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Proposed Tariffs on Imported Cars, Car Parts Could Affect Jobs in Alabama

CoStar Market Insights: State Struggling with Job Growth; Auto Supply Chain at Risk
June 29, 2018
Aerial image of the 1.3 million-square-foot Mercedes-Benz Plant in Vance, AL.

The proposed tariffs on imported cars and car parts could affect jobs in Alabama. The state is highly leveraged to the automotive supply chain, with major factories serving nearly every major manufacturer in the state.

With a fracturing supply chain around Detroit, many parts suppliers have opted to relocate to right-to-work states like Alabama, which tend to offer more flexible workforces and lower transportation costs than international suppliers. The state currently has more than 57,000 working in the sector, which could balloon by another 5,000 workers if a joint venture between Mazda and Toyota goes forward with a massive new plant outside of Huntsville.

Alabama’s dominance of the automobile supply chain jumpstarted in 1993, as Mercedes-Benz sought to move closer to its end users and employ a cheaper labor force than the high-wage German market.

Located between Birmingham, AL and Tuscaloosa, AL, Mercedes was soon followed by Honda, also near Birmingham, and Hyundai near Montgomery, AL. Thousands of smaller part suppliers dot the landscape across the state, from specialty lighting manufacturers in Florence-Muscle Shoals, AL, to steel and aluminum importers in Mobile, AL.

Indeed, Alabama sits at the center of this growing supply chain, as surrounding states like Mississippi, Tennessee, and Georgia welcome new and expanding plant announcements. Continental Tire recently started construction on a $1.45 billion tire plant located just outside of Jackson, MS.

Although expected to employ more than 2,500 at its peak, the proposed 25 percent tax on rubber and rubber products could limit the ability of the plant to import the necessary raw materials.

Plants like Continental’s are largely served by the Port of Mobile, which recently doubled its container crane count to accommodate an anticipated import surge. The nation’s largest retailer, Walmart, unveiled last month the largest logistics delivery of the cycle when it opened a 2.6 million square foot distribution center. Walmart had planned for the center to be an import terminal for its Southeast distribution chain; however, the facility may take longer to reach full utilization.

The tariffs come at a fraught time for Alabama as the state is one of seven to still have fewer jobs today than at the prior employment peak in 2007.

CoStar Market Insights provides a snapshot of recent real estate trends. The CoStar Market Analytics team monitors commercial and multifamily real estate across 390 metro areas, with a granular understanding of the projects, players and economic trends that move these markets.

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