In recent months, a string of carmakers and electric vehicle (EV) battery makers have announced their intentions to build facilities in the US. Manufacturers from across the world are putting billions of dollars into EV battery technology, too. Meanwhile, US President Joe Biden has invoked the Defense Production Act, a Cold War-era provision, to help raise the domestic availability of raw materials like lithium and graphite to boost battery-making and reduce dependence on foreign supply chains. “We need to end our long-term reliance on China and other countries for inputs that will power the future," he said.
As promising as all this is, it’s unlikely to move the needle. The US has waited far too long to ramp up and prioritize the core of any EV strategy: batteries and how to charge them. For starters, factories won’t be up and running for a while, so they won’t be churning out power packs anytime soon. Capital isn’t being directed in a focused way either. Even with Biden kicking off a top-down, Beijing-style industrial policy, China is likely to stay well ahead in the battery race.
It’s also about poor timing and planning. The EV hype has been around for a while. It has pushed up demand and consumer awareness. Yet, only last June did the US release a blueprint for battery supply chain build-out to “help guide investments." Upstarts have been trying to crack the right technologies for a while and manufacturers have been talking up big changes to auto-making for cleaner vehicles.
What’s worse, as US carmakers get desperate to make good on promises of investing billions of dollars in green cars to meet emissions regulation targets, they are pressuring their Korean battery partners for technology. Ironically, it’s a tactic often associated with China’s technology dominance goals, but it is also indicative of the lacklustre progress on development of viable and scalable power-pack options.
China, on the other hand, continues to hurtle toward making batteries for most EVs in the world. It has cornered some 60% of global battery production. Despite a faltering covid policy and supply chain delays, it’s been filling the growing gap between demand and supply.
Tesla was able to churn out cars, export them across the world and open its Europe gigafactory because of a Chinese battery partnership and wide-scale manufacturing. Other carmakers have turned to Chinese suppliers of parts and raw materials for energy storage. One of the world’s largest car companies, Volkswagen AG, recently signed agreements with Zhejiang Huayou Cobalt Company and Tsingshan Holding Group to ensure supply of nickel and cobalt for 160 gigawatt hours of batteries. Meanwhile, Contemporary Amperex Technology Ltd (CATL) is scouting for sites across North America for a $5 billion plant.
It isn’t just about scale and China’s manufacturing heft, though. The world’s largest battery maker, CATL, has been working on a third-generation battery with cell-to-pack technology that’s almost 13% more efficient than Tesla’s much-awaited 4680 battery in terms of space utilization, according to Daiwa Securities analysts. The company is also developing key thermal control technology, an important safety feature to ensure fires don’t spread in the latest types of power-packs which are prone to combust. If the US can’t lead on a key area of innovation right now, it’s hard to say how the future for EVs will play out there.
The woes of the EV ecosystem have been compounded by a market imbalance and high raw material prices. That means it will only be harder to gather supplies and make affordable batteries.
Chinese officials, though, have already started talking about more collaboration across their supply chain to ensure manufacturing isn’t hit. The US isn’t quite there yet when it comes to addressing this big— and likely prolonged—barrier because it doesn’t even have a robust supply chain.
What options does America have now? Recreating everything from scratch may leave it further behind. Acknowledging that circumventing China won’t be an option in the near future would be a good place to start. Channelling funds towards manufacturing and focusing on battery tech startups that are close to large-scale production could ensure a more streamlined approach for funding.
In addition, facilitating greater production from the few—and small—existing mines in the US may help integrate them into future manufacturing plans. Meanwhile, ensuring it can get a reliable supply of battery metals from its northern neighbour Canada—a current favourite for many manufacturers—would also help.
When it comes to electric vehicles and batteries, the US will have to move beyond flaunting billions of dollars of investments and ambitious plans if it really wants to get ahead in the race.
Anjani Trivedi is a Bloomberg Opinion columnist covering industrial companies in Asia.
