In 2019, the Michigan Strategic Fund granted Akasol $900,000 after the battery maker agreed to create 90 jobs.
A Michigan electric vehicle manufacturer, which received $900,000 as part of a state grant six years ago, will face no financial penalties for closing two Detroit-area plants and moving production to South Carolina.
Akasol, a German subsidiary of BorgWarner, will be closing two plants in Hazel Park and Warren and laying off 188 workers by April 14, the parent company announced last month. The plant operations will be relocated to one facility in Seneca, S.C. It aims to “affect the fewest number of people possible” with the move, a BorgWarner spokesperson said.
Despite moving out of state, Akasol will keep its taxpayer-funded money.
In 2019, the Michigan Strategic Fund granted Akasol $900,000 after the battery maker agreed to create 90 jobs. It was initially set to receive a $2.24 million performance-based grant for creating 224 jobs, but the financial award was reduced in accordance with the reduced number of new jobs.
Akasol will not face any clawback provisions for relocating to South Carolina because it met the minimum hiring requirements and retained those jobs through 2023, according to Michigan Economic Development Corporation Communications Manager Otie McKinley.
The Michigan Economic Development Corporation, which works with the public and private sectors, spearheaded the Michigan Strategic Fund to attract millions of dollars in investment to the metro Detroit area six years ago. The plan was formed during Governor Gretchen Whitmer’s first year in office.
One day before BorgWarner’s notice to Akasol’s employees, Whitmer proposed increasing the state’s corporate income tax from 6 percent to 8 percent as part of a $3 billion vision to fund road and bridge repairs. The tax hike would put enormous pressure on businesses within the state, according to business officials.
“This increase penalizes the entire economy and creates a new challenge for doing business in Michigan,” the Detroit Regional Chamber told MLive. “While the Detroit Regional Chamber thanks Whitmer and Speaker [Matt] Hall for seeking a long-term solution for road funding, that conversation needs to focus on user fees instead of giving more reasons to do business elsewhere.”
The announcement’s timing suggests Akasol decided to leave the state because of the increased business tax, many details of which remain unknown. South Carolina’s corporate income tax is 5 percent.
Akasol, which creates lithium-ion batteries for electric and hybrid vehicles, was one of several battery makers that Michigan supported with taxpayer-funded business incentives in recent years. Some of those same companies, however, are rolling back or canceling their plans in Michigan due to decreased demand for electric vehicles and federal policy changes.
With a new president comes less federal support for electric vehicles and green energy, both of which the previous administration prioritized.
Shortly after taking office again, President Donald Trump signed an executive order eliminating the Biden-era electric vehicle “mandate” that sought to convert half of all new vehicles to electric by 2030 in order to slash greenhouse gas emissions from conventional vehicles in the coming years.
Federal tax credits for electric vehicle production and purchases are expected to be reduced or eliminated under the Republican-controlled legislature. Because those tax credits were a prominent feature of the Inflation Reduction Act, Congress would need to pass new legislation to reverse course.
Last month, Senate Majority Whip John Barrasso (R., Wyo.) introduced a bill to repeal the $7,500 tax credit for new electric vehicle purchases and end the $4,000 tax credit for used electric vehicles, among other provisions. The GOP-sponsored bill is named the Eliminating Lavish Incentives to Electric (ELITE) Vehicles Act.
Furthermore, Senator Deb Fischer (R., Neb.) reintroduced a separate bill to impose a new $1,000 fee on electric vehicle purchases in order to make those owners help pay for roads and bridges, like owners of gas-powered vehicles already do. The $1,000 fee outlined in the Fair Sharing of Highways and Roads for Electric Vehicles Act would roughly equal the federal fuel taxes.
If enacted, these proposed bills would end the Biden administration’s federal incentives for electric vehicle producers and owners.