US Market News

States are spending billions on electric vehicles in battle to replace automotive capital Michigan

In this article

For as long as there has been an auto industry, Michigan has been its epicenter. But now, the industry is making clear that it is not bound by tradition.

The move to electric vehicles — rapidly accelerating as the price of fossil fuels rises and battery technology improves — is easily the biggest shakeup in the industry since mass production began in Michigan at the start of the 20th century. And it has left Michigan’s status as the nation’s automotive capital deeply in jeopardy.

Startups including Amazon-backed Rivian and VinFast from Vietnam are spending billions to build factories in the Southeast — Georgia and North Carolina, respectively. Korea’s Hyundai has announced that it will set up shop in Georgia. Volkswagen has a massive facility in Tennessee and is looking to expand there.

But Michigan took a body blow last year when one of its most iconic companies — Ford — announced it would spend $11.4 billion to build a manufacturing complex dubbed “Blue Oval City” in Tennessee, and a pair of battery plants nearby in Kentucky. The company says the expansion will create nearly 11,000 jobs.

Rendering of Ford’s $5.6 billion “Blue Oval City” campus in Tennessee.

“No one wants to see that, right?” said Michigan Gov. Gretchen Whitmer in an interview. “I mean, it was kind of a shock.”

It was enough of a shock to get Whitmer, a Democrat, and the Republican-controlled state legislature to agree in record time on a package of incentives aimed at matching the deals that helped other states win EV manufacturers. Georgia is doling out $1.5 billion in state and local incentives to Rivian, for example. North Carolina agreed to pay up to $1.2 billion to lure VinFast. Ford stands to collect $883 million from Tennessee and another $250 million from Kentucky.

So, in December, just weeks after Ford’s bombshell announcement, Whitmer signed a package of legislation including a new $1 billion incentive fund for “strategic outreach and attraction.”

If anyone in Michigan is annoyed about having to put up that kind of money just to retain an industry that is already there, they are not showing it.

“It’s my job to make sure that we’ve got all of the resources we can focus, so that we are competitive with what other states are throwing at these companies to try to earn their investment,” Whitmer said.

Sure enough, another homegrown Michigan company, General Motors, happily took the bait.

In January, GM announced it would spend $7 billion to expand its electric vehicle business in the state, including a new battery plant in a joint venture with South Korea’s LG Energy Solution, and expanding GM’s electric vehicle production at its Lake Orion, Michigan, assembly plant. That work had been slated to be done in Mexico.

In exchange, GM stands to collect around $1 billion in incentives, including $600 million from the new incentive fund.

“The future of mobility is very much happening in the state of Michigan,” Whitmer said.

The head of the state’s economic development arm said the new incentives will help bolster Michigan’s sales pitch as it tries to win more business.

“Michigan is a state that put the world on wheels, created Motown, tremendous advances in the life sciences and medical devices. We’re still that state of inventiveness,” said Quentin L. Messer, Jr., CEO of the Michigan Economic Development Corporation.

But one site selection consultant, who says he worked on several electric vehicle deals, warns that most of the big deals have already been done.

“I think we are at peak EV in terms of the frenzy,” said Tom Stringer, managing director in charge of the site selection and incentives practice at BDO in New York. “I think you see this reflected in the stock prices. The froth is off the market. Now, it’s ‘prove it.’ Do customers want these vehicles? Can these manufacturers go to scale and deliver?”

Stringer said that all the states have been careful to structure their incentives so the companies must first create the jobs before they can cash in.

“There have been no giveaways in this industry, which is great for from a taxpayer standpoint,” he said.

Still, subsidy watchdog Greg LeRoy of the nonprofit group Good Jobs First believes states have gotten caught up in the hype, to the potential detriment of the taxpayers.

“It’s understandable, governors want to get in on the ground floor of a rising industry, electric vehicles, in the future.” But, he said, “spending a billion dollars on a single facility, you’re never going to break even from a tax revenue point of view.”

United Auto Workers in the EV era

Another Michigan institution with a major stake in the EV battle between the states is the United Auto Workers.

“We’re headquartered here, we were founded here,” said UAW President Ray Curry in an interview. “We’re always going to advocate for Michigan. It’s always about the home team.”

Regardless, the union is still seeking to organize the facilities in less union-friendly states. It has had some successes, including at Ford’s Blue Oval City complex. But most of the other plants, like Rivian in Georgia, are non-union.

Even in Michigan, there are no guarantees. GM’s battery joint venture, called Ultium Cells, is non-union, at least for now. Curry is vowing to change that.

“It’s a very critical time for the UAW,” he said. “This transformation piece is about our future. It’s about 86-plus years of longstanding history.”

Messer, the state economic development official, believes Michigan’s deep union history may have hurt the state due to what he said are misconceptions among business leaders.

“The unions have been very focused on talent development, workforce development, getting young people into the trades,” he said. “These are critically important things that I think people don’t appreciate.”

Stringer said many companies are taking a new look at unions, no longer strictly as adversaries, but also as sources of badly needed talent.

“I think the ability to get skilled workers, whether they’re union or non-union, is critical,” he said. “If unionized states can show that value proposition, that if you hire our individuals, they’re going to be better, faster, more effective over the long term, those states are winning projects.” 

This post has been syndicated from a third-party source. View the original article here.

Related Articles

Back to top button