Kansas won big in a deal announced by Panasonic Energy of North America last week for what will be the largest economic development project in the history of the state. The company has chosen Kansas as the location for a new multibillion-dollar megafactory that will produce lithium-ion batteries for Tesla and other vehicle manufacturers.
Once the project is officially approved by the company’s board, building will begin at a site in De Soto, in the eastern part of the state near Kansas City. Ground has already been broken to prepare the location for construction, said Paul Hughes, deputy secretary for business development in the Kansas Department of Commerce. He thinks the “shell” of the 4-million-square-foot facility could be ready by next fall, at which point the manufacturing equipment will be brought in. “This is the first stand-alone, nothing-but-batteries facility that Panasonic’s ever built in the United States, and it will be the largest in the world,” Hughes said.
Panasonic plans to hire at least 4,000 workers for the $4 billion project, according to the Kansas Department of Commerce. But the factory will also exert a gravitational pull, creating an employment hub that could bring in hires from across the region. An independent economic impact study commissioned by the state found potential for an additional 3,810 jobs from suppliers to Panasonic, as well as 16,551 one-off construction jobs.
“The states and communities that invest in economic development projects, once they get a larger project, tend to have more interest and attraction to other firms,” said Jeremy Hill, director of the Center for Economic Development and Business Research at Wichita State University and lead author of the study. When the facility is running at full capacity, the study estimates over $1.8 billion of annual economic output and over $53 million in annual state and local taxes.
“It’s a huge opportunity for the state,” Hughes said, noting that he expects an immediate impact to the Kansas economy. For example, he added, the roadway leading to the facility will need improvements right away to prepare for such a large workforce at the factory. “It’s going to be very much like a minor league baseball game being let out every 8 hours,” he said. “We need to be ready for that.”
Hughes said Panasonic winnowed down its list from 70 sites in 13 different states before selecting De Soto. “Our engagement with them really began in earnest in the second half of last year,” he added. The announcement follows the passage of a secretive incentive package approved by the state legislature in February. The identity of the company that prompted the bill was kept quiet until this week, coded as “Project Ocean.”
Advocates of the bipartisan bill, known as APEX — the Attracting Powerful Economic Expansion Act — promised it would position the state for the largest private investment in Kansas’ history. “The existing incentives that we had weren’t powerful,” Hughes said. “That’s why we came up with the APEX bill.”
The act offers over $829 million in tax breaks, rebates and other financial incentives to be paid over the next decade, pending Panasonic’s follow-through on investments and hiring in the state. The largest of the incentives is a 12.5% investment tax credit worth $500 million over five years. It also includes tax incentives for up to five of Panasonic’s suppliers.
“The new oil”
The Kansas factory will rival Panasonic’s operations in Tesla’s Nevada Gigafactory, potentially doubling the company’s domestic EV battery manufacturing capacity. This is definitely an important step for the U.S., said Donna Ginther, an economics professor and director of the Center for Science, Technology & Economic Policy at the University of Kansas.
“Having that production capacity in the [U.S.] is critically important to bringing the cost down of having those electric vehicles,” she said. And increasing domestic manufacturing could also help avoid some supply-chain disruptions.
“This was the biggest and boldest candidate Kansas has ever gotten in my 20 years of living in the state,” she said, adding that this could spur other states to put together more aggressive incentive packages to woo companies. Hughes agrees and thinks this will put Kansas on the map in the global electric vehicle industry, making it a “destination point” for raw materials, as well as complementary industries such as battery recycling.
“I do think some of the states are starting to see that if they don’t make bold moves, they’re going to miss out entirely on this switch over to electric vehicles,” Hughes said. “Those who move early on this will benefit most.”
Some, Hughes said, think the battery industry is going to become “the new oil.” He said it’s hard to disagree with that, and he is optimistic the project will attract talent to the state. “There’s something about this industry that just captures the imagination.”
But it wasn’t easy to make the project happen, he said. “If a state is trying to get something like this passed, and they just can’t communicate across party lines, they’re probably going to fail,” he said. “I would encourage other states that are trying to do this to keep the discussions civil — be transparent, be authentic and be realistic.”
