Home inFocus Agenda: America (Summer 2024) Alabama’s Auto Industry

Alabama’s Auto Industry

Jerry Underwood Summer 2024
New vehicles in production at the Mercedes-Benz Plant in Tuscaloosa, Alabama.

For Alabama’s economic future, the pivotal moment came on Sept. 30, 1993, when executives of Mercedes-Benz arrived in Tuscaloosa with an announcement that shocked the global business community.

In the months leading to that day, a Mercedes team had explored potential sites in at least 30 states as a home for the automaker’s first U.S. manufacturing facility. They came to Alabama that day to announce their decision.

For many, the news was a lightning bolt out of the blue. After all, Alabama had never produced an automobile and barely had any presence in the industry. But Mercedes found what it wanted in a rolling 900-acre site, lined with pine trees, just outside of Tuscaloosa.

The initial investment back in 1993 was $400 million, with plans for 1,500 workers. The project quickly become much more than that; in fact, it came to represent a dividing line for Alabama. For many, it became “Before Mercedes” — and “After Mercedes.”

Flash forward to 2023. Mercedes has invested over $7 billion in its Alabama operation through repeated expansions that have seen its workforce in Tuscaloosa County swell to over 6,300 people. Over 4 million vehicles have rolled down its assembly lines.

Critically, Mercedes’ arrival in Alabama opened the door for other automakers, which were also attracted by the state’s low-cost environment, first-class worker training programs, a large available workforce and its status as a right-to-work state, among other factors.

Today, Honda, Hyundai and the Mazda-Toyota partnership have joined Mercedes to operate large-scale assembly plants in Alabama, solidifying the state’s reputation as an auto industry powerhouse.

“The auto industry has been the primary driver of economic growth across Alabama for over two decades, providing high-paying careers for our citizens and first-class workplaces for our communities,” Governor Kay Ivey said. “The industry’s impact on Alabama has been massive but what really excites me is how its future is going to be even brighter in our state.”

Growth Engine

The industry’s ascent has been rapid. Automakers have assembled over 15 million vehicles in Alabama since the first Mercedes M-Class rolled down the line in February 1997. Combined production capacity at the state’s auto plants now tops 1.3 million vehicles annually, earning the state a Top 5 ranking in the U.S.

Direct employment in Alabama’s automotive manufacturing sector approaches 48,000, surging from just a few thousand back in 1997. Around 26,000 of these jobs are in Alabama’s expanding auto supplier network, which today counts 150 Tier 1 suppliers and logistics companies.

Motor vehicles rank as Alabama’s No. 1 export category. Exports of Alabama-made automobiles totaled $8.9 billion in 2022, while exports of Alabama-made auto parts and products approached $500 million. Alabama ranks No. 3 among the states for vehicle exports.

Alabama’s five automakers have combined to invest around $15 billion in their assembly operations in the state, according to data from the Alabama Department of Commerce.

With capital investment of that magnitude, it’s obvious that Alabama’s auto industry functions as a dynamic growth engine for the state’s economy.

Consider the powerful impact of the Mazda Toyota Manufacturing (MTM) joint-venture assembly plant in Huntsville, which now produces a SUV for each of the automakers. This $2.3 billion facility, which began production in 2021, is not only bringing up to 4,000 direct jobs to Alabama but also generating strong economic ripples in its wake.

More than a dozen Mazda Toyota suppliers, logistics firms and support companies have established locations in Alabama, creating over 2,000 new auto-sector jobs. Combined, this supply-chain investment exceeds $725 million.

In addition, the MTM venture has joined Toyota, which operates a $1.5 billion engine plant in Huntsville with 1,900 workers, as a good corporate citizen in North Alabama.

“MTM has been a strong community partner since its inception,” Mayor Tommy Battle said. “We have been excited and honored to celebrate each milestone with our friends and partners, and we look forward to many more years of collaboration, contribution and prosperity.”

Meanwhile, investment by the auto industry continues to grow across Alabama.

Since 2020, companies in the automobile manufacturing sector have announced plans to invest around $4 billion in Alabama growth projects, creating almost 7,500 jobs, Commerce data show. In August 2023, Hyundai announced a new $290 million investment in its assembly plant in Montgomery to prepare for mass production of a next-generation Santa Fe SUV.

Other major 2023 growth projects are being launched by suppliers Samkee, which is investing $128 million to open a plant in Tuskegee with 170 workers, and Shinhwa, which is expanding in Auburn with a $114 million investment and 50 additional workers.

Economic Transition

Before the auto industry came to Alabama, the textile and apparel industry provided a large share of the bread-and-butter jobs in many small towns across the state. By the time Mercedes had planted roots, however, the decline of the old-line textile industry was beginning to accelerate across the state.

Chambers County, which borders the Georgia state line and stands 80 miles from Montgomery on Interstate 85, stood at ground zero for this free-fall. The rural county had long depended on the textile industry before the plant closings started.

During a bleak 2007, a single textile company shuttered seven facilities in the county, eliminating 1,637 jobs. More pain was on the way as jobs vanished. By February 2009, the county’s unemployment rate peaked at 19.7%, with 2,833 people out of work.

Having endured the bloodbath of lost textile industry jobs, Chambers County is now home to a dozen auto suppliers that have replaced the lost textile jobs and continue to add more workers.

At least three of Chambers County’s auto suppliers have even located in vacant textile facilities, providing a potent symbol of the economic transformation.

This shift has played out in many other rural communities across Alabama as the rise of Alabama’s auto industry began bringing supplier companies to communities such as Alexander City, Opelika, Greenville and Selma.

“Alabama’s rural communities offer auto manufacturers and other companies from all over the globe everything their ventures need to grow and thrive over the long haul,” said Brenda Tuck, Rural Development Manager for the Alabama Department of Commerce. “Opportunities abound in the state’s rural communities, and corporate decision-makers are paying attention.”

Preparing the Workforce

Alabama’s commitment to workforce development has been a factor in the auto industry’s growth in the state — and that commitment is unwavering.

In November 2023, AIDT, Alabama’s primary workforce development agency, announced plans to build a $30 million workforce training center in Decatur that will focus on electric vehicles and emerging technologies to fully position the state’s auto industry for the next chapter of its growth.

The facility will be located on the campus of the Alabama Robotics Technology Park, a unique $73 million center operated by AIDT that helps companies train workers on advanced R&D and manufacturing technologies.

“Our main goal is to help the state’s automakers continue to grow during the transition to electric powertrains and assist them as they embrace new technologies that are evolving all the time,” AIDT Director Ed Castile said. “We just want to make sure we have a workforce that has the ability to thrive in this new environment, so it’s a natural extension of what we do at the Robotics Park.”

AIDT has been involved in the growth of Alabama’s auto industry since the early days, when it assisted Mercedes in assembling and training its original workforce. Over three decades, AIDT has completed automotive training for over 125,000 people.

“We are full partners with all of our original equipment manufacturers (OEMs) and almost all their suppliers in the workforce space, having recruited, assessed and trained workers for many years and through all their expansions,” Castile said. “Our auto companies continue to invest in their Alabama operations. We’re a real player in the industry now, and we’re just going to keep becoming a bigger player in this influential global business.”

In 2023, AIDT revived a multi-state campaign called “Shift” to attract a new generation of workers for the sector and help the industry fill over 11,000 auto manufacturing positions.

The EV Evolution

It’s clear the global auto industry views electric vehicles as the future, prompting automakers to craft strategic plans — powered by massive investments — to position themselves for a revolutionary shift that’s approaching at top speed.

In Alabama, the industry is making major moves to capitalize on the evolution toward EVs.

It’s starting with Mercedes, which is steering Alabama into the future once again as a $1 billion investment to prepare for EV production is coming to fruition. The project upgraded a plant that the company already described as one of the world’s “smartest” manufacturing facilities.

In August 2022, just months after opening a sprawling battery assembly plant in Alabama, the German automaker celebrated the production launch of its luxury EQS sport utility vehicle at its Tuscaloosa County factory. Another EV, the EQE sport utility, is also being built there.

“Our team here in Tuscaloosa plays a major role in the global success of Mercedes-Benz. We are proud that not only the new all-electric EQS SUV and EQE SUV are being built here in Alabama for markets worldwide, but also their high-performance batteries,” said Michael Göbel, head of Production North America and president and CEO of Mercedes-Benz U.S. International, as the Alabama operation is known.

In another milestone, Hyundai’s Alabama assembly plant has begun producing its first EVs — the electrified Genesis GV70 and a plug-in hybrid electric Santa Fe SUV. To get ready for that production launch, Hyundai pumped a $300 million investment into its Montgomery plant.

To advance future EV production plans, supplier Hyundai Mobis is embarking on a project to open a $205 million EV battery module plant in Montgomery that will employ as many as 400 people.

The increasing activity in the EV supply chain transmits the signal that Alabama’s auto sector is fully concentrating on tomorrow, according to Greg Canfield, who as the state’s Commerce Secretary for 12 years has witnessed the industry’s growth

“In just a quarter century, Alabama’s auto industry has gone from zero to 100 mph, and I know that our five global automakers will continue to invest in their operations in the state to fully realize their potential,” said Canfield, who stepped down from his post on Dec. 31.

“There is serious horsepower here, and I think our auto industry is just getting started in this new age,” he added.

Jerry Underwood is the business editor at Big Communications.