Why the world’s carmakers are beating a path to the USA’s Southeast
Peyton Fleming reports on how the Inflation Reduction Act is supercharging the development of an entire homegrown EV ecosystem, from battery minerals to manufacturing plants.
Why the world’s carmakers are beating a path to the USA’s Southeast
By Peyton Fleming
Summary
Peyton Fleming reports on how the Inflation Reduction Act is supercharging the development of an entire homegrown EV ecosystem, from battery minerals to manufacturing plants.
The south-eastern U.S. is a region best known for college football, grits and magnolias. You can now add electric vehicles to the list.
The band of states, from Tennessee down to the Carolinas, Georgia and Alabama, has fast become the national hub for the EV industry – from vehicles and charging stations, to batteries, battery components and even battery-critical minerals such as lithium, which lie beneath the ground in North Carolina.
The region’s meteoric rise has been especially heated since last summer’s passage of the Inflation Reduction Act (IRA), with its broad mix of financial incentives to build an EV ecosystem that is less dependent on overseas suppliers such as China.
Last year, companies announced more than $73 billion in EV manufacturing projects in the U.S., more than triple the previous year, much of it in states such as Tennessee, Georgia and North Carolina, according to data compiled by the think-tank Atlas Public Policy.
Mainstream automakers such as Toyota and GM have boosted their expansion plans in the region, while upstarts like Vietnamese automaker VinFast broke ground on its first EV manufacturing plant in the U.S., a $1.2 billion facility in North Carolina that will start producing vehicles in 2024.
“Everybody, including companies we’ve never even heard of, are producing electric vehicles,” said Ryan Kennedy, co-founder and chief executive of Atom Power, an EV charging station company in North Carolina, which announced a $100 million investment infusion in mid-August, on the same day President Biden signed the IRA into law.
The region’s super-charged growth is the result of shrewd political planning decades ago and a climate change crisis that has governments and companies worldwide scrambling to accelerate EV deployment and phase out gasoline combustion-driven transportation, a leading source of greenhouse gas emissions, which is driving up global temperatures.
The European Union and numerous U.S. states, led by California and New York, have enacted plans to ban the sale of new gas-powered cars starting in 2035. Major automakers such as Ford, GM and Toyota have made similar commitments to drop gas-powered vehicle sales by 2040 or even earlier.
It was Lamar Alexander, Tennessee’s governor in the late 1970s and early 1980s, when EVs were little more than science fiction, who convinced a Japanese automaker to build its first U.S. automaking plant in the southeast. In 1983, the first white Nissan pickup truck rolled off the assembly line in Smyrna, Tennessee.
Offering cheap energy, low taxes and bountiful incentives, the region’s market share has been growing ever since, with more and more of the money going towards electric vehicles.
When, last fall, Ford began work on a $5.6 billion EV truck and advanced battery complex near Memphis, the state of Tennessee won the bragging rights for four EV auto assembly plants within its borders; the others being Nissan, Volkswagen and General Motors. The state’s auto-related workforce, including employees of more than 900 auto suppliers, totals more than 137,000, according to state data.
But Tennessee by no means holds a monopoly on success, with Georgia, North Carolina and Alabama also unveiling new EV production lines last year run by Hyundai, VinFast, Rivian and Mercedes.
Going with the current
Perhaps the biggest shift, however, is the billions of dollars flowing to the country’s nascent EV battery sector, which has been hamstrung by its reliance on foreign sources for critical minerals needed to produce lithium-ion batteries, such as lithium, cobalt and graphite.
President Biden has made clear that he wants to build an EV ecosystem from the ground up and the Inflation Reduction Act, which is chock-full of incentives for EV-related products made in the United States, is a key part.
Starting this year, for example, consumers can receive a $3,750 tax credit for electric vehicles that are assembled and had their battery components made in North America. They can receive another $3,750 if the minerals used in the battery were mined in the 20 countries with which the United States has free-trade agreements.
Companies are clearly paying attention. Barely two weeks after Biden signed the law, Toyotaannounced plans to double its investment to $5.6 billion in an EV battery manufacturing plant it is building in North Carolina, bringing total employment to 2,100.
Toyota spokesman Ed Hellwig said the law’s passage was among many factors that led it to expand its battery facility with another $2.5 billion of capital. Battery production will begin in 2025.
“We believe the future is electrification (and) Toyota’s philosophy is to build where we sell,” said Hellwig, who credits the IRA for stimulating consumer demand and localizing battery production supply chains.
The Bipartisan Infrastructure Law, which passed last year, is also driving battery development, particularly in Tennessee, where new company startups are supporting everything from lithium mining and refining to graphite production.
Among the biggest ventures is by Australia’s Novonix, which is building a plant to produce synthetic graphite anode material used in making lithium-ion batteries for EVs and power grid storage. The company says its material has a 60% lower global warming potential compared with conventional synthetic graphite anode sourced from Inner Mongolia in China. As production ramps up – the company’s goal is 10,000 tons this year and up to 150,000 tons annually by 2030 – the company’s workforce could swell to more than 1,000.
In a case of “back to the future”, lithium mining and production is also seeing renewed interest.
During much of the 20th century, a small corner of North Carolina supplied most of the world’s lithium before cheaper competition from abroad took over. Now, with lithium prices skyrocketing, it’s coming back.
Last fall, chemical company Livent Corp completed an expansion of a lithium hydroxide refinery in Bessemer City, North Carolina. Using lithium raw material from Chile, it is the first expansion of the country’s lithium production capacity in more than a decade.
Other companies are looking to bring back lithium mining. Over the past few years, Australia’s Piedmont Lithium has invested millions looking for rich veins of the lithium-rich mineral spodumene – part of the same Carolina tin-spodumene belt that made this region the cradle of global lithium industry decades ago. While Tesla has agreed to buy the material, the open-pit mining project cannot move forward until it receives local and state permits. Production is not expected to begin until 2026 at the earliest.
Regardless of whether the venture is successful, the region’s big bet on the EV industry seems promising. With more Fortune 500 companies and automakers committing to zero-emission, EV-only fleets in the next decade or two, the industry is expected to double, triple, even quadruple in size by 2030.
Like everyone involved in the EV sector, Atom Power’s Kennedy is scrambling to stay in front of the rising wave. His workforce in North Carolina has doubled to 85 employees in the past year and he expects it will hit 400 to 500 by 2026.
“What keeps me up at night is to be able to service the demand,” he said, noting that the industry’s market penetration in the U.S. will nearly double, from 6% to 12%, this year alone. “It’s not a momentum that will easily be stopped.”