United States

Automotive foreign investment in the US continues to rise


The United States continues to reign as the largest recipient of foreign direct investment (FDI) in the world. Despite the peak and gradual decline in automotive sales as seen in the first half of 2017, FDI in the United States has been on the rise. According to the 2017 A.T. Kearney Foreign Direct Investment Confidence Index, the United States’ FDI inflows increased 11 percent year-over-year to approximately $385 billion in 2016. The stable consumer environment and skilled workforce remain significant factors inciting this domestic growth. This sentiment was reflected during the 2017 SelectUSA Summit with remarks from leaders like Jeffrey Immelt, chairman of General Electric, who noted that to be a participant in this country today, companies must be in the local economy today.

Principal foreign sources for FDI  

Given the strength of Europe and Asia’s automakers, it comes as no surprise that Germany, the United Kingdom, France and Japan are the leading contributors to automotive FDI in the United States. Many large automakers have committed to increasing their investments in this country, as seen through the actions of companies such as Toyota and BMW, which pledged $10B and $600M, respectively, to their U.S. facilities over the next few years.

Automotive suppliers are similarly following suit. For example, Japanese automotive supplier Fukai Toyotetsu Indiana Corporation will be investing $56.9M to expand its Indiana operations. 

Key destinations for investment inflows

Detroit has risen from the ashes of insolvency to once again become the automotive capital of the world. And in addition to traditional auto markets, new players have started to emerge. San Francisco, for example, has seen a large increase in jobs created from the automotive industry. The convergence of technology with the automotive sector, as seen with the development of autonomous and electrical vehicles, makes nearby Silicon Valley the ideal location for automotive R&D. Southern states have seen a similar spike in their foreign investment, driven primarily by companies wishing to maintain production in the United States without sacrificing access to skilled, lower-cost labor.

Market focus

With the expected decline in sales, companies are focusing more on R&D and efficiency. Car inventories have increased due to low oil prices driving consumers to purchase SUVs over sedans. In order to keep up with changes in consumer preferences, facilities need to become more agile in their ability to interchange manufacturing between various product lines.

Fuel emissions technology will also require significant investment due to regulations on the improvement of average fuel economy for vehicles, such as the Corporate Average Fuel Economy standards in the United States. While President Trump has promised to review and potentially rescind these federal regulations, many other countries and a dozen individual states have maintained their own requirements. As manufacturing is done on a global scale, most are expected to continue spending substantial time and money in this area. Volkswagen, for example, has committed $2 billion to improving fuel emissions specifically in the United States.

The vast presence of FDI in the United States provides ample opportunities for growth to both domestic and foreign automotive companies. While foreign-owned enterprises seek to increase their market share in the automotive sector, domestic manufacturers can leverage these investments to develop partnerships and to access to new technologies. However, in order to take advantage of these opportunities, it is imperative that automakers and suppliers analyze the fast-moving shifts in FDI trends and their impact on strategies and market positions.

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Lawrence Keyler
Global Automotive Sector Leader