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Area Development - Site Selection, Facility Planning and Workforce Development

R&D in the EV/Battery Industry Powers New Technologies

Makers of EVs and the batteries that power them are receiving incentives for their R&D efforts as the technology continues to evolve.

2023 Auto/Aero Site Guide
In a lab, an engineer or technician works with an EV car battery cells module.
In a lab, an engineer or technician works with an EV car battery cells module.
As the U.S. transition to electric vehicles accelerates, so does the search for R&D and manufacturing sites. This trend figures to gain momentum during the second half of the decade. The U.S. Bureau of Labor Statistics cites increased consumer interest, government policies, improved vehicle range, and a commitment by automakers among factors driving EV investment. “If the emission regulations stay in place, electric vehicles will be the dominant type of vehicle by 2030,” predicts Dennis Cuneo, director of Site Selection Services at Walbridge and a longtime automotive industry consultant and former Toyota executive.

Industry observers cite the I-75 corridor, stretching from Michigan to the Greater Atlanta area, as the primary beneficiary of recent EV site decisions, with projects also percolating in Alabama and South Carolina. Clusters of engineering talent, proximity to OEMs, and state and local incentive programs are among the chief considerations of site selectors. Incentives play an integral role in project recruitment. A recent example is the $1.2 billion package the state of North Carolina gave VinFast, a Vietnamese manufacturer, to build a massive EV factory in Chatham County.

Flexibility in incentive programs is key — specifically for projects that are looking to offset capital investment, according to Monty Turner and Anthony Burnett, leaders of Colliers’ Site Selection team. States and local communities are aggressive and getting smarter, they say. Most are tying their incentives to performance metrics that create win-win scenarios for companies and communities.

Incentives for R&D
Patrich Jett, a senior vice president with Colliers International and chair of its Global Automotive Desk, says there are three real clusters of EV manufacturing: the Midwest, the Southeast, and Texas. “The Midwest is the traditional home for manufacturing labor/engineering talent and proximity to automotive OEMs and has become significantly more competitive on the incentives front in recent years,” Jett says. “Texas and the Southeast tend to have a big advantage when comparing recurring costs and tend to be the most competitive for incentives.”

Industry observers cite the I-75 corridor, stretching from Michigan to the Greater Atlanta area, as the primary beneficiary of recent EV site decisions. Cuneo says states are offering a combination of cash grants, refundable cash credits, training programs, and alliances with research universities. When it comes to R&D, incentives offered are similar to those that you would see for a plant, Cuneo explains, “but it’s limited because typically the places you want to put R&D are close to a corresponding university….you don’t want to put it in the boondocks. You have to be able to attract talent, and if you don’t have talent, you need a place you can convince that talent to move to.”

With many battery plants being located in the Southeast — with Georgia, South Carolina, Tennessee, and Kentucky having attracted battery plants — “if they want to attract the R&D as well, they are going to have to put money into their universities to gear toward battery cell R&D,” Cuneo says. The big players in the U.S. in battery cell production are Panasonic, LG Energy, SK Innovation — all headquartered outside the U.S.

Daron Gifford, an automotive industry expert with Auburn Hills, Mich., consultancy Plante Moran, says most states are focusing their incentives on production facilities, rather than R&D, because they are oriented toward job creation. However, Michigan has been successful in creating new R&D centers because of its large hub of engineering talent, Gifford says.

Most states are focusing their incentives on production facilities, rather than R&D, because they are oriented toward job creation. Jett cites the Detroit Regional Partnership (DRP) as an organization successfully positioning itself to attract R&D and pilot production projects. The DRP highlights Michigan advantages such as the Michigan Public Service commission approving new large-user economic development rates for the state’s two largest electric utilities, DTE Electric Co. and Consumers Energy Co. Both have strong voluntary green energy programs. Other factors include Detroit Metro having the second-largest engineering cluster in the U.S., according to DRP. Additionally, the University of Michigan is home to a battery lab, the Transportation Research Institute, and a new $130 million Electric Vehicle Center.

“The University of Michigan is the premier institution in the U.S. for automotive engineering,” Cuneo adds. “If you are looking for talent, a lot of it in the automotive industry is located in the Detroit area. Toyota’s largest R&D facility outside Japan is located in Ann Arbor, because that is where you can find the talent.”

The Production Tax Credit
There are also a growing number of startups in California’s Silicon Valley and the Boston area. Panasonic is partnered with Toyota and they are doing research on solid state batteries as well, Cuneo says. “It would be foolhardy to predict which of the startups will succeed. The Department of Energy has given grants to some homegrown companies, so obviously they hope that some of them will.”

Cuneo says much of the current investment involves companies taking advantage of the Production Tax Credit. “The incentive is huge,” he says. “Any battery cell plant is qualified for this credit. The money doesn’t have to be budgeted, it’s just a tax credit you take. You can sell it if you are not in a taxable position. A lot of the investment over the last year and a half has been driven by that. What we don’t know is whether we will end up with a surplus of battery plants over the next few years. Are we building too many too fast? Nobody really knows the answer to that.”

Much of the current investment involves companies taking advantage of the Production Tax Credit. Changing Technology
Battery technology may change in the coming years. Cuneo says Toyota has committed to concentrate on solid state batteries, and by 2026 will be able to produce vehicles that use this type of battery. This could be a game-changer. “They are lighter, they hold a charge longer, they are less susceptible to fire, and down the road they could be cheaper,” says Cuneo. “They may be able to produce a vehicle that would have a battery range of 900 miles. Once you get the charge time down, it changes everything. I drive an EV myself. It’s a great car to drive. It’s the quietest car I’ve ever owned. I don’t think I can ever go back to an internal combustion engine.”

Gifford notes current EVs are just the first generation of electrification and the entire industry is being transformed: “R&D tries to look ahead a number of years, and there will be not just electric, but also new propulsion technologies coming in the future, like fuel cells. Electric will also continue to evolve with new battery technology, such as solid-state lithium. There is also a lot coming with the electric drive, and how to improve the drive systems beyond just the battery. Then, the next generation beyond that is going to be how to deploy more safety features and automation into the behavior of the vehicle,” he notes.

Gifford also predicts increased availability of self-driving vehicles. This technology requires major testing in confined environments away from the public. “This won’t happen right away,” he says, “but there will continue to be a need for new R&D facilities over the next 20 years.”

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