Follow the money: Investing in North American production

The North American production landscape is undergoing a major transition, as evidenced by the sizeable investments in vehicle assembly plants by automakers in the region. From 2019 to 2025, manufacturers will invest over US$37 billion in automotive production facilities in North America [1]. These massive investments paint a picture of the direction in which automakers believe the industry is heading. Products, technologies and areas deemed the most likely to turn a longer-term profit benefit from hefty investments, while those likely to be less profitable are given limited capital investment or are abandoned entirely.

The most expensive projects tend to result in the construction of an all-new plant, or an increase in overall capacity at an existing facility. Between 2019 and 2025, 17 new plants are set to open in North America, with 15 of them housed in the US. Nine of the new plants will be built or repurposed by startups like Rivian, Canoo and Lucid, while the remaining eight will be operated by established automakers like Ford, General Motors and Tesla. In addition, 17 other plants in the region will receive capacity increases during the period, 12 of which will be located in the US, thus underscoring the prevailing view that US manufacturing is crucial for survival in the North American market.

Between these new plants and capacity increases, total capacity is projected to rise by nearly 2.1 million units from 2019 to 2025, representing an increase of 10%. By 2025, 32% of the plants in North America will have received a capacity increase or will be entirely new.

Another facet of these investments to consider is the technologies that they support. Perhaps unsurprisingly, most of the investments in the 2019-2025 timeframe are centred around SUVs and vehicle electrification, signalling that OEMs plan to invest considerable capital in these areas. Over 77% of the investment dollars announced for the North American region are expected to go either partly or entirely to SUV or EV projects, with 28% earmarked for projects that encompass both SUVs and EVs.

To get a sense of where OEMs think the future of the industry lies, one need only examine the investments being made. Overwhelmingly, the path ahead seems to lead to an even greater proliferation of SUVs, increased vehicle electrification, and a boost to US manufacturing might.

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[1] This figure does not include the billions of dollars that will be poured into R&D and powertrain facilities or any unannounced investments (upgrades to plants in Mexico, for instance, are not usually publicised in the same way that they are in the US and Canada).