Tennessee eyes top spot in electric vehicle assembly, state official says

Volkswagen Chattanooga project incentives to be in new state budget

The I.D. Crozz concept is the first all-electric sport utility vehicle that Volkswagen will offer in the United States. / Rendering by Volkswagen

Demand is going to continue. The market and consumers I think are going to accept the new technology.

State incentives to woo Volkswagen's $800 million electric vehicle facility to Chattanooga will come from a capital grant in the new budget due to the package's size, an official says.

Bob Rolfe, Tennessee's commissioner of economic and community development, also said the state has a goal of becoming the top electric vehicle producer in America.

"Our goal is to be at the forefront of all electric vehicle manufacturing and the suppliers that will wrap around" the automakers, he said in a telephone interview on Tuesday just a week after VW's expansion was unveiled at the Detroit Auto Show.

photo Tennessee Economic and Community Development Commissioner Bob Rolfe speaks at the Wacker polysilicon manufacturing plant in Charleston, Tenn., in 2017. / Staff photo by Doug Strickland

Rolfe declined to say how much the state incentives for VW and its 1,000 new jobs are worth, adding that the package will be disclosed in an accountability agreement between both parties.

But, he said, the capital grant for the VW project is one of two such incentive packages in the new state budget. The other is a $65 million grant for Amazon, Rolfe said. Last November, the online retail giant announced it planned to bring 5,000 jobs to Nashville and invest $230 million in a new operations center.

Chattanooga's VW plant already has received more than $800 million in federal, state and local incentives in the past decade, making it the most richly awarded business ever in Tennessee and one of the most subsidized among U.S. automakers.

The $554 million in incentives offered to VW to land the automaker in 2008 equaled $277,000 per job. Seven years later, state and local officials agreed to an additional $260 million of incentives for 2,000 more jobs to build the Atlas SUV, or $130,000 per job.

With the addition of electric vehicle production at VW in 2022 to go with existing assembly of the battery-powered Nissan Leaf in Smyrna, Tn., Rolfe said Tennessee would be proud to earn the top EV producer ranking in the nation, but it won't happen overnight.

California EV maker Tesla last year grew its deliveries to about 245,000 vehicles, which is No. 1 in America.

Nissan Leaf production has taken place at Smyrna since 2013, with more than 128,000 models sold in the United States from 2011 through 2018, figures show.

photo With an anticipated top speed of over 110 mph and DC Fast Charging to 80 percent battery power in just 30 minutes, the I.D. Crozz concept is expected to hit dealerships in late 2020. / Rendering by Volkswagen

Leaf sales in 2018 in the U.S. were 14,715 units, up from 11,230 in 2017, or 31 percent higher. But that figure is off from about 30,000 units sold in 2014.

Still, at the North American International Auto Show in Detroit last week, Volkswagen officials said electric vehicle interest is growing.

Scott Keogh, Volkswagen Group of America's CEO, said an all-electric SUV made in Germany will hit auto dealerships in late 2020.

"We're going to go all in to make this car a success," he said.

The first EV made in Chattanooga will come in 2022, based off the SUV concept that VW now calls the I.D. Crozz.

Rolfe said the auto industry is in a transformation in which more carmakers are going to making electric vehicles as driving range lengthens and battery charging times shorten.

"Demand is going to continue," he said. "The market and consumers, I think, are going to accept the new technology. I'm more optimistic we'll see this ramping up pretty fast."

Consumers will have to adapt, Rolfe said.

"The consumer has a choice," he said. "We all love our gas-powered vehicles. As technology continues its improvement, people will quickly adopt this new technology."

The EDC commissioner said the state was contacted about six months ago related to the VW project and the automaker met a couple of times in Nashville with then-Gov. Bill Haslam.

Rolfe said VW is making electric vehicles in Germany, and the company's decision involved whether to invest in the United States.

"If they invest in the U.S., the next decision was to expand assets or building a greenfield facility," he said. "Fortunately, they came to the conclusion Chattanooga is where they were expanding ... ."

Rolfe said he doesn't know how many "crossover suppliers" that VW and Nissan share, but the state has a recruiting strategy to attract more tier one and tier two suppliers for electric vehicles.

He said automakers are buying a lot of EV technology from third parties.

"That creates a whole new ecosystem," Rolfe said.

Contact Mike Pare at mpare@timesfreepress.com or 423-757-6318. Follow him on Twitter @MikePareTFP.