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SUNDAY EDITION | Charging ahead: Electric-car era brings uncertainty for Kentucky’s auto industry

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SUNDAY EDITION | Charging ahead: Electric-car era brings uncertainty for Kentucky’s auto industry

LOUISVILLE, Ky. (WDRB) – Even amid the parts shortage that has crippled the auto industry this year, Ford Motor Co. has managed to boost production of gas-guzzling F-Series pickups at its Kentucky Truck Plant in Louisville.

In fact, the large Super Duty trucks and SUVs made at the eastern Jefferson County plant alone account for more than half of the company’s North America profits, the leader of the local union representing plant workers often says.

But while Ford rakes in cash from those low-mileage trucks, the company this year has joined the chorus of automakers pledging a cleaner future in electric vehicles.

“We’re really at an inflection point,” Ford’s chief operating officer for North America, Lisa Drake, told a Greater Louisville Inc. audience in May. “If you’re not an (electric vehicle) believer, I think it’s coming faster than we might be expecting.”

Ford, GM and other automakers have said this year that fully electric cars will make up a large share of their sales by 2030 to 2035. President Biden set the bar at 50% of automakers’ sales, including plug-in hybrids, by 2030 in a nonbinding executive order earlier this month.

Industry analysts say the targets are ambitious, reflecting a response to government policies to curb climate change and to investors, who are signaling that electrification is the future. Electric-vehicle pioneer Tesla Inc., for example, is now worth more in the stock market than Ford, GM and Toyota combined, despite selling a tiny fraction of the vehicles sold by the traditional automakers.

The $1 trillion infrastructure bill that passed the U.S. Senate last week would provide $7.5 billion for a national network of charging stations, a move meant to bring electric cars into the mainstream. And Democrats are pushing other government incentives for the electric-car industry, such as beefing up tax credits now worth up to $7,500 per vehicle.

Still, it's unclear whether consumers will jump on board quickly enough to meet the lofty goals.

“We will have electrified future. From our perspective, it’s going to be a very, very long way out,” said Joseph McCabe, president of industry consultant AutoForecast Solutions LLC.

Kentucky’s big stakes in the auto industry

Regardless of the pace, the apparently inevitable transition to electric cars raises questions about the future of Kentucky’s automotive industry, a pillar of the state’s economy.

Only Michigan and Ohio manufacture more cars than Kentucky, and the Bluegrass State has been along for the ride as the gas-powered industry has grown over the last decade.

Kentucky vehicle- and auto parts-makers accounted for more than 52,000 jobs last year, up 49% since 2010, according to government statistics. Those jobs pay more than $64,000 a year, according to WDRB’s analysis of government data, compared to the state average of just under $51,000.

Made with Flourish

The state has four assembly plants – Ford’s two factories in Louisville; Toyota’s largest factory in the world in Georgetown; and GM’s Corvette plant in Bowling Green – as well as dozens of supplier manufacturers providing parts to those operations.

Kentucky’s deep entrenchment in the industry will be a leg up even as vehicle profile evolves, analysts say.

“I’m sure that Kentucky is in the cards for automakers as they plan the electrified future,” said Autotrader executive analyst Michelle Krebs.

But so far, Kentucky has watched neighboring states in the South and Midwest land battery plants and other big electric-car investments, without any major announcements in the Bluegrass.

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Kentucky Gov. Andy Beshear, June 11, 2021

Gov. Andy Beshear told WDRB News in June that Kentucky has several “exciting possibilities” in the electric vehicle industry.

“The great thing is we’ve got a lot of great sites (for new plants). And we have a lot of trade workers already in the automotive industry, and we’ve got some great universities,” Beshear said. “So, we’re working really hard on a number of fronts to make sure we are front and center.”

Beshear also noted the high stakes, saying Kentucky’s auto industry must avoid the fate of its coal-mining industry, which has been decimated by the rise of natural gas as a power source.

“You got a lot of people in eastern Kentucky that were left high and dry when the new energy jobs were created elsewhere. We’ve got to make sure that doesn’t happen on electrification,” Beshear said.

Larry Hayes, Beshear’s economic development secretary, declined to answer questions for this story, saying he didn’t want to jeopardize projects in the works.

Plants ‘on the bubble’

Even if Kentucky maintains its outsized place in the auto industry, the looming shift to electric vehicles raises other questions.

Will auto plants of the future employ the same number of people as they do today?

“The truth of the matter is that an electric vehicle just has so many fewer moving parts,” said David Clayton, director of the International Center for Automotive Research at Clemson University. “So when you talk about assembly of those vehicles, it is simpler.”

Other portions of the existing industry are threatened, such as plants producing gas-powered engines (a portion of Toyota’s Kentucky operation) and supplier plants that make transmissions, fuel systems and exhaust systems.

But with battery plants becoming a source of new jobs, Clayton said, it’s unclear whether the future industry will have more or less workers than today.

Bernard Swiecki, assistant director of the Ann Arbor, Michigan-based Center for Automotive Research, said electric vehicle leader Tesla employs more people per car at its California factory than incumbent automakers like Ford and GM do at their plants.

“It’s very inefficient,” he said.

Another possibility, according to AutoForecast Solutions’ McCabe, is that electric vehicles will last longer than conventional ones.

“The brakes last three times longer; there’s no fluids. There’s just less to fix,” McCabe said.

While good for consumers, longer-lasting vehicles would likely mean fewer new cars produced each year, which in turn would cut demand for labor in car factories, McCabe said.

“There are going to be some plants that are on the bubble,” he said.

The United Auto Workers’ union, which represents more than 50,000 rank-and-file workers at plants in the U.S., acknowledged the threat that electric vehicles pose to those jobs in a 2018 study.

“What is required is commitments from employers to re-tool plants and re-train workers to maintain employment levels and allow American workers to make advanced technology vehicles,” the report said.

Early investments bypass Kentucky

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One of Evolve KY's 35 charging stations in the Louisville area, at the Norton Commons YMCA. June 23, 2021.

While it’s still early in the electrification game, car companies have largely bypassed Kentucky as they lay out their manufacturing plans.

In Michigan, Ford is spending $700 million on a plant expansion to make an all-electric version (the “Lightning”) of its F-150 pickup, the country’s best-selling vehicle.

GM is retrofitting a Detroit factory to produce an electric version of the GMC Hummer and, eventually, Chevrolet Silverado pickup. Ford also chose southeast Michigan for a research and development facility for battery technology.

In Ohio, GM and electronics-maker LG are building a battery plant near the company’s former Lordstown car plant, which itself has been retrofitted to make electric trucks by a startup called Lordstown Motors, though the company faces uncertain prospects

In Tennessee, GM and LG are building a battery plant near GM’s Spring Hill Assembly plant, which will be repurposed to produce an electric Cadillac SUV.

In Georgia, Korean firm SK Innovation is building a battery plant that could eventually employ 6,000.

In Alabama, Mercedes Benz is building a battery plant near its Tuscaloosa facility, where the German automaker will start producing electric SUVs alongside conventional gas-powered and hybrid gas-electric models next year.

While Kentucky has yet to land a multi-billion-dollar battery plant or a promise to remake a factory for electric cars, the Bluegrass State has seen a few moves in that direction.

Japanese conglomerate Hitachi unveiled a plan last year to spend $95 million to make electric motors at a plant in Berea, Ky., which could eventually employ 162. The plant will make motors for Honda, according to Beshear’s office.

And Chinese battery manufacturer CATL, which supplies batteries to Tesla, is considering a plant in Glasgow, Ky., which could employ 350.

“A couple of our recent announcements show we’re already in the game,” Beshear told WDRB in June. “But we want to make sure that the major players are in Kentucky.”

Analysts say only a fraction of the industry’s electric investments have been decided, and Kentucky is a good position given the stakes automakers have already put down in the state.

“They’re just starting their wave -- their strategy -- of electrification,” said Swiecki, of the Center for Automotive Research. “So, it’s not that other communities are getting these investments, and Kentucky is somehow getting left behind. That’s not the case at all.”

Todd Dunn, president of UAW Local 862, the union that represents about 13,000 rank-and-file workers at Ford’s two Louisville plants, said union leaders spoke with Beshear in May about being “proactive” in maintaining jobs and landing new investments.

He said union workers are best equipped to staff plants making electric vehicles.

“Electrification brings changes to those manufacturing processes, and we have to be able to adjust,” Dunn said. “There is no reason we cannot adapt to that change.”

Dunn sees promise in Ford’s decision to electrify the F-150. The next step would be a battery-powered version of the F-Series trucks made in Louisville, which are larger than the F-150, use lots of gas and are often used in construction and other work-related settings.

“Is there a future for an electric Super Duty? I think the possibility is there,” Dunn said. “We have to gravitate toward the future and what it’s going to bring.”

A Ford spokeswoman declined to comment on its future manufacturing plans.

A GM spokeswoman said the future of the company’s Bowling Green assembly plant is “certainly strong” with the eighth generation of the sports car in the works. McCabe said there are rumors of electric Corvette, though GM did not directly comment on that.

GM spokeswoman Rachel Bagshaw added that GM’s plan to source renewable energy from the Bowling Green plant from a large solar farm in Logan County helps secure the plant’s place in the company’s “zero emissions” portfolio.

“Investments like this continue to support a bright future for Corvette and our plant,” she said in an email.

Toyota builds gas engines as well as cars at its Georgetown, Ky. factory, its largest plant in the world. It’s also the most electrified auto plant in Kentucky, building hybrid gas-electric versions of the RAV4, Avalon and Camry.

The company declined to discuss how the product mix at the plant might change.

“We see a future that has room for a wide variety of powertrains and fueling options,” Toyota’s Kim Ogle said in an email. “Different options address different needs and while unable to speak in specifics, we can assure you that Toyota is committed to building powertrains in Kentucky.”

Ford, too, builds hybrid-electric versions of the Escape SUV at Louisville Assembly Plant.

‘In the very early stages’

Kevin Collins

Kevin Collins, owner of Louisville's Collins Ford, at the Bardstown Road dealership show room, July 7, 2021.

While battery-powered vehicles are a growing share of the auto industry, they remain a small slice of the pie.

“I think we’re in the very early stages, obviously, of (electric vehicles),” said Kevin Collins, owner of Bill Collins Ford, a Louisville dealership. “There is probably a lot more unanswered questions than there are answers at this point.”

Those questions include how long the cars can operate before having to recharge – especially on long trips – what it would cost the customer to install high-capacity charging at home and the full cost of ownership of the car over time.

Collins sells one fully electric vehicle at his dealership on Bardstown Road, the Mustang Mach-E, a small “performance SUV,” that starts at about $43,000.

“I’ve sold every one of them I had to sell,” Collins said.

Still, the market for electric cars is limited, he said.

“It’s a very small percentage of consumers right now that will really buy an (electric vehicle),” Collins said. “And each year, it gets a little more." In the April-to-June period, cars with only electric power made up 2.6% of the 4.4 million new vehicles sold in the U.S., according to Cox Automotive.

When hybrid cars – which use battery packs to supplement gas engines – are added to the mix, the share of the auto market for cars with some electrification rises to 8.5%.

While still a negligible portion of the industry, analysts note that the electric sector is growing quickly. In 2020, electric cars were about 2% of the market, and the total electrified share (including hybrids) has roughly doubled in a year, according to Cox.

“Consumers are adopting them at a very, very quick rate. And it shows, really, no sign of slowing,” Swiecki said.

Still, pure battery-powered vehicles will need to grow at astronomical rates to match the ambitions automakers have set this year.

In January, General Motors pledged to transition its light-vehicle fleet to pure-electric by 2035, a goal McCabe, the industry consultant, calls “very lofty.”

Ford responded by setting a goal of 40% of its fleet being all-electric by 2030, with the automaker planning to invest $30 billion into electrification efforts over the decade.

“We’re really investing a lot in this space, because we see it coming fairly quickly,” Drake, the Ford executive, told the Louisville audience in May.

Other incumbent automakers such as Stellantis NV (parent of Jeep and Chrysler) and Mercedes Benz have also projected a future in electric vehicles.

Toyota is a notable exception. Instead of embracing pure electric vehicles, Toyota has focused on hybrids, which make up about a quarter of its sales, according to Cox Automotive.

Toyota President Akio Toyoda said in December that electric cars may tax the Japanese power grid, are often powered by electricity burned from planet-warming fossil fuels and are too expensive for many buyers.

Toyota has also bet heavily on vehicles powered by hydrogen fuel cells, a market that is so far limited to California.

The success of the hybrid RAV4 built in Kentucky shows how hybrids will be important part of the industry’s future, Toyota’s Ogle told WDRB News.

“Ultimately, our customers will -- and should -- decide which powertrain technology is right for their lifestyle and needs. We will continue to provide a portfolio of electrified options,” she said.

For Ford, there’s reason to be skeptical of the company’s projections. Ford unveiled an all-electric version of its Focus hatchback with much fanfare in 2011, only to stop making the car in 2018 when the company decided to ditch sedans altogether.

But analysts say the plug-in sector is on a much firmer footing now than a decade ago, when the only all-electric vehicles widely available were small, economy cars – the Focus, Nissan Leaf and Chevy Volt.

Battery technology has improved, bringing the cost of electric vehicles closer to that of their conventional counterparts, and giving many a range a few hundred miles on a charge.

“Now, there’s a better chance that the (electric) vehicle is a utility, or a large vehicle of some kind that people actually want, as opposed to an electrified version of a small economy car,” said Swiecki, of the Center for Automotive Research. “So suddenly, these vehicles fit consumers needs in terms of the type of vehicle, the size of vehicle, how far it’ll go, (and) it’s more affordable than it was in the past.”

And governments such as the U.S., European Union and China are boosting the sector by enacting stricter emissions limits, building charging stations and subsidizing purchases and production, all in an effort to arrest climate change.

“The future of the auto industry is electric. There’s no turning back,” President Biden said in May while visiting Ford’s electric vehicle center in Michigan.

Biden administration said earlier this month that it would enact higher mileage and anti-pollution standards from the Environmental Protection Agency and Transportation Department as part of Biden's goal to cut U.S. greenhouse gas emissions in half by 2030.

Biden’s infrastructure package would also ramp up government investment in charging stations, a job that has so far fallen to a hodgepodge of private actors.

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Stuart Ungar, an electric-car enthusiast, co-founded Evolve KY, which has overseen installation of 35 free charging stations around Louisville. Ungar is pictured at the Norton Commons YMCA, which adopted a charger. June 23, 2021 

In Louisville, a nonprofit group of enthusiasts called Evolve KY has overseen the installation of 80 free, community charging stations around town. Like water fountains, the charging stations are free to use, and the electricity is so cheap that YMCAs and other hosting locations pick up the cost.

“We see ourselves as the catalyst,” said Stuart Ungar, co-founder of Evolve KY. “We kind of feel like, if we can do it, anybody can do it.”

In addition to governments, there’s another important constituency telling carmakers that electrification is the future: investors.

Electric-vehicle pioneer Tesla’s stock has shot up seven-fold since early 2020, giving the Palo Alto, California company a market value of more than $700 billion.

RELATED: Tesla plans a Louisville 'dealership.' Kentucky law could complicate that

By comparison, Ford is worth about $54 billion.

“The conventional car (manufacturers) have gotten the memo, that they either take it seriously,” Ungar said. “Or they get left behind.”

Reach reporter Chris Otts at 502-585-0822, cotts@wdrb.com, on Twitter or on Facebook. Copyright 2021 WDRB Media. All rights reserved.