The US auto industry is pouring billions of dollars into building new factories, thanks to new federal legislation and increased demand for electric vehicles. As of November, the combined total for all auto manufacturer investments in 2022 was $33 billion, including new auto assembly plants and battery-manufacturing facilities.
According to the Center for Automotive Research, this total adds to the $37 billion committed by companies in 2021. Driving this investment is a series of bills passed by Congress last year to address climate change and invest in new jobs and manufacturing. At the heart of that legislation are investments in domestic semiconductor manufacturing as well as new EV and battery manufacturing, including facilities to process battery materials like lithium and graphite.
The biggest movers include Ford, which has multiple factory projects underway in Kentucky and Tennessee, where it recently began constructing its BlueOval City facility. In Georgia, Rivian recently committed to building a second factory, and Hyundai revealed plans for a $5.5 billion investment to expand their battery and EV production capabilities.
The new facilities also shift production away from traditional manufacturing hubs like Michigan and the Great Lakes region. Southern states such as Georgia, Tennessee, and Kentucky have invested in technical colleges and preparing project sites to attract car companies. These states have pitched the advantages of lower energy costs and an abundance of land with infrastructure, including roads and utilities, already in place. As a result, these states are reaping the rewards at a time when car manufacturers are looking for ways to speed up construction.
Battery manufacturing companies are also ramping up new factory projects, with many expected to open in the next few years. Currently, countries in Asia manufacture most of the world's EV batteries. However, rising transportation costs, combined with supply chain risks associated with overseas suppliers, led companies to consider localizing battery production.
The Inflation Reduction Act further accelerated plans to increase domestic battery production. On top of the expected supply chain cost savings, it offers billions of dollars in incentives, including a federal tax credit for buyers who purchase domestically manufactured EVs. As a result, many companies with assembly plants in the US are developing domestic battery capability, including Hyundai and Ford, as well as General Motors and Toyota.
Source: The Wall Street Journal