2023 Automotive Insights Symposium Day 1 Introduction Transcript
LESLIE MCGRANAHAN: I am Leslie McGranahan and I'm the Vice President and Director of Regional Research at the Federal Reserve Bank of Chicago, and I wanted to welcome everybody to our 29th Annual Automotive Insights Symposium. So at the Federal Reserve Bank of Chicago, we are very interested in the trajectory and performance of the auto industry.
Automotive is highly concentrated in the Federal Reserve seventh district, which includes Iowa, Michigan, minus the UP, and the great majority of the populations of Illinois, Indiana, and Wisconsin. While our district is one of 12 Federal Reserve districts, more than one third of all light vehicles assembled in the United States are made here. In addition, one in five internal combustion engines and two in five transmissions are produced within our states.
In keeping with this, our district employs roughly 40% of the nearly 800,000 US motor vehicle and parts workers, and importantly, 45% of the workers who make internal combustion engines and transmissions. So as a result, the move away from internal combustion vehicles to EVs will have a major impact within our states. From our standpoint, the transition to electric vehicles is likely the most consequential change in this critically important industry in over a hundred years, and it's fascinating to follow.
But more important than that, the decision that leaders in this industry and in government are making today will impact our region, its communities, and residents for decades to come. So this year's event is very different from those in both the recent and more distant past. First, after two years of virtual programming, we're back in person and virtual.
Second, this event has traditionally occurred in January and has had a sales and production outlook focus. This year while we continue to have an outstanding outlook panel, we're extending our topics to also cover some of the short and longer term trends that are affecting sales and production, but also vehicle consumers and workers. And second, we've traditionally been a one day conference, and we've extended to a two day conference in order to cover this broader set of topics.
So the theme of this year's conference, Electric Vehicles and Their Impact on Sticker Prices and Automotive Jobs, ties closely to the Fed's dual mandate goals of price stability and maximum inclusive employment. Even absent the shift to EVs, we'd be interested in both vehicle affordability and job quality, but there's added complexity and import to considering both in the EV context.
The shift to electric vehicles offers tremendous opportunity to lower the carbon emissions and operating costs of personal transportation and provide jobs in an innovative and growing industry, but new and used vehicle affordability remains a challenge. This is true broadly, but even more so for EVs. The average price of new vehicles has been rising throughout the pandemic, and we're now at about 47,000, and EVs are currently priced about a third higher.
Affordability is also challenged by the transmission of higher interest rates too that we're required to slow unacceptably high inflation into higher interest rates on auto loans. This is leading to record high average monthly car payments for new vehicles. In addition, the new consumer, commercial, and manufacturing incentives in the Inflation Reduction Act aim to address EV affordability. But with continuing supply chain disruptions and higher content requirements, we don't yet how these rules will ultimately impact either affordability or US jobs.
Automakers and suppliers announced $73 billion in new EV investments in the United States in 2022, but many of these facilities are not online yet, and the geography and pay and benefits in these new jobs may differ from the geography, pay, and benefits of the previous jobs. With all these investment dollars floating around, state and local economic development leaders are working feverishly to maintain and grow their region's automotive footprint. It's a busy and critically important task that could determine the economic fate of these areas for decades to come.
And finally, 2023 is also a national contract negotiation year for both the UAW and for Unifor, its counterpart in Canada. As these two unions head to the table to hammer out new agreements with Ford GM and Stellantis this fall, jobs and job quality and the EV transition will be a paramount concern for workers and their unions. So we're happy to have here in Detroit at our wonderful branch and online for this important conference.
It's really gratifying to see our conference center bustling, and I'd like to take a moment to thank all of the Fed staff who have supported this event and have joined me and enthusiastically welcome you here and into our building. I'm really looking forward to the variety of topics that we are going to cover. I'm particularly interested in hearing more about jobs and the EV transition through the fireside chat with Unifor president Lana Payne, through the panel discussion, and through the discussion with Bettany Jones and Susan Halper.
While I've been aware that EV jobs might be different, I'm really excited about hearing more of the depth and detail about what they're likely to look like. There are a number of additional key questions that I'm going to be particularly attuned to as we head into this exciting. Conference after three years of supply constrained recession level sales, what will 2023 hold in store, and what are the key things we need to watch as the year evolves to understand how these forecasts-- whether these forecasts will come to pass?
What do our panelists think will be the impact of the extensive and many new provisions in the Inflation Reduction Act? And as we learn more about the provisions, which ones will be most crucial going forward? How will consumers and manufacturers address the substantial issues around EV affordability? And finally, as we move further into the EV transition, what is becoming clearer and what is becoming more opaque? Are there certain areas where we have less certainty about what's going to happen, and are there other areas where we have more?
So on the housekeeping front-- so first of all, we're pretty packed in here, so I just wanted to mention that we have masks in the back if that makes anyone more comfortable. Second of all, I wanted to remind everyone, or let you know, that Q&A is going to be exclusively through the Pigeonhole app. This allows both in-person and remote attendees to share questions with our panelists. This is excellent technology. We've used it in a conference in the past. It's wonderful, but it only works if people are willing to try it out.
So what I need everyone to do is to join the Pigeonhole app right now while I'm standing here. There are QR codes on the table in front of you, and our remote attendees have provided with access to this as well. So take a minute, scan the code, get on the Pigeonhole app. That way you can share your questions with our panelists, you can vote up the questions of your friends and neighbors, and that really helps us.
So that helps the conference run smoothly. So I'm going to just take a second and just please do that right now. OK. Thank you. That's a good start. So now I'm going to turn the program over to Kristen Dziczek, who is a policy advisor at the Federal Reserve Bank of Chicago housed here at our Detroit branch.