The battle for EV batteries in US speeds up

This is an audio transcript of the FT News Briefing podcast episode: ‘The battle for EV batteries in US speeds up’

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Marc Filippino
Good morning from the Financial Times. Today is Thursday, November 2nd, and this is your FT News Briefing. The US Federal Reserve kept interest rates steady yesterday. And Egypt has allowed a few people to leave Gaza. The situation in the strip is dire. 

Heba Saleh
People describe it as hell — very little water, very little food, no electricity much of the time, and the bombings. 

Marc Filippino
Plus, we’ll take a look at the fierce competition over electric vehicle and battery plants in the United States. I’m Marc Filippino, and here’s the news you need to start your day.

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The Federal Reserve decided to hold interest rates steady yesterday. The meeting was the second in a row where the Fed decided against an increase. 

Jay Powell voice clip
Given how far we have come along with the uncertainties and risks we face, the committee is proceeding carefully. 

Marc Filippino
Chair Jay Powell emphasised the need to take a wait-and-see approach, even though the US economy is cruising along. 

Jay Powell voice clip
The labour market has been rebalancing, but it’s still very tight by many measures. GDP growth has been strong, although many forecasters are forecasting, and they have been forecasting that it will slow. 

Marc Filippino
All good stats except for worries about what it all means for stubborn inflation. And that’s what’s keeping Powell up at night. Equities moved higher while Powell was speaking. The S&P 500 ended the day up around 1 per cent.

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Some people are now allowed to cross the border from Gaza into Egypt. It’s the first time since the war between Israel and Hamas began on October 7th, and it’s happening at a place called the Rafah crossing. The development marks a huge turning point for the humanitarian crisis. But the number of people being allowed through is pretty small. Here to talk about the situation is Heba Saleh. She’s the FT’s Cairo correspondent. Hi, Heba. 

Heba Saleh
Hello. 

Marc Filippino
So Heba, who’s being allowed into Egypt over this Rafah crossing? 

Heba Saleh
Two sets of people are being allowed into Egypt through the Rafah crossing: some severely wounded Palestinians and selected dual nationals — not Palestinians who normally reside in Gaza. We’re speaking about dual nationals who have another place to go to once they exit into Egypt, and the wounded. 

Marc Filippino
So this is a pretty big development since we talked to you last about the crossing a few weeks ago. How was this negotiated? 

Heba Saleh
We don’t know everything, but we know that Qatar has mediated a disagreement between Egypt and Hamas over where UN officials who would examine the documents of dual nationals emerging from Gaza, where they should be located. It is also possible that there were conditions attached related to the entry of aid in Gaza. Egypt has been very keen to secure agreement from Israel that aid trucks should enter Gaza. This is important because it wants aid to be delivered to the Palestinians. It doesn’t want the Palestinians to come out of Gaza and be refugees in Egypt. It wants them to be helped on their land. 

Marc Filippino
So Heba, what are we hearing from the people who are coming out of Gaza about the conditions there? 

Heba Saleh
People describe it as hell — very little water, very little food, no electricity much of the time, and the bombings, the constant bombardment, the fear. One of my colleagues in Gaza spoke to a Palestinian with German nationality who was on his way out from Gaza. And he said, my sister is under the rubble of her house. There’s no equipment to bring her out. You know, this massive bombardment results in houses collapsing very often on the heads of their inhabitants. So you have whole families killed in these collapses, and there’s no equipment to move all this concrete and all this masonry to save people from under the rubble. 

Marc Filippino
Wow. So then this opening at Rafah, is it going to have a big impact on the humanitarian situation that you’re describing? 

Heba Saleh
I doubt it because we’re not talking about huge numbers; 2.2 or 2.3mn Palestinians live in Gaza. We understand there are a few thousand dual nationals who will emerge. Of course, if the flow of aid is increased and if it’s dramatically increased . . . Gaza used to receive up to 500 trucks a day of supplies because everything comes from across its border. We know aid trucks have been entering but not in huge numbers. So the humanitarian situation remains really bad and a few thousand people coming out is not really going to make a difference. 

Marc Filippino
Heba Saleh is the FT’s Cairo correspondent. Thank you so much for your time, Heba. 

Heba Saleh
You’re welcome. Thank you. 

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Marc Filippino
Toyota announced this week it’s investing $8bn into its battery manufacturing plant in the US state of North Carolina. It’s the latest sign that President Joe Biden’s Inflation Reduction Act is bringing in tons of foreign investment. You see, foreign companies are scrambling to grab big tax subsidies from the IRA. And states are scrambling to attract those projects into their backyards. And that’s causing an industry shift in the US. While you might think of the Midwest — places like Detroit — when you think about cars, the south-east is becoming a hub for electric vehicle manufacturing — places like North Carolina. The region has been leveraging its loose labour laws to compete for projects. As part of our series on foreign investment in the US, the FT’s Amanda Chu went to the city of Florence, South Carolina, last month. It’s a state that’s also seen billions of dollars in EV and battery manufacturing investment. Hi, Amanda.

Amanda Chu
Hi, Marc. 

Marc Filippino
So, Amanda, tell me a little bit about your trip. 

Amanda Chu
Yes. So the race is on to become the capital of the electric vehicle industry. And what is going on in Florence, South Carolina, is a perfect example of this. For those who don’t know, Florence is a small city in South Carolina, on the south-eastern coast of the United States, close to Myrtle Beach, which is a very popular vacation spot. And there’s this huge former cotton field there that’s now being turned into a battery cell factory for this company called Envision AESC. It’s a Japanese manufacturer, and it’s one of the largest investments the area has ever seen.

And so I was driving around the construction site in a massive pick-up truck with Gregg Robinson. He’s the head of Florence County Economic Development Partnership, native South Carolinian, and he is one of the main figures in wooing AESC and getting them to land in Florence. 

Gregg Robinson voice clip
These are sometimes forgotten fields that are turning into advanced technology for the future. The initiatives that are taking shape right now are gonna transform a community of significance. We’re a mid-market but would eventually become a major market. 

Marc Filippino
Like we heard in the first episode, a reason these projects can get off the ground is foreign investment. What kind of role did it play in South Carolina? 

Amanda Chu
Yeah, so foreign investors are playing a very disproportionate role in building out South Carolina’s electric vehicle and battery supply chain. I visited AESC’s site in Florence and literally 90 minutes away is where Volkswagen’s Scout Motors is building the first electric vehicle factory in the US in this town of Blythewood, South Carolina. And it’s surprising, but it makes a lot of sense because when you think about who is producing these technologies right now, it’s not the US. And so if the US wants to build out its own supply chain, it really needs to work with foreign investors, largely in Japan, South Korea, China. 

Marc Filippino
So what is the draw of South Carolina and I guess the south-east more broadly for the kind of projects that you’re describing? 

Amanda Chu
So the south-east is doing extremely well in the competition to win these projects. They’re going to extreme lengths to woo investors with state tax breaks, private dinners and subsidies. But in addition to these soft factors, there’s also an important element when it comes to right to work. 

Marc Filippino
Yeah, what are, what is right to work? What are right-to-work laws? 

Amanda Chu
Yeah, so right-to-work laws say that employees don’t have to pay fees to a union if they’re in a unionised workplace. And over half of US states have right-to-work laws, and it’s disproportionately in the US South. And so right-to-work laws are seen as a barometer of a state’s friendliness to employers. And Gregg Robinson, who we heard from earlier, said that this is a key priority. 

Gregg Robinson voice clip
We’re a right-to-work state. And we do not work with companies that are looking to unionise. Period. And in fact, I won’t even court those type of companies. 

Amanda Chu
Unions can cause companies a lot of money because they advocate for things like higher wages. And this puts a lot of pressure on Midwestern states who risk losing out on a lot of these new investments. They have a really strong history and legacy of labour organising. And as we’ve seen with the United Auto Workers strike, those unions can wield a lot of power and can be really disruptive to production. And site selectors who I talked to have told me that when they work with companies who don’t have a US presence, companies tell them that they don’t want to work in the Midwest because they know this legacy of unions. When we look at the data, about a fifth of current operating electric vehicle and battery plants in the US are unionised. And the reason why this matters is because President Biden promised to create thousands of good-paying union jobs on the campaign trail for the energy transition. And right now, where we’re seeing the trend of where battery plants are being announced and the current data for current operations, it feels very unlikely that this electric vehicle future is going to be unionised. 

Marc Filippino
So foreign companies like the Inflation Reduction Act because they get subsidies for investing in US manufacturing. It’s how Joe Biden is selling the act, but he’s getting pushback, Amanda, from Republicans in Congress, some of whom want to repeal it. What happens if there are rollbacks to the IRA? 

Amanda Chu
So many state and local officials say that while the IRA accelerated electric vehicle manufacturing across the US, and particularly in South Carolina, it’s only accelerating a trend. It didn’t start it. If IRA subsidies are rolled back, there is a concern that maybe some projects won’t get built at the same speed or reach the same capacity that they were initially announced to be. But companies are confident that these manufacturing investments will continue and the consumer demand is there for electric vehicles. 

Marc Filippino
Amanda Chu is the FT’s US energy reporter. Thanks so much, Amanda. 

Amanda Chu
Thanks, Marc. 

Marc Filippino
As part of this series, Amanda has also been putting together the best cities in America for foreign investment. That list comes out next week. Amanda and I will both be doing a live event in Miami on Tuesday to talk about what cities came out on top. We’ll put a link in the show notes where you can watch that event.

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You can read more on all of these stories at FT.com for free when you click the links in our show notes. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news. 

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