The shift to more U.S.-based battery production is underway, with big players like Tesla and GM building out their domestic capacity. U.S. battery-making capacity is expected to rise sixfold to 383 gigawatt hours by 2030, but the question is whether that will be fast enough to keep up with demand.
GM is producing batteries through its Ultium joint venture with LG at a Lordstown, Ohio, plant and has over $5 billion in investments for more plants in Tennessee and Michigan. But it will likely need another six or seven plants of that size to meet its goal of an all-electric fleet by 2035.
The challenge is even bigger for smaller startup EV makers like Rivian and Lucid Motors, which lack the resources for these huge investments and will need to rely heavily on partnerships with suppliers.
The bill’s requirements on critical materials represent an even more formidable challenge to the EV industry. Again, China dominates the production of key materials such as lithium, cobalt and nickel. The U.S. and Canada combined refine only 3 and 3.5 percent of the world’s lithium and cobalt compared with 59 and 75 percent for China, respectively.
Australia and Chile, two resource-rich countries that have free trade deals with the U.S., can take up some of the slack. But automakers, foreign and domestic, will also have to reactivate skills and resources in the U.S. that have suffered from decades of underinvestment.
The demand for new domestic battery plants, steel factories and aluminum smelters will lead to intense competition among states looking to attract the jobs and tax revenues that these mammoth investments bring. States such as Nevada, Arizona, Washington and Michigan, with significant mineral deposits, should brace for mining booms as automakers race for domestic sources of the raw materials they need.
While we won’t see the full impact of these changes for years, the starting gun has now been fired. Any player in the auto industry — from the biggest automaker to the smallest supplier — needs to get on board with an EV supply chain strategy or be left behind. Among big automakers, GM and Tesla already have a head start because of their strong sales, domestic production capacity and investments in downstream materials integration. For their part, suppliers need to figure out how to take advantage of the coming investment wave by positioning themselves with the right technology and partners.
The changeover to electric vehicles has been moving in recent years through much stop-and-go traffic. The big new law from Washington floors the accelerator for both consumers and manufacturers.
