‘War of the states’: EV, chip makers lavished with sizeable subsidies
HARRISBURG, Pa. — States are doling out more cash than ever to lure multibillion-dollar microchip, electric vehicle and battery factories, inspiring ever-more competition as they dig deeper into their pockets to attract big employers and capitalize on a wave of huge new projects.
Georgia, Kansas, Michigan, New York, North Carolina, Ohio and Texas have made billion-dollar pledges for a microchip or EV plant, with more statesubsidized plant announcements by profitable automakers and semiconductor giants surely to come.
States have long competed for big employers. But now they are floating more billion-dollar offers and offering record-high subsidies, lavishing companies with grants and low-interest loans, municipal road improvements, and breaks on taxes, real estate, power and water.
“We’re in the second war of the states,” said John Boyd, a principal at the Florida-based Boyd Company, which advises on site selections. “That’s how competitive economic development is between the states in 2023.”
The projects come at a transformative time for the industries, with automakers investing heavily in electrification and chipmakers expanding production in the U.S. following pandemic-related supply chain disruptions that raised economic and national security concerns.
One of the driving forces behind them are federal subsidies signed into law last summer that are meant to encourage companies to produce electric vehicles, EV batteries, and computer chips domestically. Another is that states are flush with cash thanks to inflation-juiced tax collections and federal pandemic relief subsidies.
The number of big projects and the size of state subsidy packages are extraordinary, said Nathan Jensen, a University of Texas professor who researches government economic development strategies.
“It is kind of a Wild West moment,” Jensen said. “It’s wild money and every state seems to be in on it.”
Good Jobs First, a nonprofit that tracks and is critical of corporate subsidies, said 2022 set a record for the number of billiondollar-plus incentive deals. At least eight were finalized, though that figure might be higher since such deals can be cloaked in secrecy and take time to come to light.
Eighteen of last year’s 23 known “megadeals,” in which state and local incentive packages to private companies exceeded $50 million in value, were for semiconductor and EV plants, according to the group’s data.
More than $20 billion in public money was committed to subsidizing those known megadeals, according to Good Jobs First data. That total eclipsed the previous record of $17.7 billion that was committed to subsidizing such deals in 2013.
Many of the companies drawing the biggest subsidy offers — such as Intel, Hyundai, Panasonic, Micron, Toyota, Ford and General Motors — are profitable and operate around the globe. Some lesser-known names in the nascent EV field are getting big offers too, such as Rivian, Volkswagen-backed Scout Motors and Vietnamese automaker VinFast.
The subsidy offers are generally embraced by politicians from both major parties and the business elite, who point to promises of hundreds or thousands of jobs, massive investments in construction and equipment, and what they contend are immeasurable trickledown benefits.
Still, academics who study such subsidies find them to be a waste of money and rarely decisive in a company’s choice of location.