There's a common thread for Canada-based automotive parts supplier ABC Technologies Holdings Inc. when looking at the locations of its U.S.-based operations: they're close to big cities, with talent pools of highly skilled workers who want to be in places that are less crowded and have fewer stresses and costs.
The company has found that in Kyle after its $130 million purchase of Plastikon Industries Inc., a plastic parts manufacturer that supplies Tesla Inc. and Toyota Motor Corp. ABC now has more than 60 employees — a figure that rises during special projects — spread across 200,000-square-feet after also taking space that was previously earmarked for California-based consumer packaged goods company Outer Aisle Gourmet LLC.
"The City of Kyle has been receptive to our growth plans, and the relationships we continue to build help solidify that positive cooperation," said ABC global communications manager Tom Hajkus.
ABC Technologies is part of an emerging cluster of Tesla suppliers in Kyle. Tesla itself has leased more than 1 million square feet in the city, which is located about 25 miles south of Austin. Other Tesla suppliers known to operate in Kyle include automotive body manufacturer Simwon North America Corp., which has nearly 500,000 square feet of space; logistics provider RK Logistics Group Inc., which has 208,000 square feet, and logistics company JIT Transportation, which has about 108,000 square feet.
The city is among a number of nodes for Tesla suppliers popping up throughout the Austin metro as a result of the so-called "Tesla effect" — which is shorthand for the trend of electric vehicle suppliers flocking to the region in response to Tesla's mammoth presence in eastern Travis County, where it has a gigafactory and headquarters. Other nodes include Georgetown and northeast Austin near Manor.
Adam Green, executive vice president at Stream Realty Partners, said there are a number of reasons why these areas are reaping the benefits of the Tesla effect, with the biggest simply proximity. Many Tesla suppliers in Austin are "just-in-time manufacturers," he said, meaning they don't keep inventory in stock. That means they have to make it when an order is placed and only have a short amount of time to do so.
"That's the Tesla draw — location and proximity," Green said.
Another factor is the types of buildings being construction in areas around Austin, Green said. They differ from typical infill products in Austin in that they're more advanced and have higher clear heights, among other differences. Plus, they have access to major highways. Those factors are beneficial to suppliers, which need bigger manufacturing sites as well as options to supply other automotive original equipment manufacturers, such as Toyota Motor Corp. in San Antonio or General Motors in Arlington.
Victoria Vargas, director of economic development in Kyle, said location is a major attraction for some suppliers. In Kyle, they're not only relatively close to Tesla's factory but also to Austin-Bergstrom International Airport, State Highway 130 and I-35.
But perhaps the biggest attraction has been the amount of speculative industrial space available. Vargas said companies are most concerned about speed-to-market, so having space ready to occupy often is a bigger draw than things like financial incentives. That was the case with Kyle 35 Logistics Park, which is wholly occupied by Tesla. She said the city has ensured that permitting goes quickly and smoothly.
"We are a business-friendly city, so anything we can do to help them get up and running is more valuable than any incentive they can give," Vargas said. "We don't want to stand in their way, we only want to help."
Still, space remains a big challenge, Vargas said. As speculative developments fill up, new buildings are needed. The city is in the process of identifying areas that would be ideal for industrial development, with good infrastructure and utilities.
"We just don't have that available space that they are looking for," she said, adding that the city routinely gets requests for information regarding tracts of land. "We're waiting for other developers to look our way and make that happen."
It's a similar story in Georgetown. Two Tesla suppliers are operating in the city: US Farathane Corp. recently took over 400,000 square feet, and CelLink Corp. is working out of its 295,000-square-foot factory. Hanwha Advanced Materials LLC is also building a 200,000-square-foot manufacturing facility there.
Cameron Goodman, Georgetown's director of economic development, said that in addition to available industrial space and proximity, Georgetown's workforce is an advantage. It has a good base of talent and also can attract skilled workers from nearby Killeen, Temple, Copperas Cove and Fort Cavazos.
He said having speculative industrial sites, especially in the 200,000- to 300,000-square-foot range, is a major draw for Tesla suppliers because they can move in immediately. It's allowed the city to overcome its biggest challenge — keeping up with the growing demands on its infrastructure as the fastest-growing city in the country three years in a row.
As for what's coming next, Stream Realty's Green noted that a downturn in Tesla's recent financial performance has resulted in something of a pause in suppliers looking at the area, as has a potential delay in production of a cheaper Tesla model that was set to be built at the Travis County gigafactory.
"That could come back if the business model changes," Green said. "Tesla themselves and their vendors, it was quiet from them for the past quarter. ... Thankfully there has been some good non-Tesla demand."