Detroit is the most populous city in the state of Michigan, and at the beginning of 1900, the city became the center of the US automaker industry. The industry grew and the city developed to an economically vibrant place and received nicknames such as Motor City or Motown (Motor Town). The so called “Big 3” automakers (General Motors, Chrysler and Ford) based their headquarters in Detroit, and competitors such as Volkswagen and Nissan later followed with factories in the city. However, even with strong brands and an export oriented industry located in the city, Detroit was unable to avoid difficult phases with a declining economy starting in the 1950s (see graphic 1 for history overview of Detroit).
The last economic crisis in 2007 harmed the US, and more specifically Detroit, tremendously. Automakers such as Ford and GM needed to be bailed out by the federal government and wages dropped significantly. Moreover, Detroit was the largest city in US history which filed for bankruptcy. The $18 billion debt was restructured, which allowed Detroit to restart its economy and rethink its urban landscape.
In order to revitalize Detroit, policymakers took various actions to escape the crisis. A main idea was to attract new startups in the tech and transport sector. The new political framework attracted numerous startups to move from San Francisco to Detroit. The “Startup Gold Rush” was also enhanced by low living costs and accessibility to housing and schools. But the dream of a resurrection of the automaker industry remained.
Urban transport development
The first North American startup acceleration program opened 2016 in Detroit. The program is called “Techstars Mobility” and focuses on mobility and technology related startup ideas. So far, it has invested in 22 startups and raised $19 million. Detroit also issued more than 2,500 patents in mobility related ideas, compared to California, host of Tesla and the tech hub Silicon Valley, which issued less than 1,500.
The latest commitment by the Detroit City Council is the transition to change its image from Motor City to Mobility City. The Mobility City program is not limited to cars but rather supports all forms of transportation including bike lanes, expansion of public transport and deployment of charging infrastructure for electric vehicles. Unfortunately, the plan lacks set targets and is seen as more of a guideline for developers. With the establishment of the first Chief of Mobility Innovation in the US, the city now has a dedicated expert on the utilization of technology, business strategy and transportation to execute the new mobility plan. Professional experience is needed since Detroit was designed to accommodate cars and is now entering its second renaissance of infrastructure development by trying to implement modern transport options, such as bike or car share, and new public transport systems.
This focus on infrastructure is much needed in Detroit. The existing public bus transportation systems (DDOT and SMART) are badly connected throughout the city and provide an unreliable and not punctual service. A new concept is the street car (tram) called QLINE which started in May 2017. So far, it covers only a small part of the city but will expand over the next years and tries to connect all neighbourhoods in Detroit.
Surprisingly, Detroit has a generous amount of bike lanes with 200 miles, and their very modern outlay make biking through the city center fairly easy. However, there is only one bike share supplier called MoGo available through the city and biking out of Detroit's heart means relying on fewer connected bike lanes.
Electric vehicles as an alternative to public transport
Both transportation developments show Detroit´s ambition to offer alternative methods to its citizens and visitors, but the car remains the most suitable option. Which means that at least in the short run, the local demand on affordable car usage raises. Automakers find that promising and are capitalizing on the city’s happy to that reluctant infrastructure planning, seeing the chance of making profits. But by selling conventional cars, the issue of air pollution raises which continuously causes public health issues and environmental damage.
Detroit provides the perfect test case to see how electric vehicle can compliment or even be an alternative to public transport. In 2015 alone, Detroit experienced a high uptake on registered electric vehicles, however local sales dropped again in 2016 from 2,500 registered electric vehicles to 1,200. One reason for this positive development of electric vehicles is the high availability of models and the easy access to them. In addition, employees of Detroit car manufacturers are offered a discount by the companies to purchase a car, including electric vehicles. Another reason is the focus on charging infrastructure. “If you build it, they will charge,” is Ford’s answer to their employee demanding charging infrastructure. Moreover, Ford plans to triple their workplace charging stations to a total of 600 charging stations within the next two years.
Next to all industry investments, Detroit continues to invest in its public transport system. However, it lacks in a city-wide policy program on electric vehicles and does not offer any consumer incentives.
Policy and Incentive Programs in Detroit
Alternative fuel vehicles, including electric vehicles, are exempt from emission inspection requirements, and DTE Energy, the local energy utility supplier, is offering a reduced rate for electric vehicles for home charging stations. The price amounts to less than 4 cents per kWh for all off-peak charging. As demonstrated in graphic 1, the discount on electricity is almost the only incentive for the consumer to switch to electric vehicles.
Another significant incentive is the development of charging stations. It benefits companies and utility suppliers and creates cooperation. In Detroit's case it is between DTE Energy and Ford and known as the “Workplace Charging Partners”. Both the utility and the automaker have two common goals - reach more consumers and expand their business models. Their combined effort created the project: DTE Energy’s solar array at Ford’s HQ. A renewable energy project which supplies charging stations with clean energy. It is also part of a larger sustainable infrastructure project on Ford’s campus, and is currently producing more clean electricity than consumed by charging stations. However, public charging infrastructure is still very limited in Detroit. There are currently only 160 charging stations in the entire city.
Industry Reliance and Risks
The international and national competitors in the automaker industry are investing in modern technology and are adapting to the transition to electric vehicles. Battery technology is the most challenging research project for all automakers. To become the leader in innovation, Ford invested in a Battery Lab and a new Manufacturing Innovation Center which is dedicated to electric vehicle research and production. The Innovation Center alone created 700 new jobs and helps to enhance the urban economy. In Warren, a suburb of Detroit, GM also plans to invest $1 billion in the GM Technical Center which will create another 2,600 jobs.
Overall, Detroit has a 31 percent increase in employment since 2010, mostly due to the recovery of the automaker industry. These investments are just two examples for the confidence the automaker industry has in the area of new passenger vehicle demand. But the risk of the next economic downfall is just a matter of time. Either national or international competitors may find a new way of developing a longer life battery or a faster way of charging. As soon as the customer's range anxiety is solved, the electric vehicle transition will become much faster and competition will become tougher for Detroit’s automakers.
Large investments by the industry in electric vehicles and falling unemployment rates make the story look like a success, and it is indeed a positive signal from industry leaders to Detroit.But exactly those actors should not be fooled nor relax and lay back because of promising numbers and a positive outlook. This phenomenon is only valid if local automakers can maintain the national and international market share. Local policymakers should react soon to diversify the economy with sectors independent from the Motor City image.
One City for National Development
A city with such economic potential needs to plan beyond its own development. Numerous US cities are investing in electric vehicles to tackle local pollution issues. The national commitment across US cities to move forward with electric vehicles brings large orders to Detroit's automakers. With that confidence, the overall employment sector is rising in Detroit. But the industry is aware that it could end up in a crisis similar to one that Detroit has experienced so many times before. Global car makers are highly competitive, and the consumer demand will probably ease out at some point.
Still, electric vehicles will also play a significant role in the future of automotive driving. Self driving electric cars have zero emission, a minimum amount of noise and use their interior space more efficiently. Another significant side effect is the self sufficiency of a self driving car. The car moves on, parks and reaches the next customer by itself. With access to autonomous car sharing services, car ownership becomes less attractive.
Detroit and its home state Michigan are taking on a leadership role in the autonomous driving sector. Michigan is the first state in the US to allow automated driving and support its development by a political framework. (see image for comparison). Although autonomous driving is still in a developing phase, it made significant progress on road behaviour and is already being tested and used on public roads in Michigan.While California-based Google and Tesla are leaders within the automotive driving technology, Detroit is giving them a playground for real world testing and data collection.
The collection of data, including the amount of stops to supermarkets or doctor's visits, is a research project on an urban scale. This information will make it easier to identify areas which need more infrastructure development because they are used the most or not used at all. Autonomous cars are also allowed to be operated without any driver present in Michigan, which allows for testing business models for driverless trucks and self driving ride sharing. The Big 3 automakers are now considered to again be one of the biggest leaders in the smart transportation sector. Just now, Ford announced it will locate its autonomous vehicle and electric vehicle business and strategy teams to Detroit’s historic Corktown neighborhood. The relocation brings new business models in a resurgent, diverse neighborhood with industrial roots.
The Auto Industry is Detroit's driving force
Detroit found its own unique way to approach its electric vehicle transition and the local automaker industry is on a very good track to lead in the new ear of consumer choice. Most impressive, the Big 3 automakers are committed to investing in research and development. Their own research centers and investments in battery technology have the potential to make US automakers a global leader in the field of production and ultimately selling electric vehicles, which is without a doubt the car of tomorrow.
Great examples are the small startup communities with modern ideas related to technology and mobility and the large established companies such as Ford and DTE finding ways to satisfy the need for affordable and convenient charging and cleaner energy.
However, for a sustainable transformation, the city of Detroit needs to increase its public infrastructure and reach people who are not employed at automaker companies. The city should implement incentives and proactive policies, for example, purchase subsidies for electric vehicles. With recent rising employment, single public infrastructure developments and a well-equipped manufacturing industry, Detroit has a strong future ahead. But, as history has shown, the urban economy should diversify its industries, as it remains risky to fully rely on one sector, in this case the automaker industry.
Find out how Washington, DC is creating an electric vehicle transition with bikes, shared economy and an attractive policy framework.