OSCEOLA — In February 2022, Envirotech Vehicles Inc. said it expected its first U.S. manufacturing plant to have “full-blown manufacturing” of electric vehicles within 12 to 18 months.
More than a year later, that timeline has been pushed to the spring of 2025. That projection is the third adjustment executives have made.
“What happens between now and then?” Sue Emry, Envirotech’s executive vice president, asked. “God only knows.”
Today Envirotech’s 580,000-SF building, once a Fruit of the Loom production facility a few minutes from downtown Osceola, is still mostly empty, the factory floor dotted with a smattering of different types of electrified vehicles imported from China.
“We are very honest that we are a final assembly manufacturer,” Emry said of the company’s current operations.
A purchase agreement for the facility between Envirotech and the city of Osceola is not finalized because of inspection delays, Emry said. Complicating that effort are challenges finding available contractors for renovations. Then there is the sourcing of the equipment needed for assembly.
“Between construction and the sourcing and installation of equipment, we are looking at 18 to 24 months,” Emry said during a recent visit Arkansas Business made to the company’s headquarters.
“It is going slower than anticipated,” Emry said. “I thought we would be the legal owner of the building already. Arkansas is not California, which is a blessing, but it is a much slower pace with regards to getting things done and finished and moving on.”
In February of last year, a few days after the EV maker said that it would open a manufacturing facility in the state and move its headquarters from Corona, California, to Arkansas, it said the Osceola plant would deploy two production lines employing about 800. The company put the total cost of the operation at more than $80 million over five years.
Envirotech is one of two publicly traded EV companies in Arkansas.
Canoo Inc. announced in 2021 that it would move its headquarters and some low-volume manufacturing to Bentonville. Both companies are players in an increasingly competitive landscape as more EV makers enter a sector bolstered by generous tax breaks, grants and other incentives for environmentally friendly vehicles.
Envirotech is one of a small but growing number of tech businesses opening in America’s heartland. The company’s strategy is playing out amid a national push to relocate manufacturing out of China, and a movement to revive rural economies where supply chains that once existed are no more and skilled labor forces could take years to rebuild.
“It was just like a massacre of jobs,” Mississippi County Economic Development president Clif Chitwood said of the factory closings in the region, which contributed to a loss of 9,000 direct jobs in the 1990s and early 2000s. “It was just awful.”
Jobs may slowly be coming back. Between 2019 and 2021, tech employment was the second-fastest growing occupation in rural America, according to the U.S. Census Bureau’s American Community Survey.
Nevertheless, less than 5% of venture capital goes to rural areas, said a study from the Center on Rural Innovation, which also estimates there are at least 80,000 missing tech jobs in industries, like manufacturing, in places like the Arkansas Delta.
Envirotech selected Mississippi County because of its proximity to shipping routes, namely the Mississippi River.
The EV maker hopes to tap into northeast Arkansas’ steel industry, one of the largest in the U.S., to eventually source parts. Arkansas’ nascent lithium industry near El Dorado was also a selling point as EV makers scramble to buy batteries in the U.S. to qualify for subsidies that require more American-made components.
“When I get interviewed, it’s like, ‘Why Arkansas?’” Emry said. “I have to start with the whole spiel about the location to the port [on the Mississippi River], the minerals, how there is everything to make a vehicle. I was shocked to find out that Arkansas is one of only three states that does not have a vehicle manufacturer.”
First Quarterly Profit
For the third quarter of 2022, Envirotech reported its first quarterly profit in the company’s history generated by the sale of 37 vehicles to customers in New Jersey that qualified for a zero-emission incentive program there. Envirotech’s third-quarter sales totaled $3.9 million, compared with about $709,000 during the same period in 2021, according to SEC filings.
It sold a little over 80 vehicles in 2022. Some models, like logistics vans, cost about $100,000.
“Looking ahead, legislative tailwinds and incentive programs are a big driver in these early days of what will be a generational shift to electric vehicles,” Envirotech CEO Phillip Oldridge said in the SEC filing. “Going forward, growth may not be linear … but we remain excited about the continued growing interest in and demand for our vehicles as we look out to 2023 and beyond.”
A Break From China
Envirotech is taking a “sail the ship as it is built” approach, tapping into growing demand — and incentive programs — for EVs while waiting to move its manufacturing from China to Osceola.
Meanwhile, it’s also looking to source components from other countries, including the U.S., where it’s competing against a feeding frenzy of electric-vehicle makers vying for the same parts.
Decoupling from Chinese manufacturers remains challenging as many American companies still make auto parts there, Emry said.
“We don’t need to reinvent the wheel right now,” she said. “We could spend a long time and a lot of money to make it perfect, or we can start generating some sales, learn along the way and then make it perfect. That has been our take on it. There is a need in the market now so deliver the need while developing the new technology.”
While moving away from Chinese manufacturing might be hard for smaller EV companies, Envirotech’s approach could work for a firm seeking quick inroads into the fast-growing electric vehicle market, said Anna Stefanopoulou, the William Clay Ford professor of technology at the University of Michigan-Ann Arbor.
“If they want to get started and establish their footprint and they want to be known, why take a big risk?” Stefanopoulou said in a phone interview with Arkansas Business. “It is a good business model when the volume is small. It is cost effective. The changes [Envirotech] makes are minor and depend on their orders, so it is like market demand and specialization to that demand.”
“Economically, it makes sense to do that,” the professor said. “If you had large [sales] volumes it would make sense to do [all of the manufacturing] here.”
Envirotech entered a memorandum of understanding last September to supply 500 electric school buses to Singapore. It’s unclear when that order would be fulfilled, Emry said.
The company announced in February that it had hired a full-time grant writer to help potential clients apply for funding to purchase vehicles. That same month, it announced a partnership with Strategic EV Solutions, an affiliate of electrical solutions provider Curtis Stout Inc. of Little Rock, to drum up clients in the Midsouth.
As part of the deal, Curtis Stout agreed to sell and deliver at least 120 Envirotech vehicles. “Will they hit that number? I don’t know,” Emry said.
During Arkansas Business’ visit to their Osceola headquarters, a handful of employees, including an engineer from Taiwan, worked on the final assembly of vehicles, many of which arrived via trucks that picked them up from the port of Savannah, Georgia.
Emry said Arkansas’ central location has helped speed delivery to customers across the country.
The employees test batteries, replace Chinese tires with American ones, customize truck beds, or reconfigure headlights. Out of the company’s 35 employees, it hired 15 in Arkansas, Emry said, with more to come by the end of March.
Building a Workforce
Finding and training employees is a concern. Envirotech’s engineers travel from China and Taiwan to work on more complex modifications. Finding talent willing to relocate to rural Arkansas for senior positions is challenging.
Emry, and her husband, Chad Emry, who manages Envirotech’s government relations, moved to Osceola with their three children. The couple has purchased five properties, including a residence where the engineers from Asia stay. They’re also involved with a new housing project, one of the first in the area in decades.
“We are all in in Arkansas at this point,” Emry said.
Local planners are working to attract more people to the county. They’ve launched a “Work Here, Live Here” initiative that offers incentives to buy houses. The program is an effort “to win back supervisory management personnel,” Chitwood, the Mississippi County Economic Development president, said.
The job losses, and subsequent population losses that followed, continue to be hard to overcome.
“We had fallen so deep in the hole that we had to climb a long way up to get back to even,” Chitwood said. “I think that is about where we are right now.”
“Workforce training, housing and being able to get talent to relocate to this area is hard,” Emry said. Envirotech is in talks with Arkansas Northeastern College, a two-year vocational school with campuses in Blytheville and Osceola, to launch an electrical vehicle training program, she said.
Nationwide there are shortages of engineers and technicians trained to work on electric vehicles, Stefanopoulou, the University of Michigan professor, said, making it even tougher for outfits like Envirotech to find workers anytime soon.
The University of Michigan, ranked as a top engineering program, may start a master’s degree for EV design this fall, Stefanopoulou said.
“It is really hard to find people,” Stefanopoulou said. “Right now, these educational training programs don’t exist. We are at ground zero of this transition [to electric vehicles]. We are in a huge race. We have to make it in two to three years, otherwise we will not make it.”
Others are skeptical of what Envirotech’s future could be in two to three years when it aims to manufacture a few thousand vehicles in Arkansas.
“A truck company that is going to produce less than 5,000 trucks a year is a truck company that is more likely to go out of business than it is to survive,” said Erik Gordon, a professor at the University of Michigan’s Ross School of Business. Gordon researches technology commercialization and transportation.
“That is a very small number of vehicles to support any kind of assembly plant, to support any kind of service operation, to support any kind of marketing effort,” Gordon said. “And it is a crowded space. There are a lot of other EV delivery van or truck platform companies that are basically running out of cash and will end up out of business within 18 to 24 months.”
Canoo, the other EV maker with operations in Arkansas, announced in February an agreement to sell $52.5 million worth of discounted stock to raise money after burning through cash reserves. The company said the funds would be used for working capital purposes.
Emry said she is aware that the future is uncertain, so the only option is to deliver on the present.
“Here in the facility, right now, I have over 80 vehicles in different stages of production,” she said. “I think that brings you a certain level of recognition where you are not saying, ‘Great, I am going to build them someday, give me a purchase order.’ A lot of times we actually show up with a vehicle.”