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EV battery factories bypass Illinois as manufacturers watch Indiana: Joe Cahill

EV battery factories bypass Illinois as manufacturers watch Indiana: Joe Cahill

Joe Cahill on Business: Illinois is also a contender for the EV industry’s top prize

Photo: Bloomberg

Illinois Governor JB Pritzker’s vision as an electric vehicle manufacturing center is in danger of becoming a pipe dream.

Having landed a few assembly plants early on, the state has fallen behind in the race for the top prize of the burgeoning new industry. Illinois still hasn’t landed a factory that produces the most valuable part of electric vehicles: the batteries that make them work.

Illinois should be an attractive location for a battery plant in every way. We have relevant technical expertise, including advanced battery research at the Argonne National Laboratory in Lemont. We also have a highly skilled workforce, manufacturing know-how, a convenient location in the middle of the continent and great transportation systems.

Still, EV battery makers continue to evade Illinois as they strive to build enough production capacity to fulfill the auto industry’s promise of making only electric cars by the mid-2030s.

Earlier: Indiana eye for GM, LG battery factory: report

By my count, Illinois is 0 to 18 in the battery manufacturing league so far. Manufacturers plan to spend tens of billions to build factories in 11 states and a Canadian province. Brought last week news from someone else that seems to be disappearing: A joint venture of General Motors and LG Energy is considering an Indiana site that would become our neighbor’s second battery factory.

Industry forecasters expect battery makers to build many more plants in North America, giving Illinois at least a chance to catch up. But the sad start does not inspire confidence. We have lost to many states, from North Carolina and Tennessee to Michigan, Ohio and Kansas. Nearly a dozen companies, including giant automakers Ford, GM, Hyundai, Stellantis, Toyota, Mercedes and Volkswagen, are building their first battery plants elsewhere. Even Rivian, which assembles electric-powered trucks in the downstate of Normal, chose Georgia for its first battery factory.

That’s despite Pritzker’s attempt to lure EV-related investment with a generous subsidy package that aims to match the incentives other states routinely offer manufacturers. Employers in the EV industry receive subsidies ranging from 75% to 100% of the income tax withheld from their employees’ wages.

But it seems the subsidies weren’t alluring enough to offset Illinois’ drawbacks in the eyes of battery makers. Like it or not, Illinois is generally not seen as an employer-friendly state. Companies complain about our tax rates, workers’ compensation system, precarious state finances and the lengthy process of obtaining permits for new factories.

Related: Illinois loses again as Samsung chooses Indiana battery factory

Pritzker’s clean energy legislation added a new concern. The Clean Energy Jobs Act is expected to drive up electricity costs, a major expense for manufacturers. Historically an economic plus for Illinois, which until recently had lower rates than nearby states, power prices are becoming another disadvantage in the competition for investment and jobs.

Electric vehicle manufacturers face specific issues, including a new Illinois law requiring automakers to pay dealer fees for warranty repairs and restrictions on direct car sales to consumers.

These concerns will be difficult to allay, but Pritzker must find a way if he is to achieve his goal of creating an “ecosystem” that spans the entire EV supply chain in Illinois.

You see, once you get past the battery, the EV supply chain is a lot shorter than the conga line of suppliers currently making parts for internal combustion engines. Batteries are by far the most lucrative component of electric vehicles, accounting for 30% of the total value, according to Bloomberg.

Related: Is Illinois Missing Its Opportunity to Fuel EV Investment?

EVs require far fewer parts than the traditional cars they are expected to replace in the coming decades. Fewer parts means fewer suppliers and fewer employees who make and assemble parts on vehicle assembly lines.

That poses a threat to an industry that generates $28 billion in annual economic activity and employs 36,000 employees in Illinois, according to a 2019 study from the Illinois Manufacturers Association.

Winning one or two EV batteries is the state’s best hope of offsetting the job losses and divestment in traditional auto manufacturing. Battery factories involve billions of dollars of investment and employ thousands of workers.

A spokeswoman for Illinois’ economic development arm says the state expects “exponential growth in all elements of the EV manufacturing space — including battery manufacturing — and we will continue to aggressively pursue opportunities.” She adds that Illinois has “several leads in progress” and “looks forward to making them public once they are finalized.”

Pritzker may be announcing a big win soon. If not, he should start working on a better pitch.