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Glenn Hegar
Texas Comptroller of Public Accounts
Glenn Hegar
Texas Comptroller of Public Accounts
Glenn Hegar
Texas Comptroller of Public Accounts

economy

Supply Chains Automotive Supply Chain

Automotive Snapshot | Print Snapshot (PDF)

Introduction

Throughout 2021, automakers in Texas and across the globe remain deeply impacted by the economic shocks caused by COVID-19 and continue to experience major production delays. The main culprit in these delays is a global shortage of semiconductors (chips), which are key to many auto parts, components, electronics and other features that are popular with customers. In April 2021, for example, chip shortages caused General Motors (GM) and Ford to pause production at several of their North American plants, affecting 10,000 GM workers.[1] However, General Motors has experienced minimal impact to its full-size pickup truck production in North America, and its Arlington (Texas) Assembly Plant — which builds full-size SUVs — has not experienced any downtime due to the semiconductor crisis.[2]

The auto industry rebounded quickly following the onset of the COVID-19 pandemic. Given the complexity and long lead times in the semiconductor supply base, which can be up to five months, this led to an initial imbalance between supply and demand. This chip shortage was compounded by a spike in demand for electronics and other high-tech consumer equipment – all of which require chips – to accommodate remote work and school environments. The semiconductor supply base has been further stressed because of the severe winter weather in Texas in February, which impacted semiconductor processing at key facilities in the state, and other global events, including a fire at a key semiconductor plant in Japan and a spike in COVID-19 in Malaysia, which is the location for critical semiconductor processing and packaging. The average wait time for semiconductor orders was 18 weeks in May 2021, and chip shortages are expected to persist into 2022.

Due to production delays and component shortages, global automotive manufacturers are expected to produce 1.5 million to 5 million fewer cars than planned in 2021.[3]

Automobile manufacturing is an important contributor to Texas jobs, trade and economic growth. Automobile manufacturing jobs rose by an average rate of 3.0 percent between 2010 and 2020, outpacing statewide job growth. Between 2001 and 2019, the gross domestic product (GDP) of Texas’ automobile manufacturing industry (which includes motor vehicles, bodies and trailers, and parts) rose by an inflation-adjusted 285 percent. The state’s total GDP, by comparison, rose by 73 percent during this period.[4] And total automobile-related exports were $11.7 billion in 2020, ranking third among all states (behind Michigan and South Carolina) and comprising about 11 percent of the U.S. total.

Supply Chain Features

Global trade in intermediate goods — or parts and components of final goods — is a key feature of advanced manufacturing products like automobiles. Motor vehicles and parts are some of the most highly traded products in the world, facilitated by highly sophisticated and complex supply chain networks. GM, for example, spends $80 billion annually across roughly 15,000 global suppliers.[5]

This large ecosystem enhances industry productivity and efficiency, but it also leaves much space for supply disruptions, as evidenced by recent semiconductor shortages. The costs of disruptions are relatively high in auto manufacturing: The McKinsey Global Institute estimates that supply chain disruptions cost the auto industry 56 percent of one year’s earnings on average over the course of a decade.[6]

Automobile supply networks are huge, but they also are some of the most regionalized, as exports of intermediate parts circulate within three broad regions — North America, Europe and Asia.[7] Texas is a beneficiary of this regional network, especially in its trade with Mexico in motor vehicle parts. Texas exports in vehicle parts were valued at $8.2 billion in 2020, accounting for 19 percent of the U.S total. More than 80 percent of Texas’ exports were to Mexico (by comparison, Mexico accounted for 37 percent of U.S. auto parts exports). Mexico also accounted for nearly 80 percent of Texas’ auto parts imports (Exhibit 1). U.S. auto parts imports from Mexico comprised a much smaller share at 43 percent.

Exhibit 1: Texas’ Top Export and Import Partners in Motor Vehicle Parts, 2020
Exports
Country Export Value
(millions)
Share
Mexico $6,661 80.7%
Canada $768 9.3%
China $211 2.6%
Brazil $53 0.6%
Australia $53 0.6%
All Other $504 6.1%
World Total $8,250
Imports
Country Import Value
(millions)
Share
Mexico $10,637 78.9%
China $734 5.4%
Canada $443 3.3%
Japan $395 2.9%
United Kingdom $169 1.3%
All Other $1,109 8.2%
World Total $13,488

Source: U.S. Census Bureau, USA Trade Online; Texas Comptroller of Public Accounts analysis


The focal points of these regional networks are original equipment manufacturers (OEM), companies like Toyota and GM that produce the final products. Tier 1 companies supply major parts directly to an OEM and are typically located near the OEM’s facilities. Tier 2 companies supply components — such as wire or stamped metal components — to Tier 1 companies. And Tier 3 companies supply Tier 2 with raw materials, such as copper or steel.

This system encourages a concentration of small- and medium-sized suppliers. Manufacturers of motor vehicle parts, for example, are usually small, employing on average 60 people.[8]

Supply Chain Risks and Opportunities

Automakers face a multitude of supply chain challenges, in addition to the size and complexities of their networks. Trade disputes are a common source of disruption, as countries often protect domestic auto production through tariffs, trade restrictions and local sourcing requirements.[9] Additionally, OEMs’ transparency and visibility of supply networks are complex, particularly beyond Tier 1 suppliers.[10] 

In response, automotive leaders have planned several strategies to build greater resilience in their supply chains, including[11]

  • Dual sourcing of raw materials.
  • Increasing inventory of critical products.
  • Nearshoring or expanding supplier base.
  • Regionalizing supply chains.
  • Investing in digital technologies to improve supply chain visibility.

Texas Automobile Manufacturing Industry and Trade

Automobile manufacturing saw strong employment growth in the 2010s in Texas (Exhibit 2) and in the U.S. (Exhibit 3). These are some other automobile manufacturing industry trends: 

  • In 2020, about 39,000 Texans were employed in automobile manufacturing (motor vehicles, vehicle bodies, trailers and parts); the state ranked seventh nationally and accounted for 4.4 percent of national industry jobs.
  • Jobs in motor vehicle parts accounted for the largest shares of automobile manufacturing — 48 percent in Texas and 58 percent in the U.S.
  • Automobile manufacturing saw heavy job losses in 2020 compared to the previous year, falling by nearly 7 percent in Texas and 11 percent in the U.S. 
  • Despite these job losses, automotive manufacturing experienced strong job growth between 2010 and 2020 in Texas and the U.S., with average annual gains of 3.0 percent and 2.8 percent, respectively. (Comparatively, total jobs increased by an average 1.7 percent in Texas and 0.8 percent in the U.S.)   
  • Auto manufacturing contributed $15.1 billion to the Texas GDP in 2020 and accounted for 10.5 percent of the national industry GDP of $144 billion.
  • Texas’ total auto industry had average annual wages of about $68,100 in 2020, higher than the U.S. average of about $66,500. Texas’ total wages in automobile manufacturing were more than $2.6 billion — 4.5 percent of the national total.
  • In 2020, Texas and U.S. automobile manufacturing GDP fell by 7.6 percent and 12.2 percent, respectively. Still, industry GDP saw strong gains over the decade, rising by average annual rates of 11.8 percent in Texas and 5.0 percent in the U.S. (changes not adjusted for inflation).
Exhibit 2: Texas Industry Overview, Automobile Manufacturing, 2020
Exhibit 2: Texas Industry Overview, Automobile Manufacturing, 2020
Metric Total Automobile Manufacturing Motor Vehicle Manufacturing Motor Vehicle Body and Trailer Manufacturing Motor Vehicle Parts Manufacturing
Employment 38,724 11,784 8,305 18,635
Employment, percent change, 2019-2020 -6.6% -3.4% -10.4% -6.9%
Employment, average annual percent change, 2010-2020 3.0% 3.2% 3.2% 2.8%
Average Wages $68,099 $98,469 $50,528 $56,725
Total Wages (millions) $2,637 $1,160 $420 $1,057
Establishments 549 37 189 323
Gross Domestic Product (millions) $15,101 $7,299 $2,210 $5,593
GDP, percent change, 2019-2020 -7.6% -5.5% -10.3% -9.1%
GDP, average annual percent change, 2010-2020 11.8% 11.8% 12.0% 11.7%
Exports (millions) $11,702 $2,387 $1,065 $8,250
Imports (millions) $38,291 $24,448 $356 $13,488

Source: JobsEQ; Texas Comptroller of Public Accounts analysis

Note: Industries are identified using the North American Industry Classification System (NAICS). Total Automobile Manufacturing is the sum of three industries: Motor Vehicle Manufacturing (NAICS 3361), Motor Vehicle Body and Trailer Manufacturing (NAICS 3362) and Motor Vehicle Parts Manufacturing (NAICS 3363).


Exhibit 3: U.S. Industry Overview, Automobile Manufacturing, 2020
Exhibit 3: U.S. Industry Overview, Automobile Manufacturing, 2020
Metric Total Automobile Manufacturing Motor Vehicle Manufacturing Motor Vehicle Body and Trailer Manufacturing Motor Vehicle Parts Manufacturing
Employment 890,016 226,583 146,409 517,024
Employment, percent change, 2019-2020 -10.8% -5.6% -9.6% -13.2%
Employment, average annual percent change, 2010-2020 2.8% 4.0% 3.0% 2.2%
Average Wages $66,464 $83,841 $54,293 $62,296
Total Wages (millions) $59,154 $18,997 $7,949 $32,208
Establishments 8,647 612 2,265 5,770
Gross Domestic Product (millions) $143,998 $49,835 $17,483 $76,680
GDP, percent change, 2019-2020 -12.2% -9.8% -9.5% -14.3%
GDP, average annual percent change, 2010-2020 5.0% 5.4% 5.2% 4.7%
Exports (millions) $107,134 $53,571 $10,454 $43,109
Imports (millions) $277,227 $171,470 $3,263 $102,493

Source: JobsEQ; Texas Comptroller of Public Accounts analysis

Note: Industries are identified using the North American Industry Classification System (NAICS). Total Automobile Manufacturing is the sum of three industries: Motor Vehicle Manufacturing (NAICS 3361), Motor Vehicle Body and Trailer Manufacturing (NAICS 3362) and Motor Vehicle Parts Manufacturing (NAICS 3363).


In 2020, Texas exported $11.7 billion in motor vehicles, bodies and parts products, accounting for about 11 percent of the U.S. total. The state’s share of U.S. exports varied by type of automobile manufacturing activity, ranging from 4.5 percent of motor vehicle manufacturing to 19.1 percent of motor vehicle parts (Exhibit 4).

Exhibit 4: Texas Share of U.S. Automobile Manufacturing Exports, 2020
Exhibit 4: Texas Share of U.S. Automobile Manufacturing Exports, 2020
Industry Texas Share
Motor Vehicles 4.5%
Motor Vehicle Bodies & Trailers 10.2%
Motor Vehicle Parts 19.1%
Total 10.9%

Source: U.S. Census Bureau, USA Trade Online; Texas Comptroller of Public Accounts analysis


Motor vehicle parts account for the bulk of automobile-related exports, totaling nearly $8.3 billion, or 71 percent, of the state’s auto-related exports in 2020. That compares to a 40 percent share nationwide, reflecting the importance of these products to Texas. Texas export values in total automobile-related products fell by about 23 percent in 2020 (Exhibit 5). 

Exhibit 5: Texas Export Values in Automobile Manufacturing Products, 2010-2020 (In Millions)
Exhibit 5: Texas Export Values in Automobile Manufacturing Products, 2010-2020 (in millions)
Commodity 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Motor Vehicles $5,017 $5,554 $5,389 $4,876 $3,449 $3,069 $3,211 $2,543 $3,106 $3,055 $2,387
Motor Vehicle Bodies and Trailers $140 $198 $1,396 $1,409 $1,430 $1,254 $1,115 $1,245 $1,484 $1,434 $1,065
Motor Vehicle Parts $8,510 $10,529 $10,562 $9,700 $8,440 $9,822 $9,372 $9,383 $9,789 $10,698 $8,250
Total Exports $13,666 $16,281 $17,347 $15,985 $13,319 $14,144 $13,697 $13,171 $14,378 $15,187 $11,702

Source: U.S. Census Bureau, USA Trade Online; Texas Comptroller of Public Accounts analysis



Questions?

If you have any questions or concerns regarding the material on this page, please contact the Comptroller’s Data Analysis and Transparency Division.