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Recent announcements reveal “mega” trends in electric vehicle and battery manufacturing expansions

August 25, 2022
By: Emily Chesser

The recently approved Inflation Reduction Act with new incentives for electric vehicle ownership and energy efficiency is likely to continue a trend among states for the location of major economic development projects, a trend toward everything mega—megasites, megadeals, mega factories, and mega projects. These large-scale manufacturing projects typically feature incentives from state and local governments, such as access to shovel-ready megasites or large tax incentive packages. These new "mega" trends have raised the stakes and increased competition between states as they advocate for the bid of electric vehicle and battery companies looking to expand.

The most recent announcement came as Panasonic Corporation committed to building a new $4 billion factory for electric vehicle batteries in Kansas, planning to create over 4,000 jobs. The Panasonic deal featured an $892 million incentive package with payroll rebates, investment tax credits, funds to cover training and education costs, and sales tax exemptions for construction. Kansas was not the only state vying for the Panasonic plant — Oklahoma was planning to offer a $698 million incentive package to draw the company there.

States have been choosing roughly one of two routes to draw in companies. The first approach is to maximize the value of a location by developing a robust ecosystem of collaboration to fit the needs of the industry, and the second is to support programs that incentivize companies to choose a particular state.

The first approach focuses on creating an ecosystem of skilled workers, access to supplies, and a stable economy for promoting successful manufacturing facilities. In Stillwater, Oklahoma, Rare Earth USA, a supplier of elements and minerals essential for producing electric vehicle batteries, decided to develop a 309,000-square-foot manufacturing center. The company explored over 50 sites across the nation but settled on Stillwater because of its access to state research institutions, advanced manufacturing workforce, and unique business community. Electric truck and van manufacturer Envirotech Vehicles announced their decision to locate their first U.S.-based manufacturing facility in Osceola, Arkansas. The company cited the state's business climate, strong local workforce, and proximity to steel needed for production as the primary factors for the decision.

The second approach has been a topic of discussion throughout the U.S. as manufacturing "mega factories" announcements have continued. Two frequently used methods for incentivizing companies in the U.S. have been streamlining the permitting and land leasing process by offering ready-to-build megasites and creating loans or grants that provide sizable tax breaks.

Georgia has seen success with its plan to develop megasites to draw manufacturing companies into the state. The first came when Rivian Vehicles, an electric vehicle manufacturer, announced plans to build a $5 billion assembly plant and battery factory at the East Atlanta Megasite along Interstate 20, where they plan to employ 7,500 workers. The purchase of the prepared megasite reportedly allows Rivian to avoid the months of negotiations required to begin construction. This megasite, along with a package of incentives and the site's position near the interstate, railway, and Hartsfield-Jackson International Airport, were cited as factors for Rivian's selection.

Not long after the Rivian announcement, Hyundai Motor Group announced its decision to develop its first manufacturing facility dedicated entirely to electric vehicles and batteries at the Bryan County Megasite with a $5.54 billion investment creating about 8,100 new jobs. Hyundai Motor Group cited the reduced barriers to operations and railway and interstate access of the Bryan County Megasite as crucial reasons for its decision. The 2,923-acre site was purchased a year ago by the Savannah Harbor-Interstate 16 Corridor Joint Development Authority (JDA) and was marketed explicitly for electric vehicle manufacturing use. According to the Savannah Morning News, the JDA, which consists of economic development officials from three Georgia counties, consolidated land owned by three different parties to create the megasite.

North Carolina is another state providing large incentive packages to encourage manufacturing companies to invest in the state. The most recent announcement from the state is Wolfspeed, Inc.’s $5 billion semiconductor materials manufacturing plant. According to an announcement from Wolfspeed, Inc., the state and local government supports the company’s expansion with an incentive package of approximately $1 billion. This package is expected to include cash incentives, infrastructure improvements, and local property tax rebates. The company also hopes to utilize federal investments from the recently passed CHIPS and Science Act to expedite construction.

Another state using megasites to draw in companies is Tennessee, which invested about $174 million in the 4,100-acre Memphis Regional Megasite. Gov. Bill Lee announced Ford Motor Company and SK Innovation's plans to develop a $5.6 billion megacampus at the site to produce Ford's new electric trucks. Tennessee also announced plans to open a new campus for the Tennessee College of Applied Technology (TCAT) at the site to support training for electric vehicle and battery manufacturing, providing the skilled workforce needed by the company.

Massive incentive packages have been another deciding factor for companies looking to expand manufacturing operations in the United States. The Good Jobs First Subsidy Tracker defines megadeals as incentive packages of at least $50 million. Large incentive packages from the states have drawn Ford Motor Company to Tennessee and Kentucky, which according to the Good Jobs First Subsidy Tracker, total about $884 million from Tennessee state and local governments and about $410 million in incentives from Kentucky state and local governments.

Electric vehicle startup Canoo Inc. recently selected Oklahoma as the site for its manufacturing facility in the U.S., bringing an estimated 2,000 jobs to the state. This announcement followed a fierce incentive bidding war between Oklahoma and Arkansas, two states eager to attract electric vehicle manufacturing to their area. According to the Good Jobs First Subsidy Tracker, the state and local incentive package was worth nearly $300 million.

In Georgia, the Rivian Automotive deal featured the most extensive subsidy package for an auto company in the U.S., with incentives amounting to about $1.5 billion.

The evolution of all things "mega" in state economic development comes as states are fighting to be at the forefront of electric vehicle and battery production in the United States. According to insights from McKinsey and Company, market forecasts for battery cells will increase by over 20 percent per year until 2030. They estimate that for the battery-cell manufacturing industry, the market will consolidate to around 10 to 15 major global players. A belief that time is running out for states to bring these companies to their region is leading state and local governments to increase incentive packages.

Note: This story was updated Sept. 23, 2022, to include the Wolfspeed, Inc., announcement in North Carolina.

Arkansas, Georgia, Kansas, Kentucky, North Carolina, Oklahoma, Tennesseetax incentives, economic development