June 27, 2023 Why EV Manufacturers are Choosing the Southeast

As the EV market grows, mid-size and fast-growing metropolitan areas like Columbia, SC have caught the attention of manufacturers.

By Sam Moses, Azad Khan, and Bruce Thompson

As the electric vehicle (EV) market continues to grow, midsize and fast-growing metropolitan areas like Columbia, South Carolina have recently caught the attention of manufacturers. In the past year, there have been a variety of large economic development deals announced in states like North and South Carolina, Alabama, Georgia, Kentucky and Tennessee involving companies in the EV space. They are attracted to the region because it positions them within a robust automotive supply chain, with access to a talented workforce, and with tax policies and financial incentives that reduce the cost of doing business.

By studying those factors and considering other best practices for new investments, EV manufacturers can expedite their site selection searches and hit the ground running in their new communities.

Supply Chain Positioning

A driving force behind EV manufacturing investment in the Southeast is the location of their supply chains. A broad range of automotive manufacturing suppliers and customers have built plants or logistics operations in the region in recent decades, and that has accelerated the need for other manufacturers that are part of that supply chain to look into the region. The result is an automotive cluster that enables its participants to source components and raw materials faster (with the help of large ports in Charleston and Savannah). The growth of the EV market is the next step in the evolution of the Southeast’s automotive cluster.  

The recent announcement by Scout Motors Inc. to locate its first manufacturing facility in Blythewood, a small city located within the Columbia metropolitan area, for the production of fully electric SUVs and trucks for the North American market is a good example. Columbia, South Carolina’s capital city is approaching one million inhabitants and has a diversified economy flanked by the state’s flagship university, the University of South Carolina state and federal government and a strong service and manufacturing sector. However, more importantly, it is positioned within less than a two-hour drive from the Volvo Car and Mercedes-Benz Vans facilities in Charleston, South Carolina and the largest BMW manufacturing facility in the world located in Spartanburg, South Carolina, the presence of which has generated substantial growth to the regional supply chain of Tier 1 and 2 automotive suppliers. Scout will be able to take full advantage of having those suppliers close to the new factory in the Columbia area, enabling it to accelerate product to market.

Workforce Needs

The Southeast’s labor pool is one of its greatest assets for original equipment manufacturers (OEMs) and component suppliers. Again, Columbia provides a good example in this case: It is located in a right-to-work state and home to a number of educational institutions that provide a diverse and skilled workforce for companies looking to establish their operations. In addition to the University of South Carolina, the state’s flagship university, there are several technical colleges, private colleges and historically Black colleges and universities (HBCUs) in the region. Moreover, through industry-targeted workforce development programs like readySC, Apprenticeship Carolina and the South Carolina Manufacturing Extension Partnership (SCMEP), as well as other public and private workforce organizations, Columbia offers a range of resources to help manufacturers meet their workforce needs.

Those institutions and programs – in Columbia and across the Southeast – produce graduates with a range of in-demand skills for the EV industry. Workforce diversity is also a strength, with HBCUs in particular adding to the variety of experiences and perspectives that employees bring to the table.

Preparedness

States in the Southeast take economic development seriously and position themselves to attract EV manufacturers. It pays dividends when states invest in infrastructure, due diligence and site development as part of their economic development strategy. Rivian, Scout, Hyundai Motor Group, Ford and VinFast sought industrial sites with 1,000 or more acres for their respective EV and EV component manufacturing plants. Each state that recruited these large EV investments made strategic decisions to identify, assemble and market their large, shovel-ready industrial sites. More importantly, these states invested in site due diligence and infrastructure, actions that help companies make informed site selection decisions and minimize construction timeframes.

Tax & Financial Incentives

The Southeast’s business expansion incentives are another reason why EV manufacturers are attracted to the region. State and local governments offer incentives that can significantly reduce up-front and ongoing operating costs for companies. For example, in South Carolina there is no state property tax, no inventory tax and no sales tax on manufacturing machinery, industrial power or materials for finished products. That means companies can save money on acquiring and owning property, equipment and materials. The state also has a favorable corporate income tax structure and there is no local income tax.

Additionally, some Southeastern communities are taking innovative approaches to addressing workforce challenges. In the recent Scout bill approved by the state of South Carolina, for example, the childcare credits for the company’s employees. Childcare has become a major hurdle for potential employees in the U.S. and this legislation was crafted to address Scout’s plans to hire a substantial workforce planned to be 4,000. 

Best Practices to Consider

Beyond the site selection considerations above, there are certain best practices that can help ensure success. One is to install a strong project management team to oversee the project from start to finish, both in terms of internal staff and external advisors. On the external side, it can be particularly valuable to partner with advisors who have knowledge of the local nuances within the states and counites you are considering.

Attorneys and consultants on the ground in a market can help you understand how the economic development process runs there, which political and infrastructure issues will be important to address and which tools in the economic development toolbox may be available. There can be flexibility and creativity in incorporating bond financing and structuring incentives packages, for example. As manufacturers increasingly focus on environmental, social and governance (ESG) considerations, they can also lean on local advisors to understand the renewable energy sources that may be available and how to mitigate the environmental impact of their plants.

Conclusion

For EV manufacturers, Southeastern U.S. metro markets like Columbia, South Carolina offer a number of attractive qualities, including a well-educated and diverse labor pool, favorable tax and financial incentives and a strategic geographic location. By considering those factors and following best practices, such as installing a strong project management team and considering sustainability and environmental impact, EV manufacturers can position their economic development projects for success.

Sam Moses is a partner in Parker Poe’s Columbia, South Carolina, office, focused on corporate work and economic development.

Azad Khan is a principal at Parker Poe consulting and advises clients on all facets of their site selection and economic development initiatives.

Bruce Thompson is a partner in Parker Poe’s Government & Public Policy group. He concentrates his practice on governmental and regulatory activities.

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