With Tesla leading the way, Austin revs up as a key electric vehicle hub
With an influx of companies making electric cars, semi-trucks, motorcycles and even batteries, the Austin area has quietly become a key hub in the electric vehicle industry — and it's doing so just as EV technology is gaining widespread adoption by consumers, according to industry experts.
The region's reputation as an electric vehicle haven might have gotten its biggest boost in July 2020, when Tesla CEO Elon Musk announced the company had chosen a site in southeast Travis County for its newest manufacturing site, a $1.1 billion facility where the company plans to produce its Cybertruck, Semi, Model 3 company sedan, Model Y and batteries.
“It was a growing hub before. Tesla puts us over the edge. Now it's one of the strongest EV communities in the country," said Ed Latson, president of the Austin Manufacturers Association. “It's a really exciting, burgeoning sector.”
Across Texas, the electric-transportation sector employed more than 7,100 people in 1,200 businesses in 2019, to a report by the Austin-based Texas Advanced Energy Alliance. The report predicted the number of workers could grow to more than 13,000 by 2024.
The industry’s activity had been growing in Central Texas already, but after Tesla chose Travis County, growth went from single to double digits, Latson said. The Tesla facility alone could bring more than 10,000 new jobs to Central Texas through 2022, and the sector has added multiple other new companies, dozens of jobs, new vehicles and even seen two companies go public.
“Everybody's talking about Austin as the next place to be and it's easy to look at what's happening here and believe that's true,” Latson said.
Austin-area colleges, talent pools huge draw for companies
Austin's reputation as a tech hub helped draw electric vehicle company Hylliion to Central Texas in 2018, said Thomas Healy, CEO and founder.
Hylliion, which was founded in Pittsburgh in 2015 but is now based in Cedar Park, designs and installs gear that enables commercial vehicles such as semi-tractors and tractor-trailers to run on electricity. It has become one of the Austin area's biggest electric vehicle players.
"When we looked at filling out our executive team we found people that were the strongest fit for us in the Austin area," Healy said. "We thought if we could source talent out of other industries other markets, then bring them into the commercial vehicle automotive space, and they can bring a lot of brand new ideas, different ways of looking at problems, other technologies. They can bring that to Hyliion and ultimately put us in a position where we can make our technology that much more competitive."
The move has paid off. In October, Hyliion went public by merging with a special-purpose acquisition firm, Tortoise Acquisition Group. At the time it raised $560 million in proceeds, which the company planned to use to continue the development and commercialization of its Hybrid and Hypertruck ERX electrified powertrain equipment.
"As we actually start deploying these units out into the real world and they continue to get millions and millions of more miles on our systems, ultimately the goal is when a truck is driving down the highway they're being operated on a Hyllion power train," Healy said.
Amber Gunst, CEO of the Austin Technology Council, said Central Texas gives EV companies proximity to a robust tech scene with hardware and software companies capable of helping in the design processes for electric vehicle companies. Tesla will further act as a catalyst, she said.
“Whether it's something as simple as robotic process automation, or it is something far more advanced, like actually building the initial code for the vehicle, having that community around them, is really what's driving these companies to Austin," Gunst said.
Gunst said the region’s educational infrastructure is also a big draw, with the University of Texas, Austin Community College and Workforce Solutions creating opportunities for workers to get involved in high tech industries.
"We have all the elements an electric vehicle needs. They need batteries and power electronics, software system design," said David Tuttle, a research associate at the University of Texas Energy Institute. "We have those skills here in Austin and we're creating them at UT students and labs and research. And then this is still a great place to live so we'll keep attracting the talent here."
Tuttle said despite not being a traditional automotive city, the diversity of Austin's tech scene offers both needed talent and potential suppliers of key components such as semiconductors, which are already produced in Austin for a range of technologies.
"Electric vehicles are basically rolling supercomputers, or what would have been supercomputers years ago," Tuttle said. "Wherever you have semiconductors, you’re going to have a supply chain for batteries and most power sources."
Consumers have become more open to electric vehicles as the technology has advanced, ranges have gotten better and more vehicles options have become available, Tuttle said.
"I think it's getting easier and easier to own an electric vehicle and that's one of the thrusts," Tuttle said. "I think we're at the start of it. We're starting to see the tipping point where you can make these really compelling vehicles, and we'll start attracting people that haven't been EV drivers in the past."
The acceleration is expected to happen fast. UBS Global Research has predicted electric vehicles will account for 40% of global new car sales by 2030. Big-name manufacturers like Ford have already started to make electric versions of their more popular vehicles, including trucks. General Motors says it plans to only be making electric vehicles by 2035, while Volkswagen estimates that 70% of its sales will be electric by 2030.
'Tip of the iceberg' for electric vehicle companies
Many of the startups in Austin's growing EV hub are focused on vehicles like cars, but Rod Keller, CEO of Round Rock-based Ayro, said other options are seeing a boom in demand, as well.
Ayro, which was founded in 2017, makes purpose-built electric utility vehicles for micro-distribution and last-mile delivery. The company designs and manufactures its utility vehicles for a range of uses and customers, including for universities, restaurants and pharmacies.
Keller said he is focused on building out an ecosystem that will enable Ayro to ship thousands of its vehicles. The plan follows a robust few years for the company. In May 2020, Ayro went public, just months after it doubled its real estate footprint with a 24,000 square-foot space in Round Rock.
Ayro also has made two key pandemic-era deals. In September 2020, it entered into a strategic partnership with California-based Karma Automotive to make "more than 20,000 vehicles" by the end of 2023, Keller said. This year, the company signed a deal with Club Car, which is known for its golf cars and low-speed vehicles, to make electric Club Car Current and Club Car 411 light-weight electric trucks that can be configured with van boxes, side or flatbed options, with an initial order valued at $2 million.
Keller said the electrification market for utility vehicles is ripe with potential. For example, if every university with at least 10,000 students transitioned just 20% of their vehicles to EV, that would equal 100,000 vehicles.
“This is the tip of the iceberg," Keller said. “I think there's a lot of runway left.”
In Keller's view, Ayro and the electric vehicle industry are just getting started, and he said Austin’s emerging electric vehicle hub will be a major player.
“I think many of the people that companies would need to lead entrepreneurial, innovative new early stage companies, they're either here or it's attractive to come here," Keller said.
Another of the region’s EV companies is taking electrification off-road.
Volcon, which debuted in October, makes two-wheel and four-wheel electric off-road vehicles such as motorcycles and utility terrain vehicles. The company has rolled out its first commercial vehicle, dubbed the Grunt, which is an all-electric motorcycle with a 100-mile range, priced starting at $7,995.
CEO Jordan Davis said Volcon's products are already attracting more demand than the company can keep up with.
“We’ve spoken to quite a few dealers around the country in preparation to open that channel, and I've yet to speak to one not interested in our product,” Davis said. “We know it’s going to be big, but we just don’t know how big yet."
For now, Volcon is building its bikes at a temporary production facility in Round Rock, but it is constructing a headquarters on 53-acre property in Liberty Hill which will house the company’s manufacturing, a customer experience center, research and development and a testing facility.
Davis, who joined the company in September, said Volcon sees a lot of advantages to growing in Central Texas.
"The talent pool for this kind of expertise, it's not huge. So it's nice to be in proximity to people who have experience," Davis said.
He said Tesla coming to town has given the EV sector in the region a "big push."
“Even before that, this is the place where huge tech players are have identified the place to put their headquarters, and a lot of that has to do with fantastic knowledge and great engineering programs in the local colleges and tech" he said. "This is just a super-friendly state for a growing company."
How Tesla set the stage for Austin
Dan Ives, an analyst with Wedbush Securities, said Austin is setting itself up to become a global second or third hub for many electric vehicle players, and said he expects the region will gain more attention next year from European and Chinese vendors who could decided to build a presence in the region.
“Tesla moving to Austin was a game-changer move that will bring more EV engineers and battery supply chain players to the 512 area code,” Ives said. “The engineering talent and technology hub of Austin lends itself to pure-play EV names settling in the area.”
Despite the potential competition, Healy said he welcomes Tesla to the area. While more electric vehicle manufacturers in the area means more competition as Hyllion looks to rapidly grow its 150-person team, Healy said overall it's a net positive because it brings more resources into the region.
"As Tesla moves here, electric component suppliers are going to move here as well," Healy said. "For us, that's really positive because now we're closer to our ecosystem of who we work with."
Keller is similarly taking note of Tesla's arrival and looking to one of the region’s biggest tech giants, Dell Technologies, for supply chain inspiration.
Since its early days, Dell has managed its suppliers and expected on-demand parts. Smaller companies don’t have the clout to demand that kind of supply, but Tesla does, Keller said. He said he also hopes Tesla’s presence will necessitate improvements to supply chain and shipping costs.
“I'm going to put many of the same parts of my vehicles that Tesla does. I have a greater likelihood of getting some of those same suppliers to agree to just in time inventory," he said.
Central Texas’ strong high-tech manufacturing industry also means a workforce already equipped to handle the growing electric vehicle market. Latson said despite making different end products, semiconductor factories and an electric vehicle factories require many of the same skillsets and both need workers capable of troubleshooting electronic issues and fixing repair equipment.
Infineon, one of the biggest semiconductor manufacturers in the world, employs about 1,000 people in Austin who are working on automotive chips for electric and other vehicles. The chips the company makes go into a range of purposes for both the vehicles and their charging systems and play a key role in making electric vehicles possible.
Sayeed Ahmed, Infineon's director of the automotive business unit in the Americas, said Austin is in great shape as the automotive world moves towards an electric vehicle revolution.
"For this kind of revolution to happen, you need an ecosystem," Ahmed said. "I think Austin has that. It has venture capital funding and infrastructure, and Austin has done a great job of attracting these high tech companies."
Latson, of the Austin Manufacturers Association, said the local labor market could go through a year or two of growing pains as Tesla moves in and Austin’s existing electric vehicle companies expand in the region. But the companies will be able to quickly move more workers in, train local workers and better fill out the region’s capability, he said.
“I think we’re going to see extraordinary EV growth over the next couple of years, some tied to Tesla, as suppliers and people working directly with them set up some sort of operation here, but I also think we’re going to see the entrepreneurs and small startups come here and be established here as well,” Latson said. “There are so many people with experience in that market. They're going to be the ones driving the next innovation wave.”