Pay Now or Lose Later: the U.S. Must Triple Investments in Battery Manufacturing to Remain Competitive
To maintain its competitiveness in the coming decades, the U.S. needs to take the threat of a foreign-dominated lithium-ion battery supply chain far more seriously than it does today.
By Allen Bernard
China dominates the world’s lithium-ion battery market today. The manufacture of all types of electric vehicles (EVs)— including cars, buses, light trucks, and materials handling equipment— and grid-scale energy storage is dependent on China.
If nothing changes between now and 2030, American battery plants will deliver 486 gigawatt-hours per year (GWh/year) of battery capacity. This is compared to China’s 2,681GWh GWh/year and the EU’s 778GWh/year, according to Benchmark Mineral Intelligence. This is the equivalent of China building one new battery gigafactory every week and the U.S. building one every four months.
As we lay out in our white paper, U.S. Role in Global Lithium Battery Manufacturing, this unrivaled market dominance of all areas of the lithium battery supply chain poses a serious threat to U.S. competitiveness.
Current effort to address the problem
At the direction of the Biden administration, the Department of Energy has developed the National Blueprint for Lithium Batteries. The authors of the National Blueprint state that the U.S. is well-positioned to take on this challenge. “We have world-class automakers and a skilled labor force. Our R&D and access to capital give the country a huge competitive advantage. We have the resources in the ground to supply all of our raw materials needs for decades to come and we have a strong network of trading partners all around the globe that can help us achieve our goals.” But is this a good reason to stay optimistic?
According to the Center for Strategic and International Studies (CSIS), to support EV adoption, state and federal governments have passed 908 separate laws that incentivize EV adoption; President Biden issued a non-binding executive order in August 2021 stating that 50% of all new passenger cars and light trucks sold in 2030 be zero-emission; and the EPA is tightening fuel economy standards beginning in 2027.
For its part, U.S. Army is planning to electrify 170,000 non-tactical cars and trucks and turn 242,000 tactical vehicles into hybrids.
More importantly, the Infrastructure Investment and Jobs Act (IIJA) provides $7.5B in direct funding to build out a national network of EV charging stations, $5B to replace gas-powered school buses with zero-emission vehicles, and $250M for electric ferry pilot programs.
The DoE has created two grant programs aimed at battery materials processing, manufacturing, and recycling industries worth $3B. In June 2021, the DoE’s Loan Programs Office published guidance about the $17B Advanced Technology Vehicles Manufacturing Loan Program, which can make loans to U.S.-based manufacturers of lithium battery cells and packs. In October 2021, the DoE announced $209M in funding for 26 new laboratory projects supporting EVs, advanced batteries, and connected vehicles.
This equates to a total investment or commitment to date of just under $33B.The result of these efforts should increase domestic battery manufacturing capacity. But, while these efforts are a good start, they are not nearly enough.
Demand far outpacing supply
To feed the demand for batteries, the U.S. auto industry alone will require far more GWh of lithium battery production than it will be able to produce if the U.S. does not double down on increasing manufacturing. According to the National Blueprint, the U.S. produced just 59 GWh of batteries in 2020. By 2025, the U.S. is “predicted” (if all goes according to plan) to produce 224 GWh. While substantial, this rate of production will not even come close to meeting the auto industry’s projected domestic demand of 320GWh for lithium batteries in 2028.
Domestic automakers are investing billions in new battery plants but all of these batteries will be used to power their EV production lines, not supply the country’s larger needs.
According to a report in Electrek, 13 new battery cell gigafactories will come online in the U.S. in 2025 to supply U.S. automakers. Each of the four GM/LG Chem plants will produce 35GWh/year of batteries. Each of the three Ford/SK Innovation plants will produce 30GWh/year. Each of the two stand-alone SK Innovation plants in Georgia will produce 10GWh/year. And Toyota said it would provide batteries for 200K EVs, which is in the range of 5GWh/year of production. This equates to roughly 255GWh of new production by 2025 and tens of billions in direct investment by U.S. automakers.
During the same period, however, the EU is planning to build 38 gigafactories. So, even with this level of investment, the U.S. is falling behind the other major economies of the world when it comes to battery production.
Since a 10GWh gigafactory costs approximately $1B and, according to the International Energy Association’s (IEA) Global EV Outlook 2021 report, five years to produce at full capacity, at the current rate of investment, the U.S. can never hope to achieve battery independence from China, or even the EU for that matter.
Based on Benchmark Minerals’ 2030 projections, to match China, the U.S. will need to invest $219.5B in gigafactories to supply all of its domestic needs; about half of that will need to go towards EV batteries, according to the consulting firm Oliver Wyman.
“The failure to create a domestic battery manufacturing infrastructure would leave the entire EV industry dependent on imports and thus vulnerable to trade conflicts and supply shortages like those we are currently seeing in semiconductors—another key EV component,” the company said. “What makes this scenario so tragic is the fact that much of the best early-stage battery research in the world is being done by US universities and national labs through federal grants.”
If the U.S. government were to meet private industry halfway through subsidies, direct support for R&D, and future tax incentives and abatements, the amount private investors and corporations would need to raise could be closer to $110B.
Regardless of where the funding comes from, it is clear that more needs to be done now.
Invest now, or lose the market.
“These projections show there is a real threat that U.S. companies will not be able to benefit from domestic and global market growth, potentially impacting their long-term financial viability,” the National Blueprint states. “Without action, the U.S. risks long-term dependence on foreign sources of batteries and critical materials.”
What is lacking is the will on the part of our political leaders, and the urgency on the part of the industry to see this looming crisis for what it is: a threat to the economic health and vitality of the U.S. economy.
The U.S. government needs to adjust its priorities and focus on the difficult problem of building more factories at home.
Allen Bernard is a technology journalist focusing on the intersection of technology and business.
OneCharge Inc. is a leading US manufacturer of industrial lithium batteries for material handling. Lithium forklift batteries reduce labor costs and improve forklift efficiency and uptime. OneCharge offers the biggest product line on the market with over 600 options for all forklift types, makes, and models. https://tinyurl.com/2p8e2umc
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