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Federal Register / Vol. 86, No. 213 / Monday, November 8, 2021 / Notices had jumped dramatically from 4 percent in 2007 to 11 percent in 2015. During that same period, the U.S. share of total automotive R&D spending dropped from 29 percent to 27 percent.187 China also replaced Germany as the second-largest importer of automotive R&D during this period.188 According to PwC, this data reflects the shift happening in the automotive industrys center of gravity.189 PwCs 2017 Global Innovation 1000 Study highlights the impact of this trend, showing that of the top 20 automobile producers ranked in terms of R&D expenditures, 11 are headquartered in Asia and six are headquartered in Europe, while only 3
are headquartered in the United States GM, Ford, and Tesla.190
Further, none of the top 10
automobile parts suppliers in terms of overall R&D expenditures is headquartered in the United States, while four are headquartered in Asia and the remaining six are headquartered in Europe.191 This is problematic for the national security of the United States because the automotive industry is highly dependent on suppliers for components as well as leading-edge technological development. While U.S.
automobile companies direct billions of dollars in R&D activities, this research is increasingly conducted by partner supplier companies. In fact, automobile parts manufacturers conduct about one-third of the annual $18 billion investment by the automotive industry in R&D in the United States.192 Most automobile producers TEXT
REDACTED.193
TEXT REDACTED 194 TEXT
REDACTED.195 As noted, automobile parts suppliers play a critical role in developing the innovations 196 that
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187 Id.
188 Id. Imported R&D refers to R&D conducted in China by companies headquartered abroad.
189 Id.
190 PwC, The 2017 Global Innovation 1000 Study, supra.
191 Id.
192 MEMA Responds to Trump Administration Announcement of Additional 301 Tariffs on China, Motor & Equipment Manufacturers Association, Jul.
11, 2018, https www.mema.org/mema-respondstrump-administration-announcement-additional301-tariffs-china.
193 U.S. Producers Survey Response, Question 12c.
194 Id.; Department of Commerce, Bureau of Economic Analysis, 2012 Benchmark Input-Output tables. As calculated by Department of Commerce.
2012 data are the latest available.
195 U.S. Producers Survey Responses, Question 10a.
196 The importance of automotive suppliers in the automotive R&D landscape is also demonstrated in future automotive technologies, and none more so than autonomous vehicle technology. For example, the Navigant Research Leaderboard, a respected and often-cited ranking system, evaluates companies
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make the automotive industry hightech,197 and within the industry, automobile parts suppliers employ approximately 40 percent of all R&D
scientists and engineers, while automobile manufacturers employ the remaining 60 percent.198
While American-owned producers lag behind their EU and Japanese competitors in automobile R&D, South Korean and Chinese companies are ramping up R&D expenditures and activities. Of course, there is a direct correlation between innovation and manufacturing. Japanese and EU firms are leaders in automobile production, and so their significant levels of R&D
expenditures should come as no surprise. Yet, it is also important to emphasize the correlation between R&D
expenditures and the low level of import penetration in each foreign countrys automobile industry.199 As discussed in Appendix F, Japaneseowned automobile producers enjoy a dominant position in their home market, as they account for nearly 100
percent of domestic vehicle production in Japan.200 TEXT REDACTED.201
Similarly, German-owned automobile producers account for 85 percent of domestic vehicle production in Germany,202 and also rank TEXT
REDACTED.203 The Volkswagen Groups research is based in Wolfsburg, Germany, and the company describes this development center as the innovation hub and the nerve centre of a global development network for all Volkswagen Group brands.204
Additionally, South Korean automobile producers account for 77
percent of domestic vehicle production developing automated driving systems. Several of the identified leaders are suppliers, including Bosch, Aptiv formerly Delphi, Autoliv, Magna, Valeo, and ZF Friedrichshafen AG. Navigant Research Leaderboard: Automated Driving Vehicles, https www.navigantresearch.com/
reports/navigant-research-leaderboard-automateddriving-vehicles.
197 Kim Hill, Bernard Swiecki, Debra Maranger Menk, and Joshua Cregger, Just How High-Tech is the Automotive Industry?, Center for Automotive Research, Jan. 2014, https autoalliance.org/wpcontent/uploads/2017/01/CARReport_Just_How_
High_Tech_is_the_Automotive_Industry.pdf 198 Id.
199 David Autor, David Dorn, Gordon H. Hanson, Gary Pisano, and Pian Shu, Foreign Competition and Domestic Innovation: Evidence from U.S.
Patents, American Economic Review: Insights, forthcoming, December 2017, https www.nber.org/
papers/w22879.
200 Wards Intelligence InfoBank.
201 U.S. Producers Survey Responses, Question 10.
202 Wards Intelligence InfoBank.
203 U.S. Producers Survey Responses, Question 10.
204 Research and Development, Volkswagen, https www.volkswagen-karriere.de/en/unserebereiche/forschung-entwicklung.html.

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in Korea,205 and Korea ranks TEXT
REDACTED.206
The R&D spending by the largest foreign-owned automobile producers is a direct reflection of the advantages the firms enjoy in their protected home markets, as described in Appendix F.
Volkswagen and Toyota have been among the top 20 overall R&D spenders every year since 2005,207 and in 2017
these companies ranked first and second respectively in terms of global R&D
expenditures by vehicle producers, a tremendous advantage in the highly competitive and always evolving automotive industry.208 China is also increasing its investments in automotive R&D, reaching $12 billion in 2015.209
Eighty-four automotive research and design centers have opened in China in the past 12 years, with the key focus of activity in cutting-edge technologies including connected vehicles and electric drivetrains.210
The internationalization of automotive R&D has focused primarily on local product development, and core research remains concentrated near the home bases of lead firms.211 Offshoring of automotive R&D is, in large part, driven by the offshoring of manufacturing capabilities. As manufacturers seek to reduce manufacturing costs, production optimization compels the offshoring of R&D that follows. Data show that a countrys attractiveness to R&D centers is also driven by the number of available science and engineering experts in that country.212 For automotive R&D
specifically, a 2008 PwC study and a 2012 study from the European Commission on the automotive sector both list access to talent pools and physical proximity to customers as the main factors driving R&D location 205 Wards 206 U.S.

Intelligence InfoBank.
Producers Survey Responses, Question
10.
207 PwC, The 2017 Global Innovation 1000 Study, supra.
208 Id.
209 Rishabh Saraswat, Automotive R&D Ecosystem in China: The Road Ahead, DRAUP, Dec. 14 2017, https draup.com/blog/automotive-rd-ecosystemin-china-the-road-ahead/.
210 Id.
211 Petr Pavl nek, The Internationalization of Corporate R&D and the Automotive Industry R&D
of East-Central Europe, Economic Geography, Apr.
25, 2012, https www.researchgate.net/publication/
260186659_The_Internationalization_of_Corporate_
RD_and_the_Automotive_Industry_RD_of_EastCentral_Europe at 4.
212 Rajesh K. Chandy, Andreas B. Eisingerich, Jaideep C. Prabhu, and Gerard J. Tellis, Patterns in the Global Location of R&D Centres by the Worlds Largest Firms: The Role of India and China, January 2010, https www.researchgate.net/publication/
265870303_Patterns_in_the_global_location_of_RD_
centres_by_the_worlds_Largest_firms_The_role_of_
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