As part of the Biden administration’s plan to increase U.S. manufacturing and decrease the country’s energy and clean tech component dependency on China, we can expect to see a boom in domestic lithium-ion battery manufacturing in the coming years. Many U.S. battery production facilities have been in the works for several years, and even more are being approved, as companies across the country use the advantage of green funding and subsidies from the state to launch new projects. This move is expected to help the U.S. become recognized as a battery manufacturing powerhouse, enhance regional supply chains and reduce the U.S. dependency on China.
Massive Growth in U.S. Battery Manufacturing
To date, the Biden administration has announced battery manufacturing and supply chain investments of over $120 billion, as well as the opening of over 200 new or expanded minerals, materials processing and manufacturing facilities and the creation of more than 80,000 potential new jobs. U.S. battery cell manufacturing facilities are expected to be able to supply around 10 million new electric vehicles (EVs) with batteries each year. Projects are dispersed across the country, with several states developing their battery manufacturing capacities.
During and following the COVID-19 pandemic, automakers faced rising prices, shortages, and delays in accessing EV batteries and related components. This has encouraged the U.S., with support from automakers and green energy companies, to accelerate the development of its regional supply chains. Having fast and easy access to critical components will be key to achieving a green transition. Further, the rapidly increasing uptake of EVs and other electronic devices is driving up the demand for batteries, with the U.S. lithium battery manufacturing industry growing at a CAGR of 2% over the last five years.
Project Pipeline
In June, the U.S. battery cell production pipeline surpassed that of Europe for the first time, largely thanks to funding and the favorable business environment provided by the Inflation Reduction Act (IRA), which has spurred greater investment in the sector. In total, 436 gigawatt hours (GWh) of battery capacity has been added to the US pipeline since the enactment of the IRA, marking an increase of 57.9%, according to a Gigafactory Assessment by Benchmark. The U.S. battery capacity pipeline for 2031 totals 1,190 GWh.
Benchmark analyst Evan Hartley explained, “The majority of announcements are coming from globally renowned automakers and Tier 1 cell producers seeking to establish and develop their place in the North American EV supply chain, however, the IRA has also prompted capacity commitments from numerous smaller producers and start ups.” By May this year, the U.S. had announced 34 Gigafactory projects, although China’s pipeline is still significantly larger, at 41 new Gigafactories.
Political Intervention Needed to Grow Production
Despite the positive strides made under the Biden administration, there is still a long way to go before the U.S. becomes self-sufficient in lithium battery production. In November, two Democratic U.S. senators urged the Department of Energy (DoE) to further develop the country’s battery manufacturing industry and next-generation battery research, highlighting the dominant market position held by China. Senate Intelligence Committee Chair Mark Warner and Energy Committee Chair Joe Manchin explained that the U.S. is “ten to twenty years behind Asia in commercialization of battery technology” and needs to rapidly develop its battery manufacturing capabilities.
In 2021, China contributed around 79% of the world’s lithium-ion battery production, followed by the U.S., which contributed 6.2%. As investment in the sector increases, this is expected to shift to 65.2% and 6.3% respectively. Meanwhile, lithium-ion battery production in Germany could jump from 1.6% at present to 11.3% in 2025, as the demand for EVs in Europe increases significantly.
Warner and Manchin had previously emphasized that “The U.S. must become a leader in manufacturing batteries and battery components while securing our supply chains for the materials that make up those components.” This followed an announcement in October from China stating its intention to restrict exports of graphite, which is critical to manufacturing battery anodes. This is being viewed as a tactic by China to maintain its global dominance in the battery manufacturing industry. China currently refines more than 90% of the graphite globally into a key component for battery anode production. The chief commercial officer at Alkemy Capital Investments, Kien Huynh, stated, “This bold and unexpected move by China in graphite has taken us by surprise, arriving far sooner than anyone could have predicted.”
Outlook
The Biden Administration has spurred investments in the U.S. battery manufacturing sector, with much greater funding expected to follow. As the U.S. looks to decrease its dependence on China, it is expected to increase its presence in the mining of critical metals and minerals, as well as boost its battery manufacturing capacity. However, achieving this goal is still a long way off, and the announcement of the restrictions on Chinese graphite exports could exacerbate mid-term supply chain constraints, making the development of regional links even more necessary.
