annual economic activity in Alabama, accounting for more than 12,600 direct jobs.
Another study, by Sam Addy at the University of Alabama, calculated the 2014 economic impact of Honda’s assembly plant in Talladega County at $6.8 billion – equal to 3.4 percent of the state’s gross domestic product.
“Honda came to Alabama with a commitment to invest $400 million and employ 1,500,” said Steve Sewell, executive vice president at the Economic Development Partnership of Alabama. “Today, that investment is more than $2 billion and the direct employment is more than 4,500. That’s been a good deal for Alabama.”
The automakers’ expanding Alabama operations have drawn supplier factories to areas such as Lee County, where 20 parts makers have settled, and Greenville, where suppliers have invested more than $300 million and created 750 jobs. Around a dozen suppliers have located in Chambers County, bringing around 1,700 jobs more than $220 million in investment.
In all, more than 140 auto suppliers operate in Alabama today, employing nearly 26,000 people. The Alabama Department of Commerce and its economic development allies, including Alabama Power, have targeted the auto supply chain as a recruitment priority.
After combining to produce nearly 995,000 vehicles in 2014, Alabama’s automakers built at least 1,033,095 vehicles in 2015 – a record annual tally for the state. The 2015 production figure traces the sharp growth trajectory of the Alabama auto cluster, which has seen vehicle output increase nearly 50 percent in five years and 115 percent in a decade.
Expanding production at Mercedes’ Tuscaloosa County plant helped Alabama’s auto industry accelerate through the 1-million milestone. In 2015, Mercedes-Benz U.S. International, as the Alabama operation is known, produced at least 300,000 luxury vehicles, an increase of nearly 30 percent from the previous year. That followed a gain of 26 percent in 2014.
“We’re successful here at MBUSI because we have a highly qualified and motivated team with a ‘can-do’ attitude,” said Jason Hoff, head of the automaker’s plant.
Meanwhile, both the Honda and Hyundai plants are also operating near or beyond capacity. In June 2015, Hyundai celebrated the production of its 3-millionth Alabama-made vehicle – a silver Sonata sedan – almost exactly 10 years after opening its Montgomery plant. The facility can produce as many as 400,000 vehicles and 700,000 engines annually.
“The commitment and dedication of our nearly 3,000 team members has allowed HMMA to achieve this production milestone faster than any other automotive assembly plant in the Southeastern U.S.,” said Jun Ha Kim, president of the company’s Alabama operation.
Alabama economic development leaders say the auto sector is set for more growth – and new milestones.