Executives around the world are viewing Kentucky as an important partner for doing business. The proof is in the numbers. Foreign direct investment in Kentucky is climbing and includes 511 foreign-owned facilities around the state. Those facilities represent 32 nations and together employ 112,000 people, according to the Kentucky Cabinet for Economic Development. Foreign direct investment trackers point to Kentucky’s reasonable cost of doing business, its dependable workforce, convenient location, and strong shipping and logistics networks as the top reasons foreign countries are investing billions of dollars around the state.
David Hahm (middle left), current Head of North America Public Affairs with SK On, shakes hands with Kentucky Governor Andy Beshear at BlueOval SK Battery Park in Glendale, Kentucky, on December 5, 2022.
The most remarkable foreign investment taking shape in Kentucky is located just outside the Hardin County community of Glendale. Springing up on farmland along Interstate 65 are the two largest battery manufacturing plants in the world. The nearly $6 billion project is a joint venture between South Korea’s SK Innovation and the Ford Motor Company. When the plants are completed, an estimated 5,000 people will build batteries for Ford and Lincoln electric vehicles. The first of the two plants is scheduled to open in 2025.
Comparing the battery plant project to the arrival of Toyota to Kentucky in the late 1980s, Gov. Andy Beshear called the South Korea-Ford joint project “a game-changer. A state-changer.”
Kentucky currently operates economic development offices in Japan and Germany. In his latest budget proposal, Gov. Beshear included funding to operate a third foreign office — not surprisingly — in South Korea.
Toyota is also expanding. It recently announced that it will invest an additional $1.3 billion at its Georgetown manufacturing complex. It will build battery packs and a new electric SUV for the U.S. market.
Other foreign countries that have made significant investments in Kentucky in recent years are iwis (Germany), Champion Petfoods (Canada), T.RAD (Japan), Diageo (United Kingdom), and Faurecia (France).
Mike Clark, Gatton College of Business and Economics professor at the University of Kentucky, sees positivity in these developments. “These foreign countries partner up their capital with our labor force,” said Clark. “That increases our productive capacity and is generally a good thing for our economy.”
In an extensive, detailed publication produced in recent months by the Kentucky Cabinet for Economic Development called “Kentucky: Where Tradition Meets Innovation,” Gov. Beshear was interviewed about Kentucky’s economic activity and its involvement in the emerging electric vehicle sector.
“Our EV investments are thrilling,” he said. “The whole state, from east to west, is excited about a bright future knowing there are likely still hundreds of thousands of jobs to come with the supply chain and maybe even more battery manufacturers.”
South Korea’s SK Innovation and Ford Motor Company have partnered to build two Kentucky-based BlueOval SK plants to manufacture batteries for Ford F-150 Lightning and other Ford/Lincoln brand electric vehicles. The joint venture represents a $5.8 billion investment.
Beshear noted how Kentucky already has thousands of good automotive jobs but that the state needed to think about what is next. “We had to get a large part of the electric vehicle battery manufacturing markets to ensure those automotive jobs would continue into the future,” he said. “What we have seen in the shifting energy industry is if you are not on the cutting edge, it’s not just about winning, it is what you lose if you are not part of that next generation.”
There are questions about whether demand for EVs can sustain itself. “The path from gas-powered vehicles to EVs is uncertain. To see it take off, we must overcome obstacles, specifically infrastructure, and that takes time,” said Clark. The professor believes that demand for EVs comes from “early adopters” — particularly people concerned about the environment. Future demand must be broader. “These cars are best for people who easily have the ability to recharge their batteries, like commuters and people running errands,” Clark said. “There is uncertainty about how we get beyond that and when. Auto manufacturers are positioning themselves to take advantage of shifting demand.”
That demand will depend on infrastructure, battery capacity, distance and range, and the availability of charging stations.
Besides foreign companies operating in Kentucky, the export of the state’s goods and services is also highly valued by international partners and customers. Kentucky’s export activity topped $33 billion in 2019 as international sales opportunities grew, according to the Cabinet for Economic Development. The top Kentucky exports included aerospace products and parts ($7.9 billion), pharmaceuticals and medicines ($3.3 billion), motor vehicles ($2.7 billion), resin, rubber, fiber, and filament ($1.3 billion), and motor vehicle parts ($1.1 billion). Currently, the leading export destinations for Kentucky products are, in order, Canada, Mexico, the United Kingdom, China, and France.
UK’s Clark says Kentucky is fortunate to have made the switch in the 1990s from partial reliance on low-paying textile jobs, which ultimately went to foreign countries, to “local jobs that relied on advanced manufacturing of products that are much more complicated, that require higher skilled workers, and which are in demand across the globe,” said Clark, who added that those workers will command better pay from those types of jobs.
Clark says Kentucky must guard against relying on any one sector of the state’s economy, such as manufacturing. “We have a strong manufacturing sector but may be susceptible to disruptions to the economy that are more focused on manufacturing,” Clark said. “You want to have a diverse economy because if you have a downturn in one sector, you might have other important sectors that are less affected.” Clark said he would be more concerned if Kentucky relied too much on sectors with lower-paying jobs like retail and the leisure and hospitality industries, but that is not the case.