Michael Wayland/CNBC SPRING HILL, Tenn. – Jack Weaver can point to a cannon on a Civil War battlefield from the comfort of a shaded bench in his backyard – a visible marker of his country’s rich past. As he talks about his small town, it’s above the loud noise of cars and trucks at the intersection in front of his red farmhouse. The 82-year-old retired dairy farmer has lived in Spring Hill most of his life. He watched the once quiet town in middle Tennessee grow into a growing suburb of Nashville. Spring Hill’s development has come in conjunction with a population boom in the state as well as the introduction of new industries—notably, automotive—that have pumped billions of dollars in new investment into the state. “It’s good and it’s bad,” says Weaver, who complains about cars hitting his fence and the traffic General Motors’ Spring Hill plant has brought since it opened in 1990. “I’m not anti-development at all. I’m not. I think a man shouldn’t do what he wants with his land.” Detroit is the city that “put the world on wheels,” but cities like Spring Hill and others in neighboring states have attracted the most investment from automakers in recent years as manufacturing priorities shift to a battery-electric future. Companies more than ever want to build electric vehicles where they sell them, because the vehicles are much heavier and more cumbersome to transport than traditional models with internal combustion engines. They also want battery manufacturing facilities to be close to avoid supply chain and logistics issues. Among the first to invest in southern states was Ford Motor in the 1950s and 1960s in Kentucky, followed by foreign automakers or transplants beginning with Nissan Motor, which established a plant in Smyrna, Tennessee in 1983. Others such as General Motors, Subaru, Toyota Motor and BMW followed suit in the 1990s. More have followed since then, including recent announcements by Hyundai Motor and Rivian Automotive to build multibillion-dollar factories in Georgia. As more companies look to the American South, investment is changing the landscape of cities across the region and the automotive workforce, supply chain and logistics. According to officials, companies that set up first in the South gain first-mover advantages over their northern competitors and future entrants. Auto industry executives say they are investing in the South for a combination of reasons: lower energy costs, available labor and sustainability among them. Many southern states also come with other, potentially controversial benefits, such as lower wages for workers, millions in tax breaks and a largely non-union workforce in many of the Republican-controlled, right-to-work states. But change also brings unique challenges. As the Motor City moves and expands south, it must contend with the preservation of historic plantation farms, the discovery of slave burial grounds, and pushback from citizens and local politicians unaccustomed to traffic or industries.
Investments are shifting
Automakers have announced $45.9 billion in investments in southern states since 2017, according to The Center for Automotive Research, a nonprofit think tank based in Ann Arbor, Michigan. This is the first year the South has surpassed the Midwest, or Great Lakes region, for announced investments since at least 2010. Midwestern states like Michigan, Ohio and Indiana saw $39.9 billion in announced investments over the same time period. Most of the money heading south – $34.2 billion, or 74% – has flowed in since last year from traditional automakers such as GM, Hyundai and Ford Motor as well as EV startup Rivian. Others such as Volkswagen and Nissan continue to invest and expand operations in the South, mainly for new electric vehicles. “We’re basically undergoing the biggest industrial transformation, I would say, not to understate it, in American history,” Scott Keogh, CEO of Volkswagen of America, told CNBC in June at the automaker’s new battery lab in Chattanooga, Tennessee. . “It’s happening right now in this area.” Volkswagen of America’s Scott Keogh at the VW plant in Chattanooga, TN, June 8, 2022. Michael Wayland | CNBC Keogh singled out energy capacity and cost as the top priority for the company’s investments in Tennessee, including the potential for new assembly and battery facilities for which the company is “actively” seeking locations. He and other officials also cited incentives, tax support, workforce and workforce training as other key elements. Ford CEO Jim Farley put a similar emphasis on energy costs and availability in September, announcing an $11.4 billion investment in new vehicle and battery plants in Tennessee and Kentucky. “We want to work with states that are really excited to do this training and give you access to that low energy cost,” Farley told The Associated Press at the time. Tennessee has among the lowest electricity prices in the nation, according to the most recent data from the U.S. Energy Information Administration. The state’s average industrial electricity price per kilowatt hour was 6.31 cents in May. Michigan’s industrial energy cost was 8.72 cents per kilowatt hour and the national average was 8.35 cents. Mississippi and South Carolina were under 7 cents, while Georgia was 9.05 cents — among the highest in the region, according to the U.S. Energy Information Administration. While these cost differences seem minimal, they add up quickly. Ford’s new battery plants will have an annual capacity of 43 megawatt hours of production. There are 1,000 kilowatt-hours of electricity in a megawatt-hour, which means savings of tens of thousands of dollars per year. Southward expansion is expected to continue for years to come, according to AlixPartners. The global consulting firm expects investments by automakers and suppliers in southern states like Alabama, Georgia and Kentucky to total $58 billion in electric vehicles between 2022 and 2026. That’s nearly four times the $15 billion expected in Midwestern states and $20 billion elsewhere in the country. “It’s definitely going to change, but right now there’s a lot more interest and activity in the southern states, particularly with all these automakers making investments on the EV front,” said Arun Kumar, managing director of automotive and industrials at AlixPartners.
Southern hospitality
State economic development officials from Tennessee and Georgia say their states have made the auto industry a priority because of the supply chain jobs that typically follow. They also say electric vehicles have helped level the playing field for new investment. “This is almost like an opportunity field as this industry is changing because we’re building the supply chain in the United States for electrification from the ground up,” said Pat Wilson, commissioner of Georgia’s economic development unit. “There’s a huge amount of opportunity.” As of July, EV-related projects have contributed more than $12.6 billion in investment and more than 17,800 new jobs in Georgia by 2020, officials said. Tennessee reports that auto companies have added more than 43,800 new jobs and invested $16.5 billion in private capital in the state since 2012, accounting for nearly 30% of private capital investment during that period. Nissan’s Smyrna Vehicle Assembly Plant opened in 1983, marking Tennessee’s first major auto plant. The plant employs more than 7,000 people and produces a variety of vehicles, including the Leaf EV and Rogue crossover. Michael Wayland/CNBC With billions of dollars on the line and tens of thousands of new jobs, states have offered huge incentive packages for companies in the form of land, tax abatements/incentives and other support such as installing utilities and road construction. For example, Tennessee approved an $884 million stimulus package for Ford’s plans to spend $5.6 billion in the state, as well as in-kind services and a $2 million grant for education services. Ford’s investment includes a new electric truck factory and battery facility with South Korea-based supplier SK Innovation. Bob Rolfe, who oversees economic development for the Volunteer State, said such actions are needed to compete with others. He said that to lure Ford last year, the state spent years accumulating enough land for an “electric vehicle megasite” before securing the automaker’s commitment. “We tell our team every day to keep recruiting. Enough, enough?” Lewis said ahead of a car recruiting trip to Japan in June. “The more big companies that call Tennessee home, the softer the landing when we hit the next wind shear that’s going to develop around the next recession.”
Unique themes
But not everyone agrees that the auto industry should expand in the South into rural areas. Rivian has faced significant pushback since it announced plans last year to build a $5 billion plant about 45 miles east of Atlanta, Georgia. Although welcomed by many politicians, including Gov. Brian Kemp, local news outlets report that rural residents are concerned about how it will affect their community. Others, including politicians, oppose $1.5 billion in tax breaks and other incentives offered to Rivian by state and local officials. Haynes Haven is a historic landmark in Spring Hill, Tennessee that has been maintained by GM since the automaker built an assembly plant near the site in the 1980s. “[Union Army General] Sherman and his troops destroyed our community. Now this so-called green company is coming to destroy it again,” JoEllen Artz told NBC News in May. Artz is group president of the No2Rivian group, which says it has raised more than $250,000 and has hired Atlanta lawyers to to fight the factory. keep it as it is…
