Revving up Site Selection for Electric Vehicle Manufacturing

by Elijah Moore, on Mar 21, 2023 9:00:00 AM

In recent years, the electric vehicle (EV) manufacturing industry has been a significant source of investment in production within the United States. By the year 2030, the U.S. is expected to see an estimated $210 billion in capital investments from the EV and battery manufacturing industries.1 This projection represents a substantial increase in the industry's growth trajectory which is expected to drive significant job creation. 

The Economic Policy Institute projects the creation of over 150,000 jobs in the industry within the same time frame. Site Selection Group, a full-service location advisory, economic incentives and real estate services firm tracks site selection trends for the EV industry. Below is a summation of the major themes within the industry. 

Recent industry major announcements

In 2022 alone, original equipment manufacturers (OEMs) of EV have announced more than a cumulative $32 billion worth of investments in future EV manufacturing facilities. The following represent some of those notable announcements.

  • VinFast (NC) $5.5 billion
  • Hyundai (GA) $5.5 billion
  • Honda/LG Energy Solution (OH) $4.4 billion
  • Panasonic (KS) $4 billion
  • Ford Motor Co. (MI, OH, MO) $4.5 billion
  • Samsung/Stellantis (IN) $3.1 billion
  • Toyota (NC) $2.5 billion
  • General Motors (OH, TN, MI) $7.6 billion
  • BMW (SC) $1.7 billion

Source: Site Selection Group, Press releases

While this list is impressive on its own, it does not even show the full picture. There is also substantial investment from non-OEM EV suppliers along the entire value chain who have brought or expanded their production to the United States. 

US and state policies and incentive updates for EV industry

Near the end of 2021, the Biden administration announced several goals to tackle global climate change, including a commitment to pollution-free electricity by 2030 and the production of zero-emission vehicles only by 2035. This commitment to sustainability, particularly in the automotive sector, has carried through in recent policies.

Fueled by bipartisan support, several pieces of legislation followed in 2021 and 2022 that have incentivized the ramp-up in the production of electric vehicles and parts, possibly the largest among them being the Inflation Reduction Act (IRA). This law created several new economic incentives for U.S. manufacturers involved in the production of EVs, EV batterie, and EV battery materials. Billions of dollars in grants, loans and credits are available to these companies when they place new facilities, and source their materials from, the United States. The policy is also aimed at boosting consumer demand by making the price of EVs more affordable, offering tax credits for buyers of EVs up to $7,500 per qualifying electric vehicle purchase. 

The IRA was not the only recent policy to be enacted, either—the Infrastructure Investment and Jobs Act (IIJA) along with the CHIPS and Science Act (CHIPS Act) are also examples of recent public support for the industry. The IIJA allocates federal funding for battery manufacturing, recycling, mineral mining and research. The IIJA also provides funding for utility, transportation and charging infrastructure, which are all vital to the EV industry. The CHIPS Act has several billions of dollars in incentives available for U.S. manufacturers of semiconductor chips — a vital component to all-electric vehicles. These directives are aimed at placing the electric vehicle supply chain (and other clean energy industries) in the United States and are likely key factors in the recent investment decisions of these companies. 

Attractive business climate

While federal support has been crucial to the expansion and relocation of these companies to the U.S., the industry would not have made the commitment without the business-friendly economic setting provided by states and locales. In the site selection process, manufacturers are constantly looking for ways to increase production efficiency and reduce costs while prioritizing factors such as a skilled workforce, access to ports, cost-effecting and reliable utilities, favorable business climates and efficient supply chains. In this regard, the South and the Midwest automotive corridor are some of the most popular regions for EV manufacturing.

The South has been the beneficiary of several project announcements due to the availability of a skilled workforce, lower labor costs, a business-friendly tax environment and a well-developed logistics network. Additionally, many of these states offer significant economic incentives for these types of businesses, making it an attractive location for automakers looking to reduce their operational costs.

In the Midwest, states like Michigan and Ohio are located near the automotive corridor and offer a rich history in automobile manufacturing. These states have well-established supply chains that make it easier for manufacturers to source the necessary components and raw materials needed for electric vehicle production. Additionally, the Midwest offers a highly educated workforce, access to cutting-edge technology, and strong infrastructure, all of which are essential for electric vehicle production. 

Site selection challenges facing the EV industry 

Innovative industries inevitably bring about new challenges in site selection, and the EV manufacturing sector is no exception. The EV manufacturing process has the specific workforce, real estate and infrastructure requirements that must be met for optimal production.

Perhaps the most pressing challenge facing EV manufacturers is an incredible demand for utility capacity. While most advanced manufacturers require significant levels of utilities, EV battery cell manufacturers and other EV suppliers take it to another level. As EV projects continue to scale up, searches for “mega” sites with infrastructure that can provide electric capacities exceeding 100 megawatts, aspirational 100% renewable power generation targets, and exorbitant water and wastewater demands are becoming the norm.3

The scale of these projects is also evident in their physical footprint, with some companies seeking sites with over 500 acres of land. Finding a site of this size with high utility capacity is a monumental task, especially in a picked-over market. 4

Moreover, like most mega projects, locations must support the employment of several hundred temporary construction workers and several thousand new permanent employees. The chosen location for a business should meet both immediate hiring needs and provide a talent pool for future requirements. It is essential to consider the availability of training resources and technical programs in the area to fulfill long-term needs. And unlike other advanced manufacturing industries, which have had more time to develop programs for workforce training, local technical colleges and other education programs have only recently begun to offer specialized programs for the EV industry. 

The industry has also encountered comparable problems with its supply network since the mass production of EVs is a recent phenomenon. Many of the companies supplying the necessary materials are new to the business. Ensuring that they can meet the level of demand at an affordable price has been a significant challenge for the industry.

While these location factors and supply chain issues are significant challenges facing the EV industry in the U.S., given more time, we can expect the industry to develop programs and solutions that will mitigate these challenges. In the meantime, they remain crucial considerations for site selection in the EV manufacturing sector. 

1 "$210 Billion of Announced Investments in Electric Vehicle Manufacturing Headed for the U.S." (EV Hub, Noah Gabriel)
2 Job creation estimates make assumptions on the projected growth electric vehicle sales and strategic policy and investment initiatives to incentivize reshoring efforts.
3 Location Factors in the EV Industry — 'Mission Critical' or 'Nice to Have'?" (Area Development, Joseph Gioino & Alan Reeves)
4 Id.
Topics:Economic IncentivesSite Selection GroupSite SelectionElectronic VehiclesMega Sites



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