Michigan's auto industry remains dominant by several metrics but faces serious threats from southern states and China, from the electric vehicle transition and other technological upheaval, and from educational shortcomings, a new MichAuto report finds.

"Michigan cannot expect to win the future of the industry through legacy alone," Glenn Stevens, executive director of the industry association that's part of the Detroit Regional Chamber, wrote in the State of Automobility report released Wednesday.

The state should draw up a "bold, cohesive agenda" for its signature industry that employs 1.2 million people, he said, or it risks falling behind.

According to the trade group, that agenda should focus on better cultivating a high-tech workforce, improving a general statewide business climate it says "has taken a step back" recently, developing "long-term and sustainable" state incentive programs to attract and retain businesses, and using state dollars to support companies transitioning to new technology and manufacturing processes.

The report is aimed at lawmakers and other policymakers and is timed ahead of what MichAuto sees as a pivotal gubernatorial election in 2026. The group plans to gather additional input from auto executives and others in the coming months as it starts to put together a detailed industry blueprint document to be released next fall.

“With new candidates that come in and with the new governor, we want to make sure that they understand that this is the single largest economic driver of our state, and what it's facing from really an unprecedented forces-of-change standpoint," Stevens said in an interview, listing Chinese competition, artificial intelligence, transformation of supply chains, and the transition to EVs.

Michigan's auto industry has maintained key strengths that continue to attract companies here, like its dense research and development ecosystem, its 14 testing and proving grounds, its mature supply chains and a legacy workforce, the report notes.

But its dominance in key areas has eroded in recent years. For example, it remains the No. 1 state for business-funded auto and mobility research and development at $17.5 billion annually, but its share of total R&D funding has fallen over the last five years.

Another example: Michigan still churns out more cars than any other state, at about 2 million per year, but its vehicle production has fallen by about a quarter in the last two decades just as southern states like Kentucky and Alabama "are experiencing rapid growth in automotive manufacturing," the report says. The South at large almost doubled its vehicle output over the same period thanks to aggressive economic development policies and investments.

Georgia, meanwhile, has passed Michigan "in important areas such as new EV investments since 2020." Thanks to that EV dominance, Georgia is nipping at the heels of Michigan's overall automotive investments in that same five-year time period, with $35 billion announced projects to Michigan's $37 billion. The next-closest state is North Carolina at $23 billion.

But perhaps the larger threat is China. Michigan has long been the largest vehicle-producing state in the country that made the most cars globally. But in the last 20 years, the U.S. share of global vehicle production has fallen while China has surged to now produce about three times as many vehicles as its American competitors. Though they are not yet being sold domestically, Chinese EVs have flooded into other global markets where Michigan-based brands compete.

“Make no mistake about it, everybody wants a piece of (Michigan’s auto industry),” Stevens said. “That means, literally, they want to take your companies and attract them to other states, or they want a piece of the Detroit Three’s market share, and that would specifically be China.”

The pace of EV sales may have recently slowed, but the MichAuto report indicates that state leaders shouldn't take that as a sign that the technology won't eventually dominate, noting that battery-powered models continue to pick up market share.

Some 76% of all auto and mobility investments in the state since 2020 were EV and battery-related, creating 16,000 jobs, and the state should keep pursuing such EV investments, the report says: "If the U.S. and Michigan fail to compete, it risks losing its economic and innovative edge to global competitors, particularly China, which produced 70% of the world’s EVs in 2024."

“Electric vehicles have been highly politicized. They can't be," Stevens said. "You have to look at the market, and the market and the consumer will drive demand, but make no mistake about it, EVs will continue to grow. They will grow incrementally, and they are proliferating around the world."

One area the report says Michigan must improve upon is workforce training, including to support in-demand professions in the auto industry in automation and data analysis. It notes the industry needs to start replacing an aging workforce, where one in four manufacturing jobs are held by workers 55 and up.

That effort has been hampered by a struggling education system, where younger students aren't hitting key reading and math proficiency standards, and where fewer than 60% of high schoolers enroll in another education step.

Another concern flagged by the MichAuto report: Michigan's youth don't view the auto and mobility industry very positively, a separate study found, with more than half saying they wouldn't consider it for a career.

This negative perception, the group said, is "largely due to low awareness of diverse roles beyond engineering and manufacturing, unclear educational pathways, and misunderstood working conditions."

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