The transition from gasoline to electric vehicles mainly depends on the supply chain for batteries and their materials.
Domestic shortages of lithium and other critical minerals have plagued U.S. auto manufacturers trying to keep up with EV demand, which is growing at a steep 30 percent annually, according to EVAdoption.com.
The largest shortfall is domestic lithium production. Australia accounts for half of the 100,000 tons of lithium produced globally, according to the World Economic Forum. Chile and China are next. The U.S. lags far behind, producing fewer than 1,000 tons of lithium annually.
The same is true for other critical minerals used in batteries. The U.S. has relied on countries like Russia and the Democratic Republic of Congo, while U.S. mining has stagnated.
As the U.S. EV market expands, the federal government and industry players are looking to build out a domestic mineral supply chain.
The feds have accelerated production plans with generous incentives. The 2021 Infrastructure Law earmarked more than $7 billion to strengthen the U.S. battery supply chain, including $400 million for grants to develop domestic critical mineral supplies.
The 2022 Inflation Reduction Act followed up with tax credits of up to $7,500 for an EV purchase, as long as a hefty share of the battery minerals comes from North America or from U.S. free-trade partners.
Before 2024, 40 percent of critical minerals must be extracted or processed in the U.S., in a nation where the U.S. has a free-trade agreement in effect, or from materials recycled in North America. That jumps to 80 percent by 2027.
Aspiring domestic lithium producers said the legislation is a concrete step toward President Joe Biden’s goal of EVs accounting for half of new-vehicle sales by 2030.
“The Inflation Reduction Act underscored Biden’s agenda,” said Jonathan Evans, CEO of Lithium Americas, of Vancouver, British Columbia. “Its passage has already unified players across the automotive industry and the battery supply chain behind it.”
Others are less confident that the Biden administration’s EV industrial policy will solidify the U.S. position in the industry, citing the massive size and complexity of the supply chain.
“Taking the power battery industry alone as an example; it covers positive and negative electrode materials, separators, electrolytes, and more. It is not possible for the United States to establish a huge industrial supply chain by itself within a short space of time, or even in association with countries with free trade agreements with the United States,” Maya Xiao, an analyst at the Interact Analysis research firm, wrote in a recent report.
