According to various news reports, ZAP and their partner Integrity Automotive announced that initial construction has started on a facility in Franklin, Kentucky for the production of electric vehicles. ZAP is a minority stakeholder in the venture. Randall Waldman, Integrity’s CEO expects production at the one million square foot facility to start in approximately one year with a work force of 1,250. While plans are still in the development stage, Integrity management states that the plant will make electric buses in addition to ZAP’s product line. A possible scenario is to have the facility replace all of the production from ZAP’s China facility. Management cited the logistics expense of shipping vehicles from China to California to the East Coast as a factor in building the facility. ZAP had previously made vehicles in the US but lower labor costs in China made manufacturing overseas more cost effective. Government incentives are making US based manufacturing more feasible.

Integrity Automotive is reportedly investing $125 million in the facility and quickly garnered government assistance which came from all levels including:

• $84 million of tax-exempt industrial revenue bonds for construction of the plant from city an county governments
• $48 million in tax incentives from the state based on the company’s commitment to create 4,000 full-time jobs within the first four years
• An executive order from Kentucky’s governor permitting the use of low-speed vehicles on Kentucky highways with a posted speed limit of 45 miles-per-hour or less.

While the production will serve the global market, in some respects, the shifting of production from China to the US is a reversal of the globalization trend I have been seeing in the market in general. I followed up the story with a call to ZAP to understand more about the situation. According to ZAP, the venture came together very quickly and the details of what vehicles will be produced and how many are still being worked out. Like some other electric vehicle manufacturers ZAP is reporting strong sales increases. In the quarter ending September 30th, 240 vehicles were sold including 121 in September compared to just 80 vehicles in the 3rd quarter last year. Most of the vehicles are sold in the US to consumers as well as some municipalities and are primarily the Xebra truck model. The company has increased their headcount by 30% this year and recently opened up a $10 million line of credit to fund expansion. The company is also planning on adding an NEV to their product line.