Why are international companies backing away from plans to build factories in America? – Dainik Savera Times

“After careful consideration, plans to set up a battery factory in Oklahoma, US, have been abandoned.” Recently, Japan’s Panasonic Corporation, a Tesla battery supplier, announced this news. This is not an isolated case.
This January, South Korea’s LG “indefinitely postponed” its plans to build a battery factory in the US in collaboration with General Motors. In July, Taiwan’s TSMC announced it would postpone the start of production in the US to 2025 due to a shortage of skilled workers. In October, Japan’s Honda announced it was withdrawing from its plan to collaborate with General Motors to make cheaper electric vehicles. Ford has suspended battery production in Kentucky State along with its joint venture with South Korea’s SK On… Starting this year, many internationally renowned companies have abandoned or postponed plans to build factories in the US. In the context of the US government launching a series of incentive measures and subsidy policies to attract companies to invest and build factories, why do they give the opposite “market response”?
For enterprises, when investing and building a factory in a location, they should consider cost-effectiveness, local market and macro environment, as well as local industrial supporting facilities, factor allocation, etc. It is a prudent decision after extensive research and judgment. ,
Let’s first look at production costs. Honda CEO Toshihiro Mibe also said that cost was a significant factor in the company’s refusal to build a factory in the US. Relevant experts pointed out that the US is dependent on imports in the mining and processing of battery raw materials, plus the high costs of energy, land, labor and other factors have increased corporate investment expenditures.
In fact, many US governments have made “re-industrialization” a policy priority in the hopes of bringing jobs back to America. The current government has launched a series of subsidy and tax relief policies. However, some analysts pointed out that America’s cost constraints, lack of coherence in industrial policies, and the extreme tilt of the economic structure toward the financial industry have made it more difficult to revive the manufacturing industry.
Let’s look at investment income. Companies certainly expect a strong consumer market to reap huge returns. However, in October this year, Panasonic announced that demand for high-end electric vehicles in North America is slowing. Moreover, the supporting infrastructure in the US has also poured cold water on consumers. Market Research Agency JD According to a report by Power, many public charging piles in the US are faulty. In 2022, the charging failure rate of American electric vehicle owners will reach 1/5. Low cruising range, high electricity prices, and an unstable power grid all cause American consumers to complain. It’s no surprise that electric vehicles accounted for only 7.9% of the US auto market in the third quarter.
More importantly, for companies, when they invest money, they expect a stable macroeconomic and business environment that is conducive to long-term growth. According to US media reports, negotiations between South Korea’s LG and General Motors have reached an impasse. Because LG executives are concerned about the US overall economic outlook.
Recently, the Federal Reserve lowered its forecast for US economic growth in 2024 by 0.1 percentage points to 1.4%. The US debt burden has reached a record high, inflation remains high, and frequent strikes in the manufacturing industry have companies worried about the US business environment. Uncertainties such as sharp changes in US monetary policy and unexpected political events have also discouraged companies.
Not only this, America has also politicized economic issues, which has weakened corporate confidence and enthusiasm. For example, new rules in the “Inflation Reduction Act” stipulate that starting in 2024, electric vehicles produced in the US cannot contain battery components manufactured or assembled in China. But currently China’s electric vehicle batteries account for more than half of the global market, and the supply of some battery materials can meet 90% of demand. It is not so easy to “break and cut ties” with China. Thousands of car dealers in the US recently signed a letter calling on the government to stop “radical” electric vehicle development plans.
(Courtesy-China Media Group, Beijing)