Inside Arizona’s push to become an electric vehicle hub
Jim Maury may not be as famous as Elon Musk, but the two do have something in common: They both run electric vehicle companies.
“He’s a pioneer, and really pushed the envelope and I give Elon a lot of credit, but we’re all learning, you know, this is a new space,” he said.
Maury is the president and CEO of Zero Electric Vehicles in Tempe, a company building kits to convert gasoline vans into electric vehicles and, one day, it hopes to build its own electric car. Maury is growing his company here with hopes of participating in what he calls the “EV Valley.”
Arizona has drawn national attention recently thanks to Lucid Motors, Nikola Corp., ElectraMeccanica and Local Motors all choosing to build their EVs in the state.
Yet some observers think — or hope — that this is just the beginning.
Electric vehicles offer Phoenix a chance to define its technological prowess, to move into the top echelon of American tech hubs and pave the way in electrification. The opportunity is obvious — EVs account for less than 3% of new car sales in the U.S. in recent years, according to a recent Pew survey — but wrestling control away from traditional vehicle manufacturing hubs won’t be easy.
The presence of international chipmaking giants Intel and Taiwan Semiconductor Manufacturing Co. Ltd. will help by ensuring a strong supply of advanced manufacturing talent in the area and these large enterprises are flanked by smaller companies and universities in the Valley that together make up an ecosystem ripe for technological collaboration.
Take for example, Everspin Technologies (Nasdaq: MRAM), a computer component maker in Chandler recently announced that some of its tech would end up in the Air sedan, the first vehicle being produced by California-based Lucid at its plant in Casa Grande.
“We want the EV collaboration to happen here in Arizona,” Zero Electric Vehicles’ Maury said. “I think we can continue to build on that and really coin the phrase, EV Valley. I think Arizona is a great place for it.”
Some of the pieces are falling into place: Battery recycler Li-Cycle is building in Gilbert, EV parts producer UACJ Whitehall is setting up shop in Flagstaff and the state has long been home to proving grounds where automakers test their tech (including EVs) in the state’s signature heat.
That heat also means that the state is home to lots of solar panels, another industry that has a vested interest in improving battery technology.
“There’s a reason that everybody’s in Detroit, right? It’s been 120 years of developing that ecosystem in and around the Michigan area,” Maury said. “I’d like to try to do the same here in Arizona.”
Phillip Pipkins, Tempe-based vice president of technology banking at Silicon Valley Bank, also believes that the Valley could be home to a reincarnation of Detroit, but he doesn’t want the state to get ahead of itself.
“Arizona is a top-tier marketer,” Pipkins said. “I’m forced to be data oriented. So I always want to look at the numbers. And most of the time I look at the numbers, Arizona is probably like a third tier (tech hub).”
Pipkins said in terms of market share of technology companies or gross domestic product, Phoenix still has a ways to go when compared to places like San Francisco, Boston, New York, Austin or Miami. But Pipkins, and the rest of the people interviewed for this article, see an opportunity for EVs to help Arizona become a bona fide tech hub.
What’s more, Pipkin told the Business Journal that, despite the EV sector, there’s another viable path for the Valley to eventually achieve tier one tech status: the fintech sector.
Changing the model
In the past century of automotive history, large original equipment manufacturers (OEMs) have dominated the car world and they continue to shape how and where electric vehicles will be produced. For example, existing General Motors plants in Ohio and Tennessee will soon get new battery plants nearby.
The shift to EVs represents an opportunity for change, first internally with the technology propelling the vehicles but also for new companies to enter the market and reshape the ownership process along the way.
Like ZEV in Tempe, Atlis Motors, an EV startup in Mesa, is hoping to change the way that cars have traditionally been made and brought to market.
Both ZEV and Atlis are building their own chassis (often called a ‘skateboard’) that they will then turn around and sell to other manufacturers who will build out vehicles atop these Arizona-built frames. These two startups intend to sell their chassis, but also build out their own vehicles on their respective platforms.
Atlis is in development of its flagship XT pickup truck, but founder and CEO Mark Hanchett said he aims to bring a holistic vision to mobility and work.
“We built a battery to try and solve a truck problem,” he said. “We look at it as trucks, energy storage, vehicles, equipment, software ecosystems, charging ecosystems, maintenance and service – How do e tie all that together?”
Atlis, unlike other EV producers, is building its own batteries and it started production at its Mesa factory last month. The company will also sell these batteries standalone, which it says can reach full charge in under 15 minutes.
Atlis also hopes to change the car ownership experience; The company will offer a subscription for its customers, where they would pay a monthly fee (starting at $700) that comes with insurance, routine maintenance and unlimited charging. The company also plans to avoid the “completely undesired” dealership process and instead sell its vehicles directly to consumers.
Hanchett, who previously worked at Axon in Scottsdale, said the state has a chance to thrive as a national EV player.
“I do think Arizona has this unique opportunity to really establish ourselves in this particular industry. We’ve got land available to build factories, we’ve got talent available here to build out teams for various different aspects of the business.”
The battery bottleneck
At the heart of an electric vehicle is its battery, but right now the world is simply not producing enough of them as global sales of passenger EVs are expected to more than triple by 2025, according to S&P Global Market Intelligence.
The EV battery market is dominated by a handful of companies, including China’s CATL, South Korea’s LG Chem and Japan’s Panasonic. Much like semiconductors, the vast majority of the world’s EV batteries come from Asia.
The Biden administration is pushing to reshore American manufacturing jobs, including billions in proposed spending to revamp chipmaking plants and a review of the EV battery supply chain, but these efforts are still years away from materializing, assuming any related legislation gets through Congress.
In the current market, smaller manufacturers struggle to compete with the established international OEMs who have the buying power and relationships to suck up all the batteries in the market.
KORE Power in Coeur d’Alene, Idaho, plans to build a 1-million-square-foot lithium-ion battery plant, which it says will be the first American-owned plant of this scale. The company recently named Arizona, along with Texas and Florida, as a potential landing spot for the plant.
Others in the Valley are already building these advanced batteries. EnPower is a lithium-ion battery building startup in Phoenix looking to raise capital and scale up its production in the Valley later this year.
EnPower is in the midst of a 9-month contract with the United States Advanced Battery Consortium, and in collaboration with the U.S. Department of Energy, to assess its battery tech. The Battery Consortium is part of the United States Council for Automotive Research, which is a joint operation between Chrysler, Ford and GM.
The company also recently added Earl Wiggins as its vice president of operations and manufacturing. Prior to joining EnPower Wiggins was senior director of cell production at Tesla Motors.
Annette Finsterbusch, co-founder and CEO at EnPower, said that the company is still in its early phases and that its batteries may one day end up in EVs, drones, eVTOL vehicles or defensive applications.
“There’s so much defense here, there’s so much defense contracting here and aerospace, right? The fact is, these are all applications which are going electric,” she said.
Finsterbusch said that in general making batteries is a low-margin business so the company needs to be opportunistic to survive here in Arizona. It will depend on building a robust tech ecosystem, beyond just software and into deep tech and advanced manufacturing, for the state to become a battery stronghold.
“If we’re going to build up a business for advanced battery technology, we need people that were not able to source here in Phoenix. So we have to move people to Arizona. So how are we going to make this cost effective for us to stay in Arizona?” she said.
“It is our intention to stay here. But we really have to see, you know, how Phoenix, how Arizona, what they want to be and how we fit into that, and what incentives there are for us to do that.”
Work to be done
Pipkins, the Silicon Valley Bank executive, may not be as boundlessly optimistic as others in the Valley, but he’s still hopeful for the region’s advance as a tech hub. He said the biggest issue he sees in the Valley is the mindset.
“Most of the people, especially the angels, they made their money from real estate in Arizona, versus in California, people made their money in the technology space. So you just get a misalignment of expectations,” he said.
Pipkins said that investing in technology may take 10 to 15 years to realize value, whereas turnarounds in real estate tend to materialize much quicker. He said bringing more investors in the state, who will inevitably fund successful businesses, is key to tech growth.
With the right combination of schools turning out talented graduates, a lower cost of living and established tech companies, Phoenix could eventually follow in the footsteps of cities like Boston or Austin that have grown into nationally renowned tech hubs.
“I do think that Phoenix could move into the top tier, I think it’s going to take a lot longer than we were expecting, probably more like 10 years,” he said.