Best time to build an EV factory in US, says VW

This month, the German manufacturer moved ahead with plans for a US$2bil (RM8.95bil) factory in South Carolina to produce electric sport-utility vehicles (SUVs) as part of Scout Motors Inc. — Bloomberg

NEW YORK: Volkswagen AG (VW) says lucrative US incentives for electric vehicle (EV) makers were just too good to pass up when weighing whether to pick a partner or build its own factory for the new Scout brand.

This month, the German manufacturer moved ahead with plans for a US$2bil (RM8.95bil) factory in South Carolina to produce electric sport-utility vehicles (SUVs) as part of Scout Motors Inc.

The factory is due to open in 2026 and will eventually produce 200,000 EVs annually.

“We view it simplistically, a little bit like the Gold Rush,” Scott Keogh, chief executive officer of the Scout brand, said Monday, equating the 1849 California Gold Rush with the federal Inflation Reduction Act (IRA) that provides incentives for domestically produced EVs.

“There’s never been a better time to build a factory in America.”

VW considered hiring a contract manufacturer like Taiwan’s Foxconn Technology Group to build its new plug-in pickups and rugged SUVs.

But the IRA signed into law in August by President Joe Biden expanded consumer credits of up to US$7,500 (RM33,543) a vehicle and added incentives to build EVs and batteries in America.

That convinced VW to break ground on its own facility on 1,600 acres near Columbia, South Carolina, which will employ 4,000 workers when it opens in 2026.

VW rose 1.3% in early trading in Frankfurt, taking its gains this year to 4.4%.

“If you look at all the, let’s say, opportunities that are coming from the states and the Inflation Reduction Act, the smartest way to handle the factory is to do it yourself,” Keogh said in a briefing with reporters from the plant’s location.

“You wanted to get there early so you could get a good location, and if you got there late, you might miss it.”

VW last year resurrected the Scout brand, which was sold from 1960 to 1980 by International Harvester, in hopes of making a dent in the US market that has foiled the German automaker for decades. VW acquired the brand when it purchased Navistar in a deal that closed in 2021.

Scout’s new factory will make SUVs and full-size pickups annually in a bid to take on American stalwarts like the Ford Bronco and Jeep Wrangler, as well as newcomers such as Rivian Automotive Inc’s truck and RS1 SUV.

Auto sales in Europe increased for a seventh straight month, aided by strong growth in the United Kingdom and Spain, and improving supply chains.

Registrations jumped 12% in February to 902,775 vehicles, the European Automobile Manufacturers’ Association said yesterday.

Sales of battery-electric vehicles surged 34%, expanding more than any other type of powertrain.

Shortages of semiconductors and other components are becoming less of a problem, but automakers are still contending with logistics snags, slowing economies and inflation.

Order books remain full for now, but carmakers are growing more pessimistic about the outlook, a survey of German manufacturers showed earlier this month.

“Supply chain constraints have abated, though tightening consumer budgets amid inflation and rising interest rates are a risk to pricing and the auto sales recovery,” Bloomberg Intelligence analysts Gillian Davis and Michael Dean wrote in a report on Monday.

They expect sales to expand by at least 5% this year based on pent-up demand.

Last month’s gains were particularly pronounced in the United Kingdom and Spain, where sales expanded 26% and 19%, respectively. Registrations in Germany rose 2.8%, recovering from a decline in January.

In the UK, fleet demand is “quite ok” even as retail is heavily affected by the cost of living crisis, Guillaume Sicard, the UK head of Renault SA, said in an interview.

Concern about higher expenses is boosting the appeal of Renault’s no-frills Dacia cars while allowing the Renault brand to focus on its most lucrative models. — Bloomberg

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