Electric vehicle hubs draw billions in state subsidies

State and local governments are offering billions of dollars in incentives and tax breaks in an increasingly expensive competition to win electric vehicle manufacturing plants.
A car on the assembly line at the BMW Spartanburg plant in Greer, S.C., Wednesday, October 19, 2022. BMW announced $1.7 in new spending in and near the plant, with large resources going to conversion to electric vehicle manufacturing. (AP Photo/Sean Rayford)

State and local governments are offering billions of dollars in incentives and tax breaks in an increasingly expensive competition to win electric vehicle manufacturing plants, fueled in part by federal stimulus dollars meant to help cope with the coronavirus pandemic.

Since the onset of the pandemic, states have announced at least 59 deals with companies set to build electric vehicles and battery manufacturing facilities. The companies involved stand to receive varying combinations of subsidies, tax credits and other incentives as they build out their sites, hire local workers and — ideally, for the states — pump tax revenues back into the local economy.

The cost of many of those deals have not been publicly disclosed. But at least five are valued at more than $1 billion each, according to a report from Good Jobs First, a watchdog group that tracks such agreements.

The race for new high-tech manufacturing plants has been supercharged in part by federal relief dollars, doled out in packages signed into law by both former President Donald Trump and President Biden, along with the bipartisan infrastructure bill Biden signed last year.

That money has reignited a race to land mega-deals.

“The reason that states have been so profligate is that they’re fat,” said Greg LeRoy, executive director of Good Jobs First and the report’s lead author.

Economic development officials say electric vehicle plants are especially attractive because they offer high-tech manufacturing jobs that provide a path to a middle class lifestyle that has slipped away in recent years.

“There’s going to be this pivot toward electric vehicles and the electric vehicle supply chain,” said Matt Englehart, communications manager at JobsOhio, his state’s economic development corporation. “We are seeing more and more onshoring of projects. Not reshoring, but onshoring.”

Georgia has struck agreements with Hyundai, valued at $1.8 billion, and the electric car manufacturer Rivian, valued at almost $1.5 billion, in recent years. North Carolina announced a deal valued at up to $1.25 billion with VinFast, a Singapore-based company that will set up a plant in Chatham County.

Michigan reached a deal with General Motors totaling up to $1.76 billion in 2020. Lawmakers last month agreed to fund an economic development program there with about $1 billion, and Gov. Gretchen Whitmer (D) this month announced two new electric vehicle manufacturing plants that she said would bring thousands of jobs to her state.

Kathleen Achtenberg, a spokeswoman for the Michigan Economic Development Corporation, said the state had attracted $15.1 billion in planned capital investment over the last fiscal year, for projects that will employ nearly 23,000 people.

“Other states aren’t standing idly by. We must remain laser-focused on out-hustling, out-competing and out-performing our competitors around the globe to make sure Michigan continues to be a global home for opportunity,” Achtenberg said in an email.

In one of the more bizarre incidents in recent years, Kansas Lt. Gov. David Toland (D), who also serves as Commerce Secretary, asked lawmakers to create new economic development incentives to win a $4 billion investment in the state — without telling lawmakers what company was involved or where the new facility would be located.

Gov. Laura Kelly (D) announced in July that Panasonic would build one of the nation’s largest electric vehicle battery manufacturing plants in the world in De Soto County.

“Winning this project has shown that Kansas has what it takes to compete on a global scale — and that our pro-business climate is driving the technological innovation needed to achieve a more prosperous and sustainable future,” Kelly said when she announced the plant.

Those four states, along with Nevada and Tennessee, have committed more than $1 billion to new electric vehicle or battery facilities, according to the Good Jobs First report.

For decades, states have vied for the right to host new mega-plants, offering incentives and subsidies that can end in an attractive photo opportunity of a governor and a chief executive armed with hard hats and spades. Companies that stand to benefit from the subsidies often pit states against each other to secure better deals.

Sometimes those mega-deals do not result in the jobs the companies claimed they would bring. Economic development officials are all too cognizant of prior examples such as Foxconn, a high-tech manufacturer that won billions in subsidies in Wisconsin before radically altering their plans, and Boeing, which signed a record-breaking deal with Washington State before moving more employees to other states.

State economic development officials are quick to point to provisions in their own deals that guard against such disappointment.

“JobsOhio and our partners at the state have guardrails in place so we can realize a return on investment for projects in Ohio, most notably the performance-based requirements,” Englehart said. “Incentives are … performance-based, so companies under an agreement must actually create jobs and new payroll for Ohioans for an incentive to be realized. If the companies do not realize their obligations, we reserve the right to claw back.”

JobsOhio, Englehart said, had clawed back money from only 1.7% of the 2,000 projects it had approved in recent years.