Pritzker pins electric vehicle hopes on subsidies – Crain’s Chicago Business

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The move comes as Illinois’ push into the fast-growing EV sector has stalled. Illinois started out strong, attracting California-based electric truck maker Rivian to a former Mitsubishi plant in Normal five years ago. In 2021, Canadian manufacturer Lion Electric announced plans for an electric school bus factory in Will County. 

Since then, not much. Automakers racing to phase out gas-powered vehicles as soon as 2035 have bypassed Illinois as they announced dozens of new production facilities across the country. 

Particularly worrisome is the state’s failure to win a single electric vehicle battery plant. Batteries are the crown jewel of electric vehicle production, representing about 30% of the value in a plug-in car. Yet none of the roughly 20 battery plants announced so far is coming here. Even Rivian is building its battery plant in Georgia.

Automakers will need more battery plants, giving Illinois a chance to catch up. But the window of opportunity shrinks every time a plant goes elsewhere.

Compounding those disappointments is concern about the fate of existing Illinois auto plants in an all-electric future. Ford’s assembly plant on Torrence Avenue in Chicago and Stellantis’ Belvidere factory have anchored auto production in Illinois for generations, supporting thousands of well-paid jobs that send economic ripple effects across their communities.

Yet neither company has committed to converting its Illinois plant to electric vehicle production. In an ominous sign for Ford’s Chicago plant, industry insiders expect an Ontario factory to make the initial electric versions of the Explorer SUV, a mainstay of Torrence Avenue. 

Without a massively expensive overhaul, these plants will almost certainly shrink and eventually go dark as gas-powered vehicles roll into the sunset. Also at risk is an array of Illinois companies that make parts for internal combustion engines, which face extinction if they can’t find a place in EV supply chains that require far fewer parts.

That would be a heavy blow to Illinois, where auto-related manufacturing generates 36,000 jobs and $28 billion in annual economic activity, according to the Illinois Manufacturers’ Association.

To soften that blow by tapping into the growing electric vehicle segment, Illinois needs to convince manufacturers that the state is a good place for multibillion-dollar investments in building new facilities and retrofitting existing ones.

In many ways, Illinois looks like an ideal location for electric vehicle investments. We offer important technical expertise, including advanced battery research at Argonne National Laboratory in Lemont. We also have a highly skilled workforce, manufacturing know-how, a convenient midcontinent location and great transportation systems.

Yet these advantages, plus a reasonably generous subsidy package, haven’t carried the day with EV battery makers. And while it’s hard to pinpoint a single deciding factor in any given plant siting decision, Illinois’ downsides as a business location surely aren’t helping its sales pitch. The state is known for relatively high taxes, costly workers’ compensation and cumbersome permitting processes. Companies also worry that clean energy legislation enacted last year will drive up electricity rates, a major expense for manufacturers and an area where Illinois once had a cost edge over neighboring states.

On top of that, Pritzker just pushed through an amendment to the state constitution that gives labor unions more power, reinforcing Illinois’ reputation for hostility to business.

Unable or unwilling to address these negatives, Pritzker is counting on a spruced-up subsidy package to change Illinois’ luck. Major changes include allowing more companies to qualify for EV tax breaks, potentially benefiting existing facilities like Torrence and Belvidere, as well as parts makers. Payroll tax credits would rise from 25% of state tax liability to as much as 100% in some cases, and their term would increase to as long as 30 years from the current 15-year duration.

According to the state’s economic development agency, the changes reflect feedback from “industry stakeholders” as Illinois pursued EV companies. The revised package evidently comes closer to the incentives offered by states that have won battery plants. 

Pritzker is smart to make Illinois’ subsidies more competitive. A real winning strategy—in electric vehicles and every industry—would do the same for the state’s business climate.

Ino Saves New

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December 5, 2022 at 06:46AM

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