U.S. Playing Catch-Up with EV Technology

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--U.S. capacity to produce the lithium-ion batteries necessary to support the growing market for electric vehicles (EVs) could improve by fivefold in a few short years, the Federal Reserve Bank of Dallas found.

China and Europe so far eclipse the United States in terms of the number of electric vehicles on the road, but the gap is narrowing. The Inflation Reduction Act offers $4,000 in rebates toward the purchase of an electric vehicle, charging stations are becoming more ubiquitous and the number of models available is increasing.

And it's not just sedans either. U.S. auto major Chevy, part of General Motors Company (NYSE:GM) (Detroit, Michigan) is releasing an all-electric version of its popular Silverado pickup truck next year, which will compete with the EV model of Ford Motor Company's (NYSE:F) (Dearborn, Michigan) F-150 line, one of the most popular vehicles in the country.

Many automakers with U.S. operations plan to significantly ramp up production of electric vehicles this decade and, in the process, "commit huge capital outlays," a report from the Dallas Fed found.

"Meeting these ambitious manufacturing goals will require batteries--lots of them--as an electric vehicle can use hundreds to thousands of individual lithium-ion batteries," according to the report.

That may pose a problem similar to the issues we're seeing with fossil fuels. The swell in demand that emerged once vaccines for COVID-19 were approved overwhelmed existing supplies and created inflationary strains well before the outbreak of war in Ukraine.

The same may hold for lithium, given the steady gains seen in the EV sector. The Dallas Fed, however, sees the sector responding with more than $40 billion in planned investments, which would target the United States in a way that would bolster the domestic supply chain for lithium-ion batteries.

The bank noted that six new facilities representing more than $5 billion in investments were unveiled just between 2018 and 2020. Much more could be coming.

"I think the Dallas Fed estimate is conservative," said Joe Govreau, VP Research Metals & Minerals for Industrial Info. "We are tracking about 78 projects totaling $67 billion for electric vehicle production in the U.S. The pressure on the lithium-ion supply chain is growing. There's another 98 projects we are tracking, totaling $27.7 billion for the upstream supply chain for EVs, including lithium mines, refineries, anode/cathode production and battery manufacturing. It's a tremendous growth market."

Subscribers to Industrial Info's Global Market Intelligence (GMI) Industrial Manufacturing Project Database can click here for a list of related project reports.

Click on the image at right for a graph showing U.S. EV project activity by market region.

In August, LG Energy Solution Limited (LGES), a subsidiary of LG Chem Limited (Seoul, South Korea), and Honda Motor Company (NYSE:HMC) (Tokyo, Japan) said they would invest $4.4 billion to set up a new plant in an as-yet-determined location in the United States. Construction through the joint venture controlled by LGES is slated for 2023 for a 40 gigawatt-hour (GWh) facility that could be mass-producing lithium-ion battery cells two years after the first shovel hits the ground. Subscribers to Industrial Info's Global Market Intelligence (GMI) project and plant databases can learn more from Industrial Info's detailed project report and can click here for the related plant profile.

Tesla (NASDAQ:TSLA) (Austin, Texas) is arguably the largest lithium-ion battery manufacturer in the United States, but proprietary issues keep those batteries out of other-model vehicles. One must look to the Asian market, and largely China, to find the major centers of EV technology, leaving the North American car market in a vulnerable state of dependency.

But shifting the actual manufacturing of batteries to the market where the vehicles are built could go a long way to reduce some of those dependencies.

Norwegian consultancy Rystad Energy said the agreement between LGES and Honda is "a move that would reduce dependency on China for fuel cells."

That, however, might represent only a small move forward. The Dallas Fed found that advances like these will give the United States a larger footprint, but China will remain the dominant force in the EV drive.

Click on the image at right for a Federal Reserve Bank of Dallas graph showing expected lithium-ion capacity growth around the globe.

U.S. capacity is indeed growing, but the supply chain is limited and investments so far have been modest. It's China that's eclipsing its rivals and that should remain the case for the foreseeable future.

For related information, see August 31, 2022, article - EV Moves in U.S. Market Could Ease Some Dependencies.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 Trillion (USD).