South Carolina already more than doubles the national average when it comes to the impact automobile manufacturing has on the state’s economy.
But last week’s decision by Volvo Cars to build its first U.S. plant in Berkeley County will further boost the state’s standing to $4.8 billion in annual economic output, according to credit-rating firm Moody’s Investors Service.
The $500 million plant will anchor the Camp Hall Industrial Campus near Ridgeville, with construction starting later this year.
The Volvo plant — along with Daimler AG’s announcement in March that it will build a $500 million facility in North Charleston to build Sprinter vans — “further strengthens South Carolina’s already healthy auto manufacturing sector,” which accounts for 3.1 percent of the state’s gross domestic product compared to the national average of 1.5 percent, according to Moody’s.
“Volvo’s announcement comes as many global carmakers are building new factories in Mexico rather than the U.S. to take advantage of lower labor costs and low export costs through free trade agreements,” Moody’s analyst Edna Marinelarena said in the report. “However, South Carolina is bucking this trend with auto manufacturing growth that has outpaced the national rate since 2008, in part owing to its low unionization rate, willingness to provide economic incentives and attractive transportation infrastructure.”
Bobby Hitt, the state’s commerce secretary who with Gov. Nikki Haley dined with Volvo Car Group CEO Hakan Samuelsson this week, said his agency has made a strategic decision to target the auto sector.
“We wanted to look at automobile manufacturing because sales in the industry were back to their 2007 and 2008 levels, and the projections are for pretty strong growth over the next five years, which would require new capacity,” said Hitt, a former executive at BMW’s Upstate plant. “So we were trying to look at those companies we thought would be looking for capacity expansions and growth, and how we might get in front of them. We put a strategy together for that and along came Volvo Cars. It was pretty remarkable timing for us.”
A study by College of Charleston economist Frank Hefner shows the Volvo plant will generate $11.3 million in annual state and local taxes as construction winds down in 2017. At full production of 100,000 vehicles per year, no later than 2024, the plant will generate nearly $72.4 million in annual taxes. That would double if Volvo builds a second production line at the site, which will depend on market conditions.
In addition to increased tax revenue, Berkeley County will provide water and sewer service to the Volvo factory, which will generate $10 million in impact fees and more than $1.3 million per year in additional operating revenue, according to the report.
The county has offered Volvo an agreement that replaces the plant’s property taxes with a lower, negotiated fee, so the county will primarily benefit from sales taxes generated by the plant and its workers.
Moody’s said the Volvo plant, which will start with 2,000 workers and may double the number by 2028, will have a positive impact on credit ratings for both the county and the state, which already have the analyst firm’s highest-quality, lowest-risk ratings.
BMW’s expansion, along with announcements from Volvo and Daimler, which will create 1,360 jobs, have “South Carolina’s employment recovery ... outpacing that of the nation,” Marinelarena said in the report, adding that Moody’s “deems the state one of the top performers in employment growth in the South.”
BMW’s plant in Greer accounts for most of South Carolina’s auto manufacturing output, with 8,000 workers and a $1 billion expansion plan to ramp up production to 450,000 vehicles per year from its current 300,000.
South Carolina ranks No. 1 in the nation in exports of passenger automobiles, with $9.2 billion worth exported through the Port of Charleston. All told, South Carolina’s automobile industry has a $27.1 billion annual economic impact, according to the state Commerce Department, with more than 57,000 people employed by the industry’s manufacturers and suppliers.
Reach David Wren at 937-5550 or on Twitter at @David_Wren_