Executives around the world look to Kentucky as an important partner for doing business. The proof is in the numbers. Foreign direct investment in Kentucky is growing and includes 511 properties owned by foreign nationals in the state. Those facilities represent 32 nations and collectively employ 112,000 people, according to the Kentucky Office of Economic Development. Foreign direct investment trackers cite Kentucky’s reasonable cost of doing business, its reliable workforce, convenient location and strong transportation and logistics networks as the main reasons foreign countries invest billions of dollars in the state.
The most notable foreign investment taking shape in Kentucky is located just outside the Hardin County community of Glendale. The two largest battery manufacturing plants in the world are rising on farmland along Interstate 65. The nearly $6 billion project is a joint venture between South Korea’s SK Innovation and Ford Motor Company. When the plants are completed, about 5,000 people will produce batteries for Ford and Lincoln electric cars. The first of the two plants is scheduled to open in 2025.
Comparing the battery plant project to Toyota’s arrival in Kentucky in the late 1980s, Gov. Andy Beshear called the joint South Korean-Ford project a “game changer.” State Changer.”
Kentucky currently operates economic development offices in Japan and Germany. In his latest budget proposal, Governor Bescher included funding to operate a third foreign office – not surprisingly – in South Korea.
Toyota is also expanding. It recently announced it will invest an additional $1.3 billion in its Georgetown manufacturing complex. It will produce batteries and a new electric SUV for the US market.
Other foreign countries that have made significant investments in Kentucky in recent years include iwis (Germany), Champion Petfoods (Canada), T.RAD (Japan), Diageo (UK) and Faurecia (France).
Mike Clark, a professor at the Gatton College of Business and Economics at the University of Kentucky, sees a positive in these developments. “These foreign countries are pooling their capital with our workforce,” Clark said. “It increases our production capacity and is generally a good thing for our economy.”
In an extensive, detailed publication produced in recent months by the Kentucky Office of Economic Development, called “Kentucky: Where Tradition Meets Innovation,” Governor Beshear was interviewed about Kentucky’s economic activity and its involvement in the emerging electric vehicle sector.
“Our investments in EVs are exciting,” he said. “The entire country, from east to west, is excited about the bright future, knowing that there are probably hundreds of thousands of jobs still to come with the supply chain and perhaps even more battery manufacturers.”
Bescher noted that there are already thousands of good auto jobs in Kentucky, but the state needs to think about what’s next. “We needed to get a large share of the electric vehicle battery manufacturing markets to ensure that these automotive jobs continue into the future,” he said. “What we’ve seen in the changing energy industry is that if you’re not on top, it’s not just about winning, it’s about what you lose if you’re not part of the next generation.”
There are questions about whether demand for EVs can be sustained. “The path from gas-powered vehicles to electric vehicles is uncertain. To see it take off, we have to overcome hurdles, particularly infrastructure, and that takes time,” Clark said. The professor believes demand for EVs comes from “early adopters” — especially people concerned about the environment. Future search should 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 will move beyond this and when. Automakers are positioning themselves to take advantage of changing demand.”
This demand will depend on infrastructure, battery capacity, distance and range, and availability of charging stations.
In addition to foreign companies operating in Kentucky, the state’s exports of goods and services are 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 Office of Economic Development. Kentucky’s top exports include aerospace products and parts ($7.9 billion), pharmaceuticals and drugs ($3.3 billion), motor vehicles ($2.7 billion), resin, rubber, fiber and thread ( $1.3 billion) and motor vehicle parts ($1.1 billion) . Currently, the leading export destinations for Kentucky products are Canada, Mexico, the United Kingdom, China and France.
UK’s Clark says Kentucky is fortunate to have made a shift in the 1990s from a partial reliance on low-wage textile jobs that end up going overseas to “local jobs that rely on advanced product manufacturing , which are much more complex, which require more highly skilled workers, and which are in demand around the world,” said Clark, who added that those workers will be better paid in those types of jobs.
Clark says Kentucky should guard against relying on any sector of the state’s economy, such as manufacturing. “We have a strong manufacturing sector, but we may be susceptible to disruptions in an economy that is more focused on manufacturing,” Clark said. “You want to have a diverse economy because if you have a downturn in one sector, you may have other important sectors that are less affected.” Clark said he would be more concerned if Kentucky relies too much on sectors with more low-paying jobs such as retail and the leisure and hospitality industries, but this is not the case.
