Driving Security? U.S. Auto Industrial Policy in a Changing World

Abstract

Industrial policy may have come back into fashion—controversially—in the last few years, but it was arguably never out for the auto sector. Auto manages to have outsized political importance in the U.S., and around the world, thanks to its relatively high paying jobs for workers without college education, unionization, and the political romance around manufacturing jobs. That political pull wins the auto sector repeat special treatment. Today’s U.S. industrial policy is not about picking winners for export potential, unlike 20th century industrial policy, but about economic security. It aims either to build domestic capacity in industries viewed as pivotal (semiconductors), achieve geopolitically secure supply by reducing dependence on China (critical minerals, rare earths), or protect politically important domestic industries and their share in the U.S. market (autos). Today is different. Auto is transforming rapidly in the shift to electric and autonomous vehicles (EVs and AVs)—a change that requires different engineering and supply chains. Automakers around the world continue to emphasize that EVs are the future of the industry, although Toyota is a notable skeptic. The EV shift is upending a long-stable competitive landscape. China’s indigenous EV automakers have become major producers and exporters in a handful of years. The Chinese government is pervasively involved in the growth of its EV industry, while having developed a national monopoly position in global EV supply chains. Adding to security considerations, domestic auto manufacturing offers contingent defense manufacturing capability—as has long been true— while the computerization of vehicles raises new surveillance and cyberattack risks. This article examines today’s U.S. auto industrial policy in international and technological context, reviews the short track record of Biden EV policies, discusses how we should evaluate Trump’s auto industrial policy, and closes with recommendations for where industrial policy would be best focused to support the U.S. auto sector.