Two important things happened over the weekend and neither of them involve the controversial season finale of “House of the Dragon.”
The first came Friday, which may not technically be the weekend, but it’s summer, and we all know what Fridays in the summer are like. The news broke that a California company that had been looking at building a battery plant in Lynchburg has scrapped those plans; see the story by Cardinal business reporter Matt Busse.
The next day, former President Donald Trump used a rally in Georgia to attack that state’s Republican governor, Brian Kemp, who had resisted pressure from Trump to “find” extra votes in the aftermath of the 2020 election. “He’s a bad guy, he’s a disloyal guy and he’s a very average governor,” Trump said.
Those two events may be quite dissimilar but are, at some level, connected.
The importance of Applied Materials canceling the Lynchburg plant extends well beyond the 100 jobs it would have created — in a metro area where the number of manufacturing jobs has fallen from 26,600 in 1998 to about 14,400 today, and one of the few places where the number of manufacturing jobs has declined in recent years no matter which party has occupied the White House. In a previous column, I looked at how manufacturing jobs have changed under both the Trump and Biden administrations; the Lynchburg metro area is unusual because they’ve fallen under both presidents.
The larger importance of a Applied Materials plant in Lynchburg would have been that it would have helped Virginia get a piece of a growing “battery belt” in the Southeast. Not all batteries go into electric vehicles — lithium-ion batteries are now in almost everything, from the laptop I’m writing this column on to the phone or desktop computer you may be reading it on — but electric vehicles are driving a lot of the major investments. The footprint of the auto industry has been changing for years, with Michigan and other Rust Belt states shedding jobs as automakers locate in the Southeast, where wages are lower and unions are not entrenched. The shift to electric vehicles has accelerated those trends. A report released earlier this year documented how most of the EV-related jobs in the country are now being created in the Southeast, with Georgia being the epicenter — and that’s where Trump’s attack on Kemp rings such a dissonant note. Trump may have his political differences with Kemp but, in economic terms, Kemp has been one of the best governors in the country. Under Kemp, Georgia has essentially grown an entirely new industry.
The report by the Environmental Defense Fund says that over the past decade — of which Kemp has been Georgia’s governor for six years — 84% of EV-related jobs have gone to just 10 states. Of those, Georgia has the most — 38,700 jobs and $31.2 billion in investment, which means 16.5% of the EV investments in the country have gone to the Peach State. Here’s another way to measure Georgia’s success: Georgia has attracted more EV-related jobs than Michigan, Ohio and Indiana combined. This creates a politically challenging environment for both political parties, both of which would like to carry both Georgia and Michigan. The growth of the electric vehicle industry has hurt traditional auto-producing states — it takes fewer workers to build an electric vehicle because they have fewer parts — but it’s also benefited other states. Over the weekend, Trump also said he now has “no choice” but to support electric vehicles because Elon Musk has “endorsed me very strongly.” Perhaps so. Perhaps he also understands he needs to carry Georgia (which makes it so odd he’s criticizing Georgia’s Republican governor, but Trump will Trump).
That political analysis is for another day. My interest here today is economic: Why has Virginia not become part of this emerging “battery belt”? We’ve come close a few times:
- Hyundai looked at the Southern Virginia Megasite in Pittsylvania County for an 8,000-job plant but eventually chose a site near Savannah, Georgia.
- Ford was looking at the same site for a 2,500-job plant but Gov. Glenn Youngkin nixed the state’s bid because of concerns about Ford’s ties to a Chinese battery plant. Ford went instead to Michigan (and it’s since scaled back the size of the project to about 1,700 jobs).
- Now the Lynchburg battery plant has gone kaput, for reasons unclear other than a strategy change by the company (although state Sen. Mark Peake, R-Lynchburg, speculates that a softening EV market may have something to do with this).
Why is Virginia being left out? Here are some of the possible reasons:
We don’t have a cluster to build on.
This is the old conundrum: Experience required, but how do you get experience? For our purposes here, economic clusters create their own gravity. Think of how data centers have clustered in Northern Virginia. Once one company comes, it’s easier to get others. Also, supply chains grow up around them, which makes those locations more attractive to others. When Hyundai chose Georgia over Virginia, one of the reasons it cited was a network of supply chains that were already in the state. That’s why the Lynchburg plant would have been important — it would have been a way to get started.
Lack of site preparation
In Hyundai’s official statement on why it chose Georgia, it cited several other factors, including “speed-to-market” (meaning that site was closer to being ready than ours was). That’s why Youngkin has been pushing for more state spending on site preparation. Once Virginia spent $5 million a year on site preparation; the current budget allocates $20 million per year over the next two years. That’s less than the $225 million Youngkin wanted (he proposed $200 million for site development and $25 million for site acquisition over two years).
Older demographics in many rural areas.
Hyundai also cited “workforce” as a reason for picking Georgia. That can mean many things but here’s one of them: Bryan County, Georgia, where Hyundai is now building, is a lot younger than Pittsylvania, which means there’s a more guaranteed labor pool. The median age of Bryan County is 34.4. In Pittsylvania County, it’s 48.4. That’s why the demise of the Lynchburg battery plant hurts so much: Workforce shouldn’t have been an issue there. Lynchburg has one of the youngest median ages in the state. (I explored this in more detail in a previous column.) As for the map above, notice how much lighter parts of Georgia and the Carolinas are compared to Virginia. That means those counties are younger, which gives large employers more confidence that they’ll find a sufficient labor pool there.
Other states have been willing to pay more in incentives.
Georgia’s incentive package for Hyundai was $1.8 billion (yes, billion) and $1.5 billion for a Rivian electric vehicle plant; Tennessee’s incentive package for a Ford electric vehicle plant was $900 million. By contrast, Virginia’s incentive package for Amazon’s HQ2 was about $750 million.
There may well be other reasons that I’m not privy to, but those are four good ones to start with. I sometimes hear critics say Youngkin should go “get” these jobs, but economic development isn’t like making a shopping trip to Walmart. Kemp in Georgia has courted the electric vehicle market, and had great success, but in some ways he’s also had more to work with — and, as with many things, success begets success.
The good news is there will be other chances. The global battery market is projected to grow by 30% by 2030. The bad news is that roughly 80% of the battery market is driven by electric vehicles and, as Peake points out, the market demand for such vehicles has been slowing. Sales grew from 150,000 in 2016 to 320,000 in 2020 to 1.08 million last year, but are expected to only hit 1.28 million this year, according to Statista Market Insights. That growth is projected to continue, reaching 2.46 million by 2028, but that slowing demand is why Ford has scaled back its new Michigan plant (the one that could have gone to Pittsylvania County) and may be why Applied Materials has backed away from its proposed Lynchburg plant.
The other bad news is that there may only be so many large-scale EV plants being built for a while — and the economic laws of clustering may draw them somewhere else. The website TechCrunch recently listed five major companies that say they want to build more battery plants — but all already have locations in other states (or, in one case, the Canadian province of Quebec) that would seem to give those places an edge. That suggests to me that Virginia may have already missed out on the big battery-building boom, although we could still snag some smaller operations — such as that Lynchburg one that just went “poof,” which is why that one kind of stings.
I hope I’m wrong but I fear I’m right.
How many third parties will be on Virginia’s presidential ballot?
Robert F. Kennedy Jr. filed petitions in Virginia on Monday to qualify for the state’s presidential ballot. The State Board of Elections will now review those to see if he has enough signatures (he says he does).
In Friday’s edition of West of the Capital, our weekly political newsletter, I’ll write about how many third party candidates we might expect on the Virginia ballot and how they’ve fared in the past. I’ll also have other political news from what promises to be a busy week.
That newsletter goes out Fridays at 3 p.m. You can sign up for that or any of our other free newsletters here: