2016 Auto Index Results
The index uses seven points derived from publicly available data.
The components of the index are based on research into the economic value of different components of auto manufacturing that was done by the Center for Automotive Research in Ann Arbor Michigan. For example, the highest ranked cars are made by U.S. based manufacturers using American engines and transmissions, and a with a high AALA percentage of U.S. and Canadian parts.
The seven criteria are as follows:
- Profit Margin. This was measured based on the location of an automaker's headquarters. If an automaker's global headquarters is located in the US, the model receives a 6. If it is not, it receives a 0. The assumption here is that (on average), 6% of a vehicle's value is profit margin, so if it is a U.S. automaker, the profits remain in the country.
- Labor. This category considers where the car is assembled. If a model is assembled in the US, it receives a 6. If not, the model receives a 0. We assume that approximately 6% of the vehicle's value is labor content.
- Research and Development (R&D). This category looks at the location of a car's R&D activities. If the model is a product of a US company, it receives a 6. If it is the product of a foreign company but is assembled in the U.S. it receives a 3; if it is a foreign import it receives a 1.
- Inventory, Capital and other expenses. If assembly occurs in the US, the model receives an 11; if not, it receives a 0.
- Engine. If the engine is produced in the US, the model receives a 14; if not it receives a 0.
- Transmission. If the transmission is produced in the US, the model receives a 7; if not it receives a 0.
- Body, Chassis, and Electrical Components. 50 % of a vehicle's score is assigned to this category. The AALA percentage is divided into two to derive this score.
In 2014, Fiat acquired the outstanding shares of Chrysler. The new entity, Fiat Chrysler Automotive (FCA), is headquartered in the Netherlands with a tax domicile in London, and shares listed on the New York Stock Exchange. As such, because of the hybrid nature of its organizational structure and its large production and R&D presence in the U.S., we assigned a value of 3 for profit margin and R&D, rather than a 6 or 0.
The index shows that vehicles produced by automakers headquartered in the US rated higher overall in the index. This is for two reasons: (1) profit derived from their sale was more likely to return or remain in the United States; and (2) a majority of a U.S. company’s R&D activities are located in the US.
The index also finds that foreign companies were more likely to use fewer US-produced parts, even if they utilize American manufacturing locations. US economic impact is lower, as the vehicle’s home country receives much of its profits. While the data contained in the AALA is important, a true index of “localness” must recognize other things such as company’s country of origin, as well as the location of its research and development activities.