The South Is Winning The EV Manufacturing Battle

“Alabama is full steam ahead on electric,” said one interviewee on a recent report from NPR’s The Indicator. The South is “becoming the new Detroit,” claimed another. Alabama, along with Georgia, Tennessee, and the Carolinas, account for dozens of new electric vehicle and battery manufacturing plants announced in the last 18 months. “If it’s gotta be in the United States, it’s going to be in the South,” the show contends. It’s a quick 9-minute segment, go give it a listen.

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The Biden administration’s 2022 Inflation Reduction Act has proven an absolute boon for the American South. Because the act requires electric cars to have final assembly in North America in order to be eligible for the $7500 federal tax incentive, Asian and European manufacturers are rushing to retool their existing American-based plants or build new ones for EV production. Thanks to their largely union-opposed legal atmosphere, cheaper passive labor forces, and billions in available incentives, many of these plants will open in the South.

For decades southern states have been courting automakers and suppliers, trying to build a new warmer-weather supply chain. Volkswagen in Chattanooga, BMW in Greenville, Hyundai in Montgomery, Honda in Lincoln, Toyota in Huntsville, the list of foreign automakers based in the South has continued to blossom as these states promise low wages and an anti-union sentiment. With the advent of the Inflation Reduction Act, these plants are ramping up for electric production and more are on the way.

Beyond the relatively low cost of labor, state governments are desperate to give incentives to attract manufacturing to their jurisdictions. Hyundai’s new plant, a $7.6 billion facility in coastal Georgia, is eligible for as much as $2.1 billion in state and local tax breaks. Northern states simply aren’t interested in giving up the tax revenue to draw these plants to their states.

The local supply chain benefit to building your new facility in Michigan or Indiana or Ohio is waning. It used to be that if you wanted your parts quickly, you had to be located near the midwest sources for those components. With the decades-long growth of suppliers drawn to the South, it is now a much more viable region for building cars, and soon may be one of the electric car capitols of the world.

The only question at this point is whether the south will remain non-union into the near future. Last week UAW President Shawn Fain promised that “(w)hen we return to the bargaining table in 2028, it won’t just be with the Big Three. It will be the Big Five or Big Six.” Looking to grow the UAW’s influence to new automakers won’t be easy, but recent contract wins may prove to workers at other automakers that they can fight for greater value and influence.