By James J. Tanoos, PhD
Clinical Assoc. Prof/PPI Undergrad Research Faculty Lead,
Purdue Polytechnic Institute.
Jim’s Website
In 1913, Ford Motor Company revolutionized the automobile industry with its plant in Highland Park, Michigan, often called the “birthplace of mass production.” Instead of skilled craftsmen building entire cars by hand, the factory used an assembly line system, where work-in-progress moved along a conveyor while workers installed specific parts to the final product, thus dramatically cutting costs and increasing speed.
Other early automakers near the Detroit area, like General Motors and Packard Motor Car Company, followed similar models, and by the 1920s, the Detroit metropolitan area became synonymous with the emerging national auto industry. Detroit was soon surrounded by hundreds of suppliers, toolmakers, and specialized labor as regional supply chains became more financially viable. These supply chains evolved from similar longstanding industrial organizations that thrived in the larger Midwest USA’s geography, or “Rust Belt” manufacturing corridor, due to existing access to coal, steel, transportation routes, and machine tool industries.
Parts suppliers sprouted up and signed contracts with factories, whose assembly lines required a steady flow of standardized components. A network of specialized parts suppliers evolved near these manufacturing centers, giving rise to modern economic automobile clusters, where regional industries based on the production of the automobile in a factory and their original equipment manufacturer (OEM) supply chains became booming economic epicenters, and roads and infrastructure facilitated supply chains both to and from those early factories.
These supply chain partners, or “suppliers,” provided engines, tires, and axles, along with glass, electrical systems, and interior components, in addition to R&D and innovative specialized tools. Smaller machine shops located not far from Detroit pivoted to making parts to meet automakers’ needs as the automobile supply chain spillover began around other major Rust Belt cities. For example, Firestone Tire and Rubber Company and Goodyear Tire and Rubber Company emerged in Akron, Ohio, to supply tires to multiple carmakers as a result of the industrial prowess that arose in Cleveland and around its metropolitan area, along with various other OEM partners.
Munich, Germany, is within one day’s drive of 50% of Europe’s population (not counting Russia), and the region’s economic strength is similarly tied to the automobile industry. Munich is both a historic manufacturing base and a modern mobility headquarters: BMW has built vehicles and engines there since 1922, and its Munich plant has grown into a major industrial employer with around 7,800 employees working across its holistic on-site production supply chain. Munich also hosts BMW’s iconic “four-cylinder” headquarters (in use as the corporate HQ since 1973), anchoring high-wage engineering design, supply chain, and R&D jobs in the region. The BMW Group reported €142.4 billion in revenue in 2024, including 159,104 global employees worldwide—global earnings that help sustain deep local supplier and services ecosystems.
Munich’s economic development tourist literature emphasizes that automotive and mobility companies “play a major role” in its economy and labor market, citing major OEM presences like Infineon, Knorr-Bremse, and MAN Truck & Bus, alongside mobility firms and transit operators to oversee its vast transportation network, consisting of some of the best transportation infrastructure on the continent. Munich also benefits from being embedded in Bavaria’s broader auto cluster: networks like Bayern Innovative’s Automotive Cluster connect 700+ companies and institutes, reinforcing economic value added via the spillover organizations from the local automobile cluster related to advanced manufacturing, software, and engineering talent that keep Munich prosperous even as the industry shifts toward electrification and digital mobility.
To Detroit’s south in Indiana, Indianapolis’ economic prosperity is similarly tied to the automobile industry. A similar facet driving the automobile cluster in both Indianapolis and Munich is their geographic proximity to regional markets. Indianapolis developed due to the Detroit model of specialized labor, a central location to geographic markets, and a supply chain-based economy. While Munich is within one day’s drive to 50% of Europe’s population (not counting Russia), Indianapolis is a day’s drive away from a whopping 80% of the entire American population.
The city became both a proving ground and a production hub early in U.S. car culture: the Indianapolis Motor Speedway was formed in 1909, and the first Indianapolis 500 ran in 1911, cementing the region’s identity in racing-driven engineering and attracting automotive talent and suppliers. That motorsports ecosystem still shows up in hard numbers—an Indiana University Public Policy Institute analysis estimated that the Indianapolis Motor Speedway generated about $972 million in total economic impact and 8,440 jobs from June 2022 to May 2023. On the manufacturing side, Allison Transmission, founded in 1915 as the Speedway Team Company to support Indy 500 racing ventures, evolved from a precision machine shop for race cars into a major aviation and military engine producer known for its automatic transmissions. Allison has kept high-value engineering and heavy-vehicle drivetrain manufacturing anchored in Indianapolis, where its global headquarters today includes a large engineering/manufacturing campus.
Today, the economy in and around Indianapolis benefits from being at the center of a state-scale auto cluster: Indiana’s auto industry provides an estimated 217.3K total auto jobs and about $30.68B in gross state product (6.2% of the state GDP). This supply-chain base supports central Indiana firms, logistics, and skilled-trades employment even when final assembly occurs elsewhere. Three multinational automobile organizations (Subaru, Honda, and Toyota) producing vehicles in Indiana contribute to a combined footprint of 17,339 direct employees and 937,726 vehicles produced in 2024. These three operations (plus the in-state supplier/dealer ripple effects tied to them) generate an estimated $19.2B contribution to Indiana’s state GDP, supporting 122,667 supply chain-related jobs statewide. Purdue University is at the forefront of advancing this auto cluster.
| Category | Munich, Germany | Indianapolis, Indiana, USA |
| Auto Cluster Summary | A high-tech, R&D-driven automotive hub anchored by BMW, deeply integrated into the regional economy with strong spillovers into engineering, electronics, and innovation sectors. A substantial share of GDP comes from the auto sector | Diversified automotive influence; strongest in transmissions, specialty components, OEM parts manufacturing, motorsports, and logistics |
| Primary Automotive Anchor Firms | BMW Group (global HQ and major manufacturing/R&D); strong Tier-1 and Tier-2 supplier presence in Bavaria | Historically GM/Allison, Chrysler, Ford components; now dominated by Allison Transmission, motorsports manufacturing, and diversified suppliers |
| Economic Dependence on Auto Sector | Automotive & engineering are core pillars of Munich’s regional economy; a substantial share of GDP comes from mobility & manufacturing | Automotive manufacturing matters, but is less central than its direct and indirect logistics. Auto industry is historically important but more diversified now |
| Employment Impact | Tens of thousands directly employed by BMW; strong multiplier effect through precision engineering, robotics, electronics, and supplier ecosystem | Historically large manufacturing base; today fewer assembly jobs but strong employment in advanced components, transmissions, EV components, racing tech, and logistics |
| Supplier Network Characteristics | Dense cluster of high-tech suppliers across Bavaria (Siemens, Infineon, ZF, MAN nearby); major competencies in electronics, mechatronics, high-precision engineering | Supplier base focused on transmissions, metal fabrication, drivetrains, performance parts, aftermarket, and motorsports; strong network around IndyCar/NASCAR technical ecosystem |
| Innovation & R&D Influence | Major global hub for automotive R&D (BMW R&D campus, universities, Fraunhofer institutes); leadership in EVs, autonomous tech, and digital mobility | Innovation centered on specialty manufacturing (e.g., transmissions), racing technology, lightweight materials, electrified powertrains; home to the Motorsports Technology sector |
| Infrastructure Impacts | Economic growth spurred high-quality transportation networks, logistics parks, and engineering campuses; strong export infrastructure through Bavaria | Indianapolis developed significant highway logistics and distribution capacity; strong intermodal hubs; auto sector helped grow warehousing and supply-chain infrastructure |
| Skill Development & Workforce | Highly skilled workforce; technical universities and apprenticeship systems integrated with automotive R&D and precision manufacturing | Skilled manufacturing and engineering workforce; motorsports ecosystem generates unique expertise in high-performance design and advanced fabrication |
| Cluster Stability Over Time | Very stable core cluster—BMW ensures long-term continuity; strong supplier relationships; continuous reinvestment in mobility technologies | More volatile—shift from mass auto production to specialized components and motorsports; supply chain remains strong but less centralized than Munich |
| Broader Economic Spillovers | Luxury goods, engineering services, IT-mobility startups, and high-value export industries benefit from automotive anchor firms | Growth in logistics, aftermarket parts, aerospace overlap, motorsports industry, and advanced manufacturing training institutions |
Beyond the Munich and Indianapolis regions, similar automotive clusters appeared in places like Yokohama and Nagoya in Japan, where early industrialization began as small domestic auto industries formed in the 1930s, and Turin in Italy, where Fiat spurred the growth of machine tools and infrastructure projects across the Po Valley. Other automobile clusters exist in Birmingham and Coventry in Southern England, where auto organizations like Austin and Morris expanded, and a suburban driving lifestyle took shape around the London commute. The automobile cluster model of regional economic development still exists for modern automotive production globally, increasingly in China, in the Lingang region of Shanghai, where EV manufacturing, parts makers, logistics providers, and export infrastructure around the ports have brought economic prosperity.
These suppliers are proximate to the factories due to a multitude of key advantages, including reduced transportation costs, just-in-time delivery (even before the term was coined), easier coordination between automobile organizations and suppliers, and knowledge transfer by which skilled workers and technical know-how circulated in the region. In addition, a strategy of enhancing infrastructure alongside the growing auto clusters is common, and smooth and modern roadways are an integral aspect of the automobile cluster.
This geographic concentration reinforces itself: once a major manufacturer sets up operations and becomes successful in a location, suppliers follow, and then new manufacturers are attracted to the existing supplier base. This has occurred in other areas of the United States, like the Greenville-Spartanburg area of South Carolina. Today, even with automobile supply chains becoming globalized, many automotive hubs retain that early geographic template of large manufacturers at the center, surrounded by tiered suppliers feeding the supply chain system. It is no surprise that supply chains are an integral component of economies where the automobile industry is driving prosperity.
Students attending Purdue University in Indiana, USA, including some in the Indianapolis motorsports industry, have been touring German automobile factories such as BMW in Munich on study abroads for many years. These students, who are studying industrial engineering technology, supply chain management technology, management, and similar disciplines, have gone on to work at the thriving multinational automobile factories Subaru, Honda, and Toyota in Indiana, and elsewhere in the auto industry in Indianapolis, as 60% of Indiana-resident Purdue students remain in the state for employment after graduation.
Undergraduate students from Purdue University studying the global supply chain at the BMW Welt (showroom) and the BMW museum before their factory tour