Competitiveness at Stake: 2025-26 State Budget Impact on the Automotive and Mobility Industry

While a state government shutdown was narrowly avoided and the fiscal year 2025-26 budget has been signed into law, the results have serious consequences for Michigan’s economic competitiveness and the strength of its signature automotive and mobility industry.

Several MichAuto advocacy priorities were impacted by either a reduction or cut in this latest budget, and work will need to be done to ensure the industry’s needs are met as it continues to evolve amid mounting global competition and tariff- and supply chain-related challenges.

The complete elimination of the Strategic Outreach and Attraction Reserve (SOAR) fund in this budget comes at the expense of business competitiveness and industry strength. While SOAR has suffered from a raft of bad press and recent bipartisan criticisms, since its inception, the program has yielded some significant investments toward large industrial projects that have bolstered the state’s economy.

The legislature also chose not to provide additional funding for the R&D Tax Credit. The Governor’s Executive Budget Recommendation earlier this year recommended allocating $100 million for this credit.

The MEDC’s Business Development Program (BDP) was also an unfortunate casualty of the budget agreement. The BDP has a strong track record of helping spur investment in innovation and job creation here in Michigan. Choosing to defund this program will have a negative effect on Michigan’s business competitiveness.

MichAuto Perspective: These incentives have made the state a more attractive place to do business. MichAuto believes that rather than eliminating it entirely, SOAR should have been retooled. Further, without an attractive suite of incentives or a closing fund, Michigan businesses are at a disadvantage compared to national competitors with more resources of this sort.

There are positive indications, however, that the Governor and Legislature will reach a deal to fund other important economic development tools, specifically the HIRE Program and the Transformational Brownfield Plan, by the end of the year. MichAuto will continue to monitor that development and provide updates.

Business organizations across the state were unified in opposition to the decoupling of state taxes from federal tax reforms designed to spur investment and innovation. The decision to decouple results in Michigan businesses paying higher state taxes, effectively amounting to more than a $2 billion tax increase on businesses over the next five fiscal years.

MichAuto Perspective: Read more about this issue impacting business competitiveness from the Detroit Regional Chamber.

Of particular concern is the significant cut to the Going PRO Talent Fund. The $22 million reduction — a 50% cut — will adversely affect manufacturing companies’ ability to train up and retain needed talent in Michigan. This program has long been supported by bipartisan majorities, and in past budget cycles, MichAuto investors routinely expressed the need to increase funding for Going PRO.

Further compounding the precarious nature of this funding, the legislature moved most of the remaining Going PRO funds to a one-time appropriation. This means the baseline funding for this vital program in future budgets went from approximately $45 million to just $9.5 million.

MichAuto Perspective: Developing the high-tech talent pipeline through education, training, and upskilling continues to be a top MichAuto priority. The team will work to ensure sufficient funding for Going PRO is restored to future budgets.

The Legislature and Governor finalized a Transportation Funding Package allocating an estimated $1.85 billion in new funds toward road and bridge construction. While investing in roads is critical to our state’s success and growth, the budget deal places a disproportionate burden on businesses compared to other road users, leaving less support for them to create jobs and drive economic growth.

MichAuto Perspective: World-class infrastructure is critical to the safety and well-being of Michigan citizens. In addition, strong infrastructure and communities play a vital role in the development, retention, and attraction of people to the state. MichAuto will continue to advocate for sustainable road funding, including thoughtful policy on road usage charge revenue options.