Industry Spotlight: Spurring Increased Investment

For almost 17 years, a significant share of Georgia’s economy has been tied to the fate and decisions of a single company: South Korea’s Hyundai Motor Group. With its 2006 decision to build a $1 billion, state-of-the-art Kia automobile assembly plant in West Point, and its 2022 decision to build an even more forward-looking electric vehicle (EV) assembly plant in Bryan County, Hyundai and its suppliers opened up a new sector for the state’s economy and expanded job opportunities for its residents.

Interest in Local Supply Chain: Thomas Kurfess, professor and executive director of the Georgia Tech Manufacturing Institute Photo by Matthew Odom

Since its first car rolled off the assembly line in 2009, Kia Georgia’s investment in the 2,200-acre West Point site has grown to $1.8 billion. It now produces 340,000 K5, Sportage, Sorento and Telluride vehicles a year, employs nearly 3,000 people working in three shifts around the clock and claims to have spurred 14,000 plant and supplier jobs in the region – well above original projections.

In Georgia, Troup and Harris counties have historically been the preferred choices for supplier locations, especially for Kia’s 39 Tier 1 suppliers, which provide the primary components for the production process.

The Tier 1 group is comprised mostly of “just-in-time” suppliers that need to locate their physical operations within a few miles’ radius of the Kia plant. About 70% are subsidiaries of South Korean companies, notes Stuart Countess, president and CEO of Kia Georgia.

Kia’s first suppliers included some that already served the then-new Montgomery, Ala., plant of Hyundai, their joint parent company, Countess says. In 2013 the Alabama Department of Commerce listed 106 Kia suppliers and vendors on its website, with many concentrated along the I-85 corridor linking West Point and Montgomery.

Since then, the number of suppliers and the complexity of the components they manufacture in Georgia has grown. West Point, a city that straddles both Harris and Troup counties, hosts Kia suppliers, including:

• Hyundai Mobis – the self-described “parts and service maker” for the Hyundai group
• Hyundai TRANSYS Georgia Powertrain – automatic transmissions
• Hyundai Transys Georgia Seating System
• Hamco America Inc. – wheel and tire assembly
• Daehan Solution Georgia – noise insulation and trim parts
• Daesol Material Georgia – automotive fiber padding for Daehan
• Adient – automotive seating
• JinTech – interior parts and accessories.

LaGrange in Troup County boasts, among others:

• Sejong Georgia – muffler and exhaust systems
• GLOVIS Georgia – integrated logistics services
• Sewon America – auto body parts
• Seoyon E-Hwa Interior Systems – seats and interior and exterior parts
• Daeha-America Corp. – engineering plastics.

The complexity of Kia’s supplier base was brought home by the COVID pandemic, which disrupted global supply chains and challenged management of suppliers. Even though large-component assembly is done in West Point, many materials and parts are imported from elsewhere, including from Canada, Mexico and abroad, in states and nations with different COVID-related restrictions. “We had to closely coordinate to understand our supply chain and the complexity of trying to manage its components,” Countess says.

From Gas to Electric

Kia Georgia currently makes only gas-powered internal combustion engines (ICE) but that will soon change. The company announced in April that the West Point plant will begin assembling an advanced electric vehicle, the EV9, in 2024. It will be the first Kia EV to be assembled locally. Kia has not yet stated how the workforce will change, how suppliers will be affected or what the new investment will total. However, it is clear all will be significant.

“Kia Georgia is proud to have the assignment of building Kia’s first EV produced in North America,” says Countess. “The addition of the EV9 represents a new chapter of opportunity and growth of our facility, as well as a bold step for the Kia brand in being a leader in the future automotive industry.”

At the same time, it will create new challenges by introducing another powertrain technology into Kia’s existing manufacturing system, Countess notes. “The EV launch will create new processes that are unique to the model and will require changes in others as we add new tooling and equipment to support the integration of the new technologies. For example, an EV does not require a fuel tank or circulation system, so changes related specifically to the EV will be necessary in those process areas.” The company will also have to adopt new testing and validation processes to maintain its high-quality standards.

Meanwhile, the plan remains for Hyundai’s $5.54 billion EV manufacturing “Metaplant” in Bryan County to produce EVs for its Hyundai, Genesis and Kia brands. It will employ 8,100 workers.

Once the plant was announced, the first wave of EV suppliers quickly followed. First up was parts supplier Joon Georgia with a $317 million investment near Statesboro in Bulloch County that will create 630 jobs. Soon after, Ecoplastic Corporation, which makes automotive interior and exterior plastic parts, announced plans to build a $205 million facility in Bulloch County and hire 456 workers.

Three West Georgia suppliers quickly indicated they will increase their Georgia presence. Hyundai Mobis is building a $926 million Bryan County plant generating 1,500 jobs making EV power systems and integrated charging-control units. Seoyon E-Hwa will create 740 jobs at a $76 million plant in Chatham County and Sewon America is investing $300 million in an Effingham County facility that is expected to generate 740 jobs.

Chatham also won a $67 million, 400-worker investment from South Korea’s PHA, a global auto parts manufacturer.

One supplier that will not be located on-site is Hyundai’s EV battery plant. Instead, the factory will be located in Bartow County – closer to Kia and Montgomery than to Savannah. The $4 billion to $5 billion facility is a joint venture with SK On, a leading South Korean EV battery maker and subsidiary of SK Innovation. SK On’s SK Battery America plant in Commerce was Georgia’s first EV battery plant. The new plant in Bartow is expected to create 3,500 jobs and begin operating in 2025.

Thomas Kurfess, a professor at Georgia Tech and executive director of the Georgia Tech Manufacturing Institute, sees interest among automobile manufacturers in moving toward a local supply chain to alleviate some of the risk from global supply chains. He believes suppliers that do not make the necessary “pivot” toward making components for EVs instead of internal combustion engines will lose out to those who do.

In January, Hyundai’s senior executives held a town-hall meeting with staff in Korea to explain company strategy, including a transition to electrification and to software-centered systems. (Software-centered systems, or software-defined vehicles, can be updated with new functionality similar to how we regularly update our smartphones.) They set a goal, by 2040, of offering only zero-carbon EVs in major markets and of producing “flawless” software-defined vehicles (SDVs). They announced that, as of 2025, Hyundai-Kia will apply over-the-air software update functionality to all its EV models.

Asked if these goals would also apply to the Bryan County Metaplant, a company spokesperson in Korea said only, “We are currently focused on building world-class electric vehicles.”

However, Kurfess said it would make sense. “If we are talking about zero-carbon emissions, as we get more energy-efficient electric motors and better storage capacity, everything that is being developed is moving in that direction. As for software-defined vehicles, much of the EV cost is going to be in software. In the future, a ‘recall’ will be a software update to the system.”

To Kia’s Countess, the main challenge to EV acceptance is putting in place the infrastructure to address consumers’ concerns about availability of charging stations and time needed. “It needs a change in lifestyle, behaviors and patterns,” Countess says. “We will get there, but I’m not really certain what the timeframe is.”

Federal, state and utility officials are working to address these concerns. Among other measures, the Biden administration plans to install 500,000 EV charging stations across the U.S. by 2030, setting aside $5 billion in formula funding for states and $2.5 billion in competitive grants to help cities, tribes and states build them. It has also released new domestic manufacturing standards for federally funded EV chargers. The Georgia Department of Transportation will deploy those federal funds to build charging stations to fill gaps along interstates in areas that meet its criteria, according to its EV Infrastructure Deployment Plan states.

The state has attracted the North American headquarters of Heliox, a Netherlands-based company that makes e-mobility charging systems. The U.S. Department of Transportation requires final assembly in the U.S. for new charging stations to be eligible for federal funds.

Georgia Power is also playing a role with its ownership of about 3% of the 1,700 charging stations in Georgia. Bentina Terry, senior vice president of customer strategy and solutions for Georgia Power, says the company builds public charging infrastructure where necessary, such as in low-income or underserved areas.

Terry says the company’s primary role is to encourage the use of EVs by individuals, developers, company fleets and industry through incentives, rebates and guidance. “Our motto is enable, empower and educate,” she says.

Without Hyundai’s initial investment in West Point, it seems unlikely the automobile industry in Georgia and the thousands of jobs it has spurred in its plants and those of its suppliers would be flourishing as they are.

And it seems to justify the Georgia Department of Economic Development’s recruiting philosophy. “Georgia has consistently targeted entire industry ecosystems, and the electric mobility and automotive industries are examples of how successful these efforts can be. We approach each opportunity with the knowledge that one investment often spurs further investment – directly or indirectly,” says Kristi Brigman, deputy commissioner of Global Commerce.