While manufactures in China continue to speed capacity expansions and maintain leadership in the market, the US and European nations are moving forward aggressively with deployments in localized manufacturing of EV-use batteries.
Given that geopolitics will have a significant impact on the future growth of the battery industry and that batteries are a core component of electric vehicle production, the US and Europe are eager to establish local manufacturing capabilities and capacities in an effort to counteract China’s market dominance.
The Inflation Reduction Act (IRA), which highlights increased investments in domestic energy generation, was recently adopted by the US. The statute also expressly states that the percentage of upstream battery components that are domestically sourced must increase year over year, demonstrating the nation’s commitment to increasing the local content rate for EV batteries.
Amid rising tensions between the US and China, Chinese battery manufacturers have encountered obstacles in their attempts to establish production facilities there. However, according to industry sources, even American and Korean automakers have expressed dissatisfaction with the US demands for localizing the production of EV batteries.
Currently, just 10% of batteries are produced domestically, with significantly lower local supply ratios for upstream elements like nickel, lithium, graphite, cobalt, and manganese, according to the sources. Europe currently produces 30% of the world’s EVs.
According to a new PwC research, European automakers must significantly raise their investments in the production of lithium batteries because Chinese companies now control the majority of the industry’s fundamental value chain.
By 2023, Europe will need to invest around EUR 74 billion in the battery industry, of which EUR 18 billion will go toward the production of battery materials and EUR 56 billion toward the cost of batteries. Through that year, when the world’s EV sales are anticipated to reach 42 million units, with 19 million produced in China and 12 million in Europe, global battery output will continue to rise at a CAGR of 35%.
According to insiders in the supply chain, although Europe began localized battery production before the US, it was first controlled by foreign producers, particularly those from China and Korea. European manufacturers are now gradually moving towards volume production, but they still need to increase the scale of their operations and their cost competitiveness. To showcase its role as the host nation, German automakers have collectively created the “European Battery Passport” to track domestic battery statistics and carbon footprints.
Since 2021, many local suppliers of ternary cathode and precursor materials, including GEM, CNGR Advanced Materials, LB Group, and SD Lomon, have quickly transitioned into production of LFP battery materials to meet the high demand for EV and energy storage applications. Today, up to 99% of LFP (lithium iron phosphate) batteries for EV applications are produced by Chinese manufacturers.
According to Chinese news outlets, China’s ability to produce LFP battery materials reached 890,000 tonnes in 2021, is expected to increase to three million tonnes by the end of 2022, and then double to six million tonnes over the long run. The majority of material suppliers have partnerships with top battery manufacturers including Contemporary Amperex Technology (CATL) and BYD.