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The shift to electric vehicles is sparking the biggest car factory construction boom in decades

The U.S. auto industry is in the midst of one of its biggest factory-building booms in years, a spending spurt largely driven by the shift to electric vehicles and new government subsidies to boost U.S. battery manufacturing.

According to the Center for Automotive Research, a Michigan-based nonprofit, the U.S. had committed about $33 billion in new auto plant investments through November, including money to build new assembly plants and battery manufacturing facilities.

The 11-month total comes on top of $37 billion in new spending on auto plants in 2021, as a slew of new projects were unveiled in states like Tennessee, Kentucky and Michigan. The annual figure has increased from $9 billion in 2017 and is more than eightfold from two decades ago, the center found.

About two-thirds of new auto investment uncovered in the past two years goes to locations in the southern U.S., the data shows, moving the activity further from the Great Lakes region, the auto industry’s powerhouse for a century.

Automakers’ race to fill their lineups with electric vehicles is the biggest factor behind the factory spending spree. The federal climate package was passed in 2022 is likely to further accelerate US investment, allocating tens of billions of dollars to subsidize electric vehicle and battery factory projects, as well as facilities to process battery materials such as lithium and graphite.

Some foreign-owned auto companies are targeting US expansion to offset weakness in other global markets. Meanwhile, freshly capitalized EV startups including Rivian Automotive inc,

expand their production capacity.

Rivian, which began building vehicles in Illinois in 2021, has committed to opening a second factory in Georgia in 2026. Hyundai engine co

also unveiled plans for a $5.5 billion factory complex in the state.

The capital outlay amounts to a collective bet by the auto industry that buyers will adopt battery-powered models in sufficient numbers to support these investments. According to consulting firm AlixPartners, the global auto industry plans to spend a total of $526 billion on electric vehicles by 2026.

“You have to invest now or you will be left behind in the transition,” said John Lawler, Ford Motor’s chief financial officer co

The bet is made riskier by signs of a possible economic downturn, which could affect consumers’ willingness to spend. Still, business leaders say they’re confident manufacturing investment will boost their future well beyond a possible recession. State officials see this as a unique opportunity to strengthen the local economy and secure jobs.

Southern states like Georgia, Tennessee and Kentucky have emerged as some of the biggest winners in the battle for new auto plant projects.

Pat Wilson, commissioner for Georgia’s economic development department, said it was no coincidence. Georgia had spent years investing in technical colleges and preparing project sites to attract them car companies, he said.

“I feel like we’re riding that wave right now,” said Mr. Wilson.

Southern leaders have highlighted the benefits of lower energy costs and an abundance of buildable land, analysts and site selectors say. Auto companies are also looking for shovel-ready locations where certain infrastructure, such as roads and utility lines, is in place. This preliminary work helps speed up factory construction.

Energy costs are a key factor when choosing a location for a battery factory, as these facilities are large consumers of energy. Tennessee, for example, had an average industrial electricity price of 6.89 cents per kilowatt-hour, according to October 2022 data from the US Energy Information Administration, compared to Michigan’s 8.38 cents.

“There is no question that some of the markets in the Southeast have found a great secret on how to court these big projects,” said Eric Stavriotis, head of location incentives at CBRE Group,

a Dallas-based real estate company.

Over the past year, the rush to move more of the battery manufacturing supply chain to the United States has also prompted many new factory projects, many of which are expected in the next few years.

Most EV batteries are now made in Asia. But transportation costs, coupled with the risks of relying on foreign suppliers, have prompted more automakers to localize battery manufacturing.

The Anti-Inflation Law further accelerated efforts to increase domestic production. It offers billions of dollars in manufacturer incentives for domestic battery production and limits a state tax credit for electric vehicle buyers to vehicles with batteries and their mineral components that are sourced in North America or from trade-friendly countries.

Last year General Motors co

opened a new battery factory in Ohio with LG Energy Solution and is developing two more in Tennessee and Michigan.

Panasonic Holdings corp

said in the summer that it has a $4 billion battery factory in De Soto, Kan. would build. Ford, Toyota Motor corp

and Jeep owner Stellantis NV.

also have multi-billion dollar battery factory projects underway.

The investments contrast with other measures that have tightened their belts in recent months as auto industry executives brace for a possible one downturn. Some auto companies have laid off workers or held back on hiring. Stellantis said last month it would indefinitely shut down a 1,350-worker assembly plant in Illinois that makes the Jeep Cherokee in February.

Ford’s Mr. Lawler said despite recession concerns, auto companies cannot be short-sighted about their electric vehicle investments. Ford has several factory projects underway, including in Tennessee and Kentucky, and plans to invest $50 billion in electric vehicles by 2026.

“The bigger risk we see is that if you don’t make the investments, you hold back,” he said. “We cannot pause the future.”

Authors: Nora Eckert at nora.eckert@wsj.com

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Source: Crypto News Deutsch

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