Automakers look to the South to build electric vehicle batteries

You won't find many electric vehicles on the back roads in Alabama and Tennessee yet thousands of residents in these states are building them to meet growing demand.

Automakers such as Mercedes-Benz, Ford and Volkswagen are investing billions of dollars in high-tech plants that will supply the battery packs necessary for the transition to EVs.

Last month, Volkswagen of America opened a $22 million Battery Engineering Lab (BEL), a 32,000-square-foot facility located near its Chattanooga, Tennessee, plant. Engineers at the lab test batteries for safety, durability and quality in extreme climate conditions and the company's compact ID.4 SUV, currently imported from Germany, will roll off assembly lines for U.S. consumers later this year. More than 4,000 workers are employed at the Chattanooga plant and Volkswagen plans to hire 1,000 new production team members by year-end.

Producing battery packs locally "makes us faster," Wolfgang Maluche, vice president of engineering at Volkswagen of America, told ABC News. "Chattanooga [will] become Volkswagen's hub for electric mobility in the United States."

More battery plants are coming and southern states will continue to benefit, according to Arun Kumar, a managing director at consulting firm AlixPartners, which forecasts a 54% EV market share globally by 2035.

"Southern states are definitely aggressive ... 46% of vehicle production in the U.S. currently happens in the South. It's not a surprise to me that more investment is going there," Kumar told ABC News. "This is just a start. The EV era is real."

Gil Tal of UC Davis' Institute of Transportation Studies said southern states are "fighting hard" to be chosen by automakers, offering attractive tax incentives and favorable investment packages. As the Biden administration pushes consumers toward EVs, setting an ambitious target to make half of all new vehicles sold by 2030 electric, Tal, like Kumar, expects automakers to diversify their supply chain.

"Demand is going up for EVs and there will be new regulations that mandate sales of them," Tal told ABC News. "Battery production is changing and getting better and more efficient. Any company that sells a significant amount of cars in the U.S. will build battery plants here."

Producing these highly technological batteries within the U.S. solves many of the headaches plaguing automakers in recent years, Kumar argued. Tesla, the No. 1 seller of EVs in the country, produces batteries and electric motors for the Model 3 at its Gigafactory in Sparks, Nevada, which broke ground in June 2014. The site currently produces more batteries in terms of kWh than all other carmakers combined, making it the highest-volume battery plant in the world, according to Tesla.

Mercedes, which said it would go all electric by the end of the decade, will invest over 40 billion euros into battery electric vehicles between 2022 and 2030. The Bibb County plant joins the company's global battery production network with factories on three continents.

In September, Ford Motor said it would construct twin battery plants in central Kentucky to power a new lineup of Lincoln and Ford EVs. Another battery campus in Tennessee will focus on next-generation electric F-Series pickups like the F-150 Lightning. The two projects will cost $11.4 billion and create nearly 11,000 new jobs, Ford said. The Dearborn automaker expects 40% to 50% of its global vehicle volume to be fully electric by 2030.

BMW expanded its battery facility at Plant Spartanburg in South Carolina in late 2019, more than doubling its capacity for battery assembly. Higher performing, fourth-generation batteries are assembled on-site for the BMW X5 and BMW X3 plug-in hybrid electric variants and 120 employees were specially trained to work the new line, having completed an extensive program in battery production, robotics and electrical inline quality inspection along with end-of-line testing, BMW said.

States in the traditional "auto belt" are still vying for automakers' investment dollars. Panasonic, a major supplier to Tesla, announced this week it would build a new U.S. lithium-ion battery cell factory in De Soto, Kansas, investing $4 billion and creating up to 4,000 new jobs. The plant will primarily supply batteries to Tesla but is not limited to the company, Reuters reported.

Stellantis said it would build an EV battery plant in Kokomo, Indiana, with its partner Samsung SDI. The plant, on target for a 2025 launch, would create 1,400 jobs in Kokomo and the surrounding area, Stellantis said, for a total investment of $2.5 billion.

Ultium Cells, a joint venture of LG Energy Solution and General Motors, will open a new 2.8 million-square-foot facility in Lansing, Michigan, its third battery cell manufacturing plant in the country. At least 1,700 manufacturing jobs will be available at the location and workers will supply battery cells to Orion Assembly in Michigan and other GM EV assembly plants.

The southern shift by automakers and intense focus on EVs has some long-time industry workers worried about their future. EVs take 40% less powertrain assembly hours than a gas-powered vehicle, according to Kumar. Workers with core skills in combustion engine technology would need significant retraining to work in a battery plant, he noted. EVs in general are less complicated to manufacture, are not labor intensive and many parts of the process are automated.

"Workers are worried about job security and concerned their sons and daughters won't have jobs" in the industry, said Erik Gordon, a professor at the Ross School of Business at the University of Michigan. "Working in an auto plant is often a family affair -- and these are pretty good jobs."

The U.S. may be viewed as a laggard in EV battery production compared to China, where EVs caught on early with consumers and government leaders deemed batteries to be a critical industry. Gordon argued that automakers are tackling U.S. battery production at the right time and any earlier could have been a foolhardy move.

"People would have been laughing 10 years ago if automakers wanted to build these plants," Gordon said. "They would be obsolete today. The underlining tech is changing so quickly and for the better."

What will happen to these plants and the workers if EV sales in the U.S. hit the brakes in the next five, 10 years?

"The interest in EVs won't die off," Tal said. "Automakers have a secure EV market. All this investment won't go away."