Electric Vehicles are Creating a New Manufacturing Industry
Until a few years ago, the Red Roof Inn in Commerce, Georgia, was just a quiet stop on the I-85 between Atlanta and Charlotte. Even in the busy season, most visitors only stayed for a couple of nights.
But business started to pick up in 2019, after the opening of a new factory by the Korean conglomerate SK Innovation. The new factory, with 3,000 employees, produces batteries to satisfy the growing market for electric vehicles.
“We have people that are coming months at a time,” said Jennifer Glass, who has worked the front desk for the past five years. “Our whole third floor was all Koreans.” At one point, she estimated that workers at the factory accounted for about half of the Red Roof’s customers.
The SK Innovation plant is one of the first outposts of what advocates hope will become a new nationwide manufacturing industry. Anticipating further growth in demand, automakers have poured billions into setting up new factories and assembly plants. Those investments could turn small towns like Commerce into new industrial communities.
The new factory “had a pretty big impact,” on the mostly-rural area, said John Scott, Director of Economic Development for the Jackson County Chamber of Commerce.
Electric vehicles have reached a “tipping point,” according to Beia Spiller, an economist with the Renewable Futures Foundation. While total car sales fell last year, sales of electric vehicles rose to over 800,000, accounting for nearly 6% of the total.
“We expect to see rapid growth in the number of vehicle offerings,” Spiller said, “and so a lot of manufacturers are jumping in feet-first.”
Last year, the Department of Energy estimated that about 105,000 people work in electric vehicle manufacturing, a 26% increase from 2021. Hybrid vehicles, which have both a battery and a combustion engine, experienced slower growth but employ about twice as many workers.
That growth is likely to continue, according to a report by Atlas Public Policy. As of the first half of 2022, the Washington, D.C.-based think tank projected an additional 115,000 jobs in EV manufacturing and related industries, and the number is steadily growing.
Much of the new production will be in Michigan, the established capital of the U.S. auto industry. There are also many planned facilities in states like Georgia, Tennessee, and Kentucky. Together, these three states account for at least $24 billion of planned investments in electric vehicles.
One of the new factory towns is in rural Bryan county, at the rim of Savannah, where Hyundai Motors plans to produce electric vehicles and batteries. With an expected 8,100 jobs, it is the biggest economic development project in Georgia’s history.
Although the factory won’t open until 2025, it’s already having an effect on the local economy. “Over the last six months, everything started getting busy,” said Amy Sayre, who works at the Dollar General in nearby Ellabell. “I noticed a lot more new faces.”
“It’s definitely bringing a lot more houses, a lot more apartment complexes,” Sayre added. “We never had any kind of traffic problems out here, now they’re putting up new lights and talking about putting in a roundabout.” Developers are already working to create 800 acres of new housing in the area, according to local media sources.
The Biden administration has implemented tax incentives to support the domestic EV industry. The Inflation Reduction Act, the president’s signature climate and economic legislation, offers a $7,500 tax credit for new electric vehicles. But there’s a catch: half of the credit requires that the car be assembled in North America, and the other half requires a battery sourced from the U.S. or one of its free trade partners.
Since the new law passed, even more battery plants have been announced in places like Woodruff, S.C., and Fayette County, Ohio. Altogether, automakers announced $10.45 billion of investments in the last three months of 2022, providing an expected 6,400 jobs.
“We’ve seen a number of companies talk about the way (the Inflation Reduction Act) has affected their decision-making,” said Noah Gabriel of Atlas Public Policy, noting that some analysts have cited it in reference to Tesla’s decision to relocate production from Germany.
However, it may be premature to attribute recent growth to the president’s legislation, he said, given that these announcements may take a year or longer to negotiate.
The new law is intended to assuage concerns about the effects on the labor market as electric vehicles become more common. Electric cars have fewer moving parts than traditional vehicles, and some of their components rely on overseas markets. Both the United Auto Workers and the Economic Policy Institute have warned that the electric vehicle transition could result in a net job loss, without appropriate policy measures.
And there are other pieces of the puzzle, from charging networks to critical minerals sources, that must be connected before the electric vehicle transition can be solved. But based on the latest investment trends, car makers aren’t waiting for those pieces to fall into place.
“EVs are ultimately the cheaper technology to own over their entire lifetime, and costs are coming down due to economics of production,” Gabriel said. “However, the IRA will certainly help accelerate adoption.”