The implications of the EV transition are vast. It will include new investment for battery manufacturers, vehicle producers of all types, charging station producers, and suppliers to all aspects of the above. This is resulting in site selection projects at all points along the supply chain.
This article discusses the key elements executives should consider for EV-related manufacturing projects: infrastructure and utilities, market factors, economic development incentive programs, and a community’s capability.
Infrastructure and Utilities
Different users will present diverse needs ranging from energy and water-intensive battery facilities to heavy manufacturing with high energy demands. Ensuring a community and site can meet a project’s needs is critical. Access to a stable power supply is particularly critical for battery and EV production, which rely heavily on electricity. Many projects require a robust water supply, waste disposal systems, and other necessary utilities to support daily operations.
Different users will present diverse needs ranging from energy and water-intensive battery facilities to heavy manufacturing with high energy demands. Utility providers hold the keys to much of the data required to determine if a community can meet a prospect’s needs. Most available sites are not fully equipped to meet all of a project’s infrastructure needs out of the gate. Due to the scale of these projects and acreage required, many projects are evaluating rural areas and existing roadways and access points are often insufficient. Consideration should be given to timelines to meet a project’s needs, cost of necessary enhancement, and sources of funds to pay for enhancements. In some cases, utility providers can contribute via economic development incentives for a project to decrease extraordinary costs.
Market Factors: Labor and Supply Chain
Another key step in the process of selecting a new site location is effectively evaluating the factors pertaining to supply chains and labor. Both considerations can thoroughly disrupt an operation if not properly evaluated. In general, supply chain associated costs represent one of, if not the most, significant annual costs for a manufacturing operation. Therefore, when selecting a new site, thoroughly understanding the effects that the location can have on the cost and timing to transport both the inbound inputs needed for the manufacturing process and the outbound delivery of the final goods is critical.
Consideration should be given to alternative strategies and modes of transportation. Could having access to rail on site or a transload facility nearby significantly reduce transportation costs or timing? Could importing raw materials via an alternative port mitigate supply disruptions? The result of the analysis naturally uncovers the sites that appear to mitigate costs, optimize timing, and overall reduce risks of disruptions.
Understanding the effects that the location can have on the cost and timing to transport both the inbound inputs needed for the manufacturing process and the outbound delivery of the final goods is critical. The recovery of the labor markets in the post-pandemic era has shifted how employees perceive work in today’s economy; therefore, the location factors relating to staffing requirements become critical to the short-term and longer-term success of the operation. Initially developing a staffing model that details the intended number of employees and their desired skillsets by job functions for the operation, and how each job function is intended to grow employees over time, helps inform the process of evaluating the feasibility of a location’s labor market.
Assessing the feasibility of a labor market can take on many forms depending on the various inputs of the staffing requirements, but typically a project can summarize many of the factors into distinct categories pertaining to either supply, demand, scalability, sustainability, or exposure risks. Questions such as the following inform the feasibility of a labor market:
- Is the location within regional proximity of enough workers that have the right skillsets needed for my operation?
- Have comparable facilities demanding similar talent as my business been established in the area, and would I be at risk of competing with them for labor?
- Is there a talent pipeline in the area that could be upskilled to fit my staffing requirements?
- Is the region experiencing positive growth to support my intended business growth over time?
- Is my operation at risk of union organization based on recent union activities in the area?
Economic Development Incentives
EV-related projects represent a major undertaking to transform modern transportation. Battery projects represent billions of dollars of investment and the creation of thousands of new jobs. EV-suppliers often have to retrofit existing plants to account for new product lines and retrain workers to be compatible with new technologies. This comes with a big price tag. Companies are requiring public-private partnerships to make these projects work from a financial standpoint. Projects are tapping into long-standing incentive programs awarded for the typical metrics of job creation and investment as well as EV-specific incentives. Adoption of EV-related incentives has been common across many states in the last few years and can drive material benefits not available under the old-guard standard incentive programs. Communities around the country are competing to win these projects to boost local economies with job creation, investment, and spin-off activity.
Where infrastructure or utilities are not up to par, incentives can also alleviate extraordinary costs. Incentives can be utilized to address shortfalls in capacity or access to put sites on a level playing field or win against similarly situated sites with no access to incentive assistance. Some states are looking to the overall impact of a project on the area and allocating funds to address large-scale issues.
During the site selection process, prospects pay close attention to the interplay between community stakeholders. One of the often-overlooked attributes of the incentives process is community engagement. A harmonious relationship with the local community and stakeholders is essential for the long-term success of the project. Engaging with the community early in the site selection process can help identify potential concerns and address them proactively. Community support can minimize potential opposition to the project and lead to smoother operations.
Our final site selection factor is community capability. Consideration should be given to how capable a community is of undertaking a complex EV-related project.
A successful EV-related project involves many community stakeholders: the state, municipality, economic development organizations, politicians, and utility providers, to name a few. Success will be greatest with a community that can demonstrate among its stakeholders aligned priorities and experience working together to achieve common goals. During the site selection process, prospects pay close attention to the interplay between community stakeholders.
EV-related projects require a large investment, and as such, prospects are extremely risk adverse when it comes to selecting a site. The site selection process for electric vehicle, battery, and manufacturing projects demands a comprehensive evaluation of various factors that can influence the project’s long-term success. Proximity to supply chains and markets, availability of skilled labor, infrastructure and utilities, economic development incentives, and community capability are all crucial elements in making an informed decision.
Jason Lake, Executive Managing Director, Total Workplace at Cushman & Wakefield, also contributed to this article.