At the end of last year, General Motors, Ford and other car manufacturers he slammed on the brakes on electric vehicle production as consumer adoption lagged expectations. GM fault of lower demand for its decision to scrap plans to produce 400,000 electric vehicles by mid-2024, while Ford similarly cut production of its electric pickup truck.
Electric machinery construction, which includes EV battery plants, reached $35.2 billion by 2023, according to the Dodge Construction Network. This is approximately 47% of global manufacturing construction.
Still, despite this drop in interest from consumers and car manufacturers, economists predict that The manufacturing boom will continue in 2024with Dodge expecting a 15% increase in overall manufacturing construction.
For this reason, the construction professionals who build these plants are confident that these levels will increase this year, despite the pushback from consumers and car manufacturers.
“When you read the media coverage in the electric vehicle space, a lot of it has gotten a little heated with some negative headlines,” said Anthony Johnson, president of the industrial business unit at Clayco, a construction company based in Chicago. “But when you step back and look at this overall growth curve, I see things continuing to increase over time strongly.”
Chip plants and electric vehicles are leading the manufacturing boom
Electrical machinery accounted for about 47% of manufacturing construction in 2023
US consumers bought 15.6 million vehicles in 2023, with approx 9% of these sales come from electric vehicles. General Motors expects those sales to rise at least 10% this year, according to CEO Mary Barra’s remarks during the company’s most recent earnings call.
In 2030, it is likely that the market share of new vehicles for new vehicles jump to 40%, according to forecasts from S&P Global Mobility. That demand would require about 60 billion batteries and 40 large-scale gigafactories, Johnson said.
“Obviously going from 9% to 40% doesn’t happen overnight, either on the demand side or on the production side,” Johnson said. “So just continuing to build toward that ultimate capability is really what the industry is going to continue to do.”
Contractors prepare for growth
Kansas City, Missouri-based JE Dunn plans to stay busy with manufacturing-related work this year, particularly in the EV-related space.
The general contractor will deliver Dongwha Electrolyte’s first project in North America, a $70 million electric vehicle battery production facility in Clarksville, Tennessee. In addition to this project, Brent Strength, JE Dunn’s senior vice president and manufacturing market leader, expects manufacturing construction in 2024 to surpass its 2023 levels.
“We continue to see demand in the market for major capital projects and our counterparts in the architectural and engineering firms remain busy with new project inquiries,” Strength said. “Contractors have a good portfolio from previous years and right now they’re spending a lot of the Inflation Reduction Act, the CHIPS Act and similar money.”
Chicago-based Clayco also expects to stay busy with advanced manufacturing construction this year. The company recently won the construction contract Rivian’s $5 billion electric vehicle plant in Stanton Springs, Georgia.
“I think the advanced manufacturing segment definitely continues to see significant investment, and I think it’s going to continue to expand at very high rates into 2024,” said Anthony Johnson, president of Clayco’s industrial business unit. “We’re going to see an increase in more capital projects in 2024 than last year.”
Changes in tax deductions
Despite this momentum, contractors acknowledge that maintaining this record level of activity indefinitely is not a given, mainly due to factors outside of the onshoring boom. Obstacles include changes to consumer electric vehicle tax breaks and persistently high interest rates, Strength said.
“The overall growth trajectory may not be as steep as previously projected, given slower consumer adoption, higher interest rates and changes in tax credits,” he said.
The number of electric vehicle types that qualify for clean vehicle tax credits of up to $7,500 under the Inflation Reduction Act dropped from 35 to 14 this year, according to the US Department of Energy and the Internal Revenue Service of the US Treasury Department. The change stipulates that vehicles sourcing electric vehicle battery components from foreign-based entities, such as companies in China or Korea, will no longer be eligible for the credit in 2024.
Without that incentive, 2024 will give a good idea of where demand for electric vehicles actually stands in the U.S., said Richard Branch, Dodge’s chief economist. Johnson expects EV adoption to continue to advance, albeit slowly, which will translate into a long-term job boom for contractors in the industry.
“With 2024 being an election year, you’re starting to see EVs even becoming a political issue as it relates to climate change and government subsidies. So there’s no question that there will be some volatility in the segment,” Johnson said. “Obviously, if you look at individual automakers, there will be ups and downs along the way. But when you zoom out and look at that growth curve over time, it’s going to continue to rise.”
