These days, finding cars that can legitimately claim the distinction of being “Made in America” is not an easy endeavor. In fact, when Cars.com attempted in 2015 to compile a list of new models that qualified, it could not even come up with 10. A big reason is that, in order to earn that designation, a vehicle not only has to be assembled in America, but 75 percent of its parts must be manufactured in the U.S. too.
In the decades-long rush to cut costs, the U.S. auto industry has succumbed to the notion that outsourcing parts to foreign manufacturers is the most effective way to keep prices competitive in the global marketplace. While that business model has indeed helped auto companies stay in business, it has also had a devastating impact on American manufacturing. From 2000 to 2016, the U.S. lost 6.7 million manufacturing jobs, the largest decline in U.S. history. While a significant portion of those losses can be attributed to automation, a growing reliance on foreign-made auto parts also played a role, as demonstrated by the skyrocketing U.S. trade deficit for car parts, which jumped from $9.5 billion in 2000 to $31.2 billion in 2010.
Despite such telling figures, the debate still rages over whether the outsourcing of parts is good for the U.S. economy, with automakers worried about the impact that domestic parts manufacturing will have on the price of vehicles, and those who oppose offshoring concerned that trade deals will negatively impact American workers. Of course, for American manufacturers, the choice is clear.
“This is a part that could have been produced in the U.S.,” Scott Paul, president of the Alliance for American Manufacturing, told the Washington Post, “and so, when you have a weaker rule of origin, it’s an open door for other countries to free-ride.”
Regrettably, that’s exactly what has happened. As a result, the American auto parts industry, a once-robust manufacturing sector, has fallen into decline. Mexico, meanwhile, has seized an opportunity, rising to become the top supplier of car parts to the U.S. market. In 2016, shipments of auto parts from Mexico to the U.S. totaled well over $51 billion, according to figures from the U.S. Census Bureau.
Too many industry leaders tend to view this manufacturing trend-line as an unavoidable consequence of the global economy, but others are now starting to realize that returning to the “Made in America” ideal is the key to revitalizing the U.S. auto industry and our Nation. Simply put, the future the American middle class depends on it.
By now, it should be self-evident that good jobs result in a robust middle class. The average annual salary for U.S. manufacturing jobs in America is $77,500—outpacing retail and food service pay—and 95 percent of those jobs come with health insurance. But the resulting stability from solid wages also has a paradoxical effect. While paying workers a decent salary costs companies more on the front end, doing so helps build the fabric of a community and ignites demand for cars that can ultimately bolster a bottom line.
What’s more, the benefits of a “Made in America” ethos extend beyond the corporate balance sheet. Domestic supply chains are also crucial when it comes to protecting the environment. U.S. factories are subject to far more rigorous pollution regulations than those in other countries, and cutting the transportation distance between parts and assembly plants translates into a significant reduction in both costs and greenhouse gas emissions.
The good news is that more companies are starting to embrace the idea of a return to a “Made in America” mindset. Since 2012, automotive parts manufacturing jobs have actually increased by 19 percent nationwide, according to a study released by the Motor and Equipment Manufacturers Association.
At Elio Motors, we hope to contribute to that trend. We’ve set out to produce a vehicle that uses a domestic supply chain that exceeds the 75 percent threshold. Nearly 90 percent of the parts that comprise our cars will be produced in the U.S. But far from passing a premium to consumers to offset U.S. labor costs, we will offer a vehicle with a base price of $7,450 that also gets 84 miles to the gallon on the highway. It’s vitally important that we discard the outdated idea that survival in the industry requires discarding our values.
“Made in America” is more than a patriotic catchphrase, it’s an ideal with the potential to revitalize our shrinking middle class, safeguard the environment and ensure that companies have customers for their decades to come. Moreover, it should not be viewed as a business obstacle, but as an opportunity that’s long been staring us right in the face.