ANNUAL AUTOMOTIVE INDUSTRY REPORT Cars and the Economy: A Michigan and National Perspective 1
Cars and the Economy: A Michigan and National Perspective I. Introduction This is the first in a series of annual reports that will provide a general overview of the U.S. and Michigan economies with special emphasis on the automobile industry and its impact on Michigan and America. The report draws from numerous sources and is prepared by the McNair Center for the Advancement of Free Enterprise and Entrepreneurship at Northwood University and will be released each fall in conjunction with the Northwood University International Auto Show (NUIAS). The NUIAS is run completely by our students and is the world s largest outdoor auto show. II. The Michigan Comeback Continues Not So Nationally The Great Recession in the United States from December 2007 to June 2009 saw the largest decline in GDP, 4 percent, and the sharpest increase in national unemployment, from 4.5 percent to 10.1 percent since the U.S. Great Depression of the 1930 s. Economic conditions were far worse in Michigan with the bankruptcy of General Motors and Chrysler, and new automobiles, sport utility vehicle and light truck sales were at a 40 year low of 10.4 million vehicles sold nationally in 2009. Let us not forget that Michigan s unemployment rate hit a peak of 14.2 percent in 2009 and was just above 5 percent at the end of 2016 while new vehicle sales reached a record high in 2016 as well (see Exhibit 1). Michigan job growth was impressive in 2016 and projections call for an annual increase of more than 2 percent in 2017. The University of Michigan s early projection of solid job growth of 69,000 jobs for Michigan in 2016 was surpassed with 96,800 jobs created for the year; an annual growth rate of 2.3 percent. Michigan has averaged roughly 74,000 jobs created annually since the summer of 2009. From December of 2010 to December of 2016, Michigan lead the country in the creation of manufacturing jobs and was number six in the creation of private sector jobs with more than 580,000 jobs created. Michigan s unemployment rate has dropped more than 70 percent since late 2010, making it the top performing state in this category at the end of 2016. 2
Michigan remains the automotive management capital of the U.S., as well as its design and research and development center. In 2016, the U.S. automobile industry reached an all time record for automobiles, SUV s and light trucks sold at just over 17,539,000 vehicles. Record-breaking sales in 2016 were up just under.5 percent with impressive gains by the Detroit three and a promising 2017 in progress. Today, Michigan is home to roughly 13,800 manufacturing firms of all sizes employing just over 600,000 people while the overall automobile industry produces just under 20 percent of all jobs in Michigan. Michigan ranked 15 th in state GDP growth in 2016, outpacing all of the Great Lakes Region states with Ohio (20 th ) and Wisconsin (28 th ) following close behind, according to the U.S. Bureau of Economic Analysis (BEA). The Tax Foundation s 2017 State Business Tax Climate Index ranks Michigan the 12 th most competitive state relative to the overall business tax climate, something that is important for job creation, the attraction of new businesses and investment in human capital. Michigan has made tremendous progress in changing its state business tax environment since 2006, when it was ranked the 28 th most competitive business tax climate in the United States. Perhaps even more remarkable, Michigan has gone from being the 49 th most competitive state relative to corporate taxation in 2006, to being 8th in 2017 (see Exhibits 2-5). 3
Clearly the Michigan economy has made a bold comeback of late experiencing strong economic and job growth especially in the manufacturing and automotive sectors. We continue to be concerned about our federal tax rates, especially relative to business on a global scale (see Exhibit 6).. We believe tax reform at the federal level will spark economic growth, ensure competitive advantages and increase tax revenues to reduce our national debt as the U.S. economy has averaged less than 2 percent annual GDP growth since 2009 (see Exhibit 7). 4
III. U.S. Economy and Motor Vehicle Industry U.S. 2016 GDP was $18,456,292,000,000. The U.S. population in 2017 is 325 million. There were roughly 1.34 billion automobiles, light trucks and SUVs registered worldwide with just under 270 million registered in the U.S. in 2016. The U.S. had 4.3 percent of the world s population and just over 20 percent of the world s registered automobiles, light trucks and SUVs in 2016. The U.S. auto industry provided 7.25 million jobs to the U.S. economy in 2016, or 1 in 25 jobs were dependent on the U.S. auto industry. There were roughly 17.54 million new automobiles, SUV s and light trucks sold in the U.S. in 2016, which was a record 7 th year of automotive sales growth. The auto industry provided roughly $205 billion in taxes to local, state, and federal governments in the U.S. on $1.19 trillion in total automotive related sales. The U.S. auto industry after adjusting for imports and exports of automobiles, parts, and services contributed between 3.0 percent ($554 billion) to 3.5 percent ($645 billion) to U.S. GDP in 2016. Median household income nationally was $56,516 for 2016. There were 269.4 million automobiles, light trucks and SUVs registered in the U.S. in 2016. The average dealership in the U.S. spends just under $600,000 on advertising. New car dealerships and independent garages contributed $297.14 billion to the U.S. economy through servicing of vehicles and parts sales. The number is roughly $366 billion if you include warranty work. The average retail sales price for a used vehicle sold in the U.S. in 2016 was $19,886. The average retail sales price for a new vehicle sold in the U.S. in 2016 was $31,696. There were 16,708 total new car dealerships in the U.S. with an average of 334 new car dealerships per state in 2016. Average new car payments in the U.S. in 2016 was $576. 5
IV. Michigan Economy and Motor Vehicle Industry Michigan s 2016 GDP was $487,239,000,000. The population of Michigan was 9.935 million in 2016. Michigan is the 13 th largest state economy in the United States. If Michigan were a country its GDP would rank 24 th in the world, slightly larger than the country of Belgium. Michigan represents 2.63 percent of U.S. GDP Michigan economic growth ranked 15 th among the 50 U.S. States in 2016 and 6 th after adjusting for inflation. Median household income was $51,048 in Michigan for 2016. There were 8,445,828 automobiles, SUV, and light trucks registered in Michigan in 2016. There were almost 944,000 auto related jobs in Michigan in 2016, which accounted for 19.9 percent of the total state workforce. There are 53,153 total auto related employers in the state of Michigan in 2016. There was roughly $30 billion in automobile sales and maintenance in the Michigan economy in 2016. There were 645,029 total new cars sold in Michigan in 2016. Auto related business activity accounted for $3.4 billion or 14% of Michigan state tax revenue in 2016. The average new car dealership employee has an annual salary of roughly $58,292 annually; more than $7,000 higher than median household income in Michigan. There are 36,677 people employed by automobile dealerships in the state of Michigan, roughly 60 people per dealership. The average new car price in Michigan in 2016 was $32,719. Michigan had 611 new car dealerships located in the state in 2016, almost double the national average ranking it 7 th nationally in dealership concentration. Average new car payment in Michigan was $595 in 2016. 6
V. Ways to Get to Work in Michigan Transportation Michigan Overall U.S. Drive Alone 82.4% 76.6% Carpool 8.8% 9% Public Transportation 1.5% 5.2% Work at Home 3.8% 4.6% Walk 2.2% 2.8% Taxi, Motorcycle, Bicycle and All Other 1.3% 1.8% VI. Top Auto Industry Related Businesses Motor Vehicle and Equipment Production 2,454 facilities 394,984 employees Suppliers, Parts, and Tires 5,077 facilities 88,862 employees Motor Vehicle Dealers (New and Used) 3,684 facilities 109,958 employees Auto Supply Stores 3,999 facilities 27,933 employees Gas Stations 5,821 facilities 35,954 employees Property and Casualty Insurance 90 facilities 844 employees Car and Truck Rentals 2,323 facilities 13,328 employees Auto Repair Shops 18,464 facilities 66,901 employees Car Washes and Other Services 6,567 facilities 33,368 employees VII. Conclusion Clearly, the Michigan economy has come a long way since the trough of the Great Recession in 2009. It is a tribute to hard working Michiganders, sound public policy in Lansing and a highly successful and resilient automobile sector. the comeback continues on a positive path and the destination has yet to be reached. The federal government could learn much from reforms in Michigan since 2011 especially relative to tax and regulatory reform. Sources: Auto Alliance, Bureau of Economic Analysis, Bureau of Labor Statistics, Automotive News, KPMG, Tax Foundation, National Automobile Dealers Association, Auto Care Association, OECD, World Bank, IMF, University of Michigan RSQE, Center for Automotive Research, Dun and Bradstreet, IHS Markit, U.S. Department of Energy, U.S. Census Bureau, Bloomberg, U.S. Department of Treasury, U.S. Office of Management and Budget, Standard & Poor s, The Wall Street Journal and Ward s Automotive. 7
ABOUT THE MCNAIR CENTER FOR THE ADVANCEMENT OF FREE ENTERPRISE AND ENTREPRENEURSHIP The McNair Center for the Advancement of Free Enterprise and Entrepreneurship at Northwood University is a leading economic think tank generating information focused on the study, advocacy and expansion of the market-process and the creation and cultivation of entrepreneurs. The McNair Center aims to generate knowledge and understanding of the importance and value of entrepreneurship in a free and competitive economy, and the impact entrepreneurs have beyond transactions on the progress and prosperity of society as a whole. It was dedicated in July 2015 and funded by a generous gift from the Robert and Janice McNair Foundation. ABOUT NORTHWOOD UNIVERSITY Northwood University is committed to the most personal attention to prepare students for success in their careers and in their communities; it promotes critical thinking skills, personal effectiveness, and the importance of ethics, individual freedom and responsibility. Private, nonprofit, and accredited, Northwood University specializes in managerial and entrepreneurial education at a full-service, residential campus located in mid-michigan. Adult Degree Programs are available in multiple states and online. The DeVos Graduate School offers day, evening, weekend programming in Michigan and Texas, and online. The Michigan-based Alden B. Dow Center for Creativity and Enterprise provides system-wide expertise in family enterprise, entrepreneurship, creativity and innovation, and new business development. International education is offered through study abroad and in Program Centers in Switzerland, China (Changchun and Wuxi) and Sri Lanka. For additional information regarding Northwood University, go to www.northwood.edu. ABOUT THE AUTHORS Timothy G. Nash is senior vice president and director of the McNair Center at Northwood University, Keith A. Pretty is president and CEO of Northwood University, Lisa A. Fairbairn is dean of the Richard DeVos Graduate School of Management at Northwood University, Kevin G. Fegan, vice president, Executive Education and Corporate Programming at Northwood University, Josh Weckesser is an economics major and McNair scholar at Northwood University, Morgen Panning is a marketing major and McNair scholar at Northwood University, Elgie Bright is chair of the automotive marketing program at Northwood University and Donna Wagner is chair of the automotive Aftermarket program at Northwood University 8