John McCloud is editor of Industry Property Journal, from which this article is excerpted.

Pinson, AL—Even as some markets reel from the falling fortunes of major US automobile manufacturers, others hope to take advantage of improvements in alternative segments of the automotive industry. North Central Alabama is the latest region to benefit from continued growth among Asian automakers following an announcement by a subsidiary of Tokyo-based Isuzu Motors Ltd. that it plans to build a truck assembly plant in this town of 5,000 northeast of Birmingham. Isuzu Manufacturing Services of America Inc. of Cerritos, CA paid San Francisco-based Del Monte Corp. $7.8 million for a 280,000-sf closed food distribution center here, which it plans to use for manufacturing.

During the past decade, Alabama has become a major force in the automotive industry. DaimlerChrysler AG, Honda Manufacturing of Alabama LLC, Hyundai Motor Corp. and Toyota Motor Manufacturing Alabama Inc. all have manufacturing and assembly facilities in the state. One of the Isuzu site's neighbors is a factory owned by Ogihara America Corp. of Howell, MI, which builds body panels for two of those four car companies. But several other Southern states, notably Mississippi and Tennessee, have also become automotive powerhouses. In October, Georgia joined the list of big-timers when Seoul, Korea-based Hyundai began construction of a $1.2-billion KIA manufacturing facility in West Point, about 50 miles southwest of Atlanta.

Now North Carolina wants in on the act, hoping to become the primary manufacturing base for another segment of the automotive industry with a promising future. The state, which already boasts several automotive suppliers, is making an intensive pitch to land the $100-million plant envisioned by Tesla Motors Inc., a San Carlos, CA startup that builds high-end roadsters that get 130 miles to a gallon of gas. Seeded with $60 million in venture capital, the four-year-old company produced its first 225 cars last year at a leased factory in the UK. It plans to produce 1,000 more there this year. Those models cost $130,000, but the company plans to build a US plant that would produce up to 10,000 units a year of a model priced around $50,000.

North Carolina, however, is only one of several states hoping to land the project. New Mexico, Arizona and California are also courting the innovative firm. In January, Michigan Gov. Jennifer Granholm officially threw her state's hat into the ring after learning Tesla had selected the Detroit suburb of Rochester Hills for its 50-employee engineering center. Granholm hasn't completed a formal proposal, but officials in the other three states have offered the company economic incentive packages worth an average of $15 million.

With the competition building, incentives are almost certain to climb higher. Recent history proves states are willing to make extreme financial sacrifices to build or rebuild their manufacturing bases. North Carolina offered Stuttgart, Germany-based DaimlerChrysler some $200 million in grants, loans, tax breaks and other subsidies to build a $500-million Mercedes-Benz factory in Greensboro. However, Alabama lured Mercedes-Benz U.S. International Inc. to Tuscaloosa County instead by sweetening the kitty with yet another $100 million of contributions. Georgia used some $400 million in state and local aid to entice Hyundai to build the KIA plant in West Point.

The Tarheel State's willingness to kick in $200 million for a $500-million facility suggests it should be willing to go up to $40 million for Tesla's $100-million project. But Tesla CEO Martin Eberhard says the three Southwestern states have the edge because of their proximity to the high-tech suppliers his company needs for cutting-edge components. He acknowledges, however, that Gov. Granholm's initial pitch for Michigan is prompting him to reconsider his requirements.

The auto companies are not the only beneficiaries of states' eagerness to land new manufacturing jobs. In Georgia, real estate brokers report state and local officials paid up to 2.5 times market value to acquire the individual properties assembled for the KIA site.

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States Compete for Auto Plants

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