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‘Future May be Further Out’: Michigan Plays Long Game on Electric Vehicles

January 2, 2024

Dec. 27, 2023
Rose White

Michigan bet big on the billion-dollar electric vehicle industry.The state drove into this year with momentum, pouring billions into securing EV projects, but slowing electric vehicle sales, loud opposition to development and criticism of state incentives have cast a shadow on this boom.“Overall, Michigan is continuing to play a leadership role. But we did see scaling back of investments, not necessarily on a permanent basis but more to align with market demand and adoption,” said Glenn Stevens Jr., executive director of MichAuto.In September, Ford Motor Co. halted progress on the state’s flagship investment, Ford’s $3.5 billion BlueOval Battery Park Michigan until the automaker figured out how to “competitively operate” the plant. Two months later, trucks started moving again. But Ford had scaled back its plans cutting battery capacity and about a third of the expected jobs in response to a softening electric vehicle market.“While we remain bullish on our long-term strategy for electric vehicles, we are re-timing and resizing some investments,” Ford said in a November statement.A month later, Ford announced it’s postponing $12 billion it planned to spend on electric vehicles. General Motors has pumped the brakes on its plan to produce 400,000 electric vehicles through 2024. And Michigan-based battery startup Our Next Energy laid off about a quarter of its staff in November “to align with our revised business plan.”“There is a consensus that EVs are the vehicles of the future. It’s just that that future may be further out, but it’s not that far out,” said Michelle Krebs, executive analyst for Cox Automotive

Automakers Reevaluate as EV Sales Slow

Automakers are adjusting as the electric vehicle market although on pace to hit 1 million sales in the United States this year begins to plateau.“It is still the fastest growing segment in the market by a longshot, but the pace of growth has slowed some. And that’s why we’re starting to see automakers reset their expectations and plans,” Krebs said.Electric vehicle sales hit record highs this year, but prices have dropped as supply outpaced demand.When measured in days’ supply, traditional internal combustion engine vehicles hovered between 52 and 58 days this year while the electric vehicle supply peaked at 111 days in July, according to Cox Automotive. Meanwhile, electric vehicles accounted for nearly 8% of all auto sales in the third quarter.Krebs said adoption has slowed among mainstream buyers because of high costs, range anxiety and still-developing infrastructure. About half of U.S. adults report they’re not likely to buy an electric vehicle, according to Pew Research, with infrastructure like a lack of charging stations being a sticking point.To Stevens, it’s not surprising automakers are modifying their plans.“Globally, electric vehicles are growing, and they are growing in North America too,” he said. “We just have a slower adoption curve that a lot of other people, maybe even government, thought there would be.”

A Manufacturing Renaissance Lands in Michigan

The advent electric vehicles has breathed life into the manufacturing industry.Manufacturers have announced $165 billion in electric vehicle projects across the country over the past eight years, according to a report from the Environmental Defense Fund. More than half of that came since the federal Inflation Reduction Act passed last year with the goal of spurring American manufacturing.Michigan, ranked second in this race for investments, has landed nearly $19 billion of projects that are expected to create 19,700 jobs.Cornerstone investments include $7 billion from General Motors, the $3.5 billion Ford battery plant, a $2.36 billion Gotion Inc. battery parts plant, a $1.7 billion LG Energy expansion and a $1.6 billion gigafactory from Our Next Energy.“We’ve really seen a dramatic increase in the level of investment and associated job growth in a very short period of time,” said Peter Zalzal, associate vice president for clean air strategies at the Environmental Defense Fund.The state created a $2 billion fund called the Strategic Outreach and Attraction Reserve in 2021 solely to net big business. But critics, including some Michigan lawmakers, have questioned whether this “megadeal spending spree” will pay off.Josh Hundt, chief project officer with the Michigan Economic Development Corp., said incentives are important for winning competitive projects, but they should be coupled with a skilled workforce, development-ready sites and a robust supply chain.“We are not looking to win solely based on having the highest incentive package or necessarily being the lowest cost location,” he said. “What we want to be is the best overall location.”

Electric Vehicle Momentum Faces Pushback

Another headwind pushing back on these electric vehicle investments: criticism.Ford’s BlueOval campus clashed this year with an opposition group called Committee to Save Marshall – Not the Megasite whose chief concern is that an industrial park will scar 1,900 acres of rural land. A legal battle over a ballot petition on the Ford project is still pending in the courts.The Gotion plant has also been caught in crosshairs.The company’s ties to China have clouded what local leaders called a “generational” and “transformational” investment. Some Republican lawmakers have pushed for the federal government to investigate the Chinese Communist Party’s role in the project. But company leadership has repeatedly diffused these claims saying there is “no communist plot” within Gotion Inc.This pushback likely won’t shift Michigan’s economic development strategy. Hundt says it underscores the need to “be present and remain engaged” in communities that will be home to these projects large and small.“We just continue to learn is that it’s important to make sure that we are listening to as many voices as possible,” Hundt said. “Each step of the way throughout the process.”What’s next?Despite the bumps in the road, Michigan plans to stay the course.“It’s our priority to make sure that Michigan is the center of whatever the future holds for the automotive industry and that we are the center of the clean energy industry going forward,” Hundt said.In response to market demands, automakers seem to be pivoting to hybrids, which are less expensive than electric vehicles. The hybrid market share increased 99% in the past year whereas electric vehicles grew by 25%, according to analysis from Edmunds.Ford reportedly plans to double production of hybrid F-150s next year. Toyota will make the 2025 Camry only as a hybrid. And Stellantis has seen hybrid sales take off with the Pacifica Plug-in Hybrid jumping 329% in a year and the Jeep Wrangler and Jeep Grand Cherokee being the top selling plug-in hybrids in the country.Although automakers are funneling billions of dollars into electrifying production, Krebs said it’s a gamble for them to not invest in electric vehicles.“Any automaker who isn’t putting energy and effort into development of electrification that can mean plug-in hybrids, hybrids, EVs and hydrogen they will be left out of the future,” Krebs said. “And by the way, the Chinese are way ahead on EVs, especially affordable ones.”Looking into 2024, electric vehicles are only a piece of Michigan’s economic development puzzle.The state also landed a $400 million hydrogen fuel gigafactory from Swedish company Nel Hydrogen this year. Federal funding will help develop a $1 billion hydrogen hub with production plants in Ypsilanti and Flint. And Michigan is shoring up its $30 billion defense industry by supporting projects like Calumet Electronics’ new $51 million factory.“What we recognize is that we need to be nimble and shift with the economy,” Hundt said.