Creating a Plug-In Electric Vehicle Industry Cluster in Michigan: Prospects and Policy Options

This Article seeks to examine how policy can be used strategically to foster the development of a plug-in electric vehicle ( PEV ) industry cluster in Michigan. The tendency for certain industries to localize in particular regions has captured the interest of much economic research and policy discussion in recent years. The trend toward the clustering of new industries has stayed strong despite the acceleration of globalization. Attention to clusters has proven to be an enduring theme in economic development circles for nearly thirty years. Clusters generate synergies that make industrial activity greater than the sum of contributions by individual players. In this Article, we review a broad array of literature on the development of economic clusters in general, assess the key elements of the PEV value chain, and summarize interviews with several major players along the electric vehicle value chain. Our goal is to look beyond simply buying jobs with tax subsidies, and to identify ways in which targeted policy support can spark a self-perpetuating, high-technology PEV economic cluster centered in the State of Michigan. The remainder of this Article is organized as follows. First, in Part I, we review the literature on industrial clusters in order to identify the broad features of clustering behavior. In Part II, we explore the factors that lead industries to cluster in the first place, apply this analysis to the case of the automobile industry in the twentieth century, and assesses the likelihood of development of PEVs within one or more industrial clusters. Part III turns to the key characteristics of successful clusters. Part IV explores the factors Michigan will need to successfully build a PEV cluster and examines the range of policy options that have been used to support cluster development in various locations around the world. Part V pulls the foregoing analysis together by presenting a set of policy recommendations that may support the creation of a successful PEV cluster in Michigan