The electric vehicle revolution is coming to America.
GM's Ultium battery is made for all types of vehicles.
So soon everyone can drive an EV.
So this F-150 prototype is all electric.
China sold roughly one million more EVs than the U.S.
last year, but domestic automakers are finally getting serious about going electric.
While Tesla has dominated the U.S.
industry for years, Ford and General Motors recently announced major investments in the space.
They are announcing that they are setting a target of being fully electric.
That's the goal by 2035.
If we're looking over the next 10 to 15 years, you're probably going to see more change in the automotive industry than we've seen in the previous 100
years.
Volkswagen, Jaguar, Land Rover, Toyota and Volvo have also made big commitments, planning to rapidly ramp up production of EVs in the coming
five years. Problem is, electric cars run on lithium-ion batteries, and the U.S.
is in short supply.
And so it doesn't take much looking ahead to realize we don't have enough, we simply don't have enough electric batteries.
The fact that the U.S.
is building one gigafactory or the equivalent of one gigafactory every four months and China's building one every week, China is in tune with the
pace of what's happening here and the U.S.
at the moment isn't.
China has nearly 100 large-scale battery manufacturing plants, while the U.S.
has just four. If current trends continue, projections for the next decade show the U.S.
continuing to lag far behind.
And relying on China for battery imports is neither cost-effective nor good for national security.
Should the U.S. become over-reliant on Chinese batteries?
Well, it would be so simple.
Just the Chinese would say, sorry, we don't have enough supply for you.
Biden's messaging around the need for more EVs could incentivize battery manufacturers to invest more heavily in the U.S.
market. But even if they all started planning facilities today, we'd probably still face a temporary shortage, inevitably delaying the
transition to an electric future.
By the time you acquire the land, by the time you get all the environmental permits, by the time you construct it, by the time you operate, you know it
could be two, three, four years.
And those years are going to be critical as we fight to avoid the worst effects of climate change.
Even before China's big EV push, lithium-ion batteries were an Asian-centric industry.
The tech was first commercialized by Japanese company Sony for use in their video cameras and Walkman media player.
The Japanese giant Panasonic and South Korean heavyweights LG Chem, Samsung and SK Innovation then took the lead throughout the 1990s and
2000s, producing lithium-ion batteries for portable tech from power tools to iPhones and laptops.
While the U.S. may have been okay relying on imported batteries for their phones,now that vehicle electrification is an issue of energy independence,
the gaps in the U.S.
supply chain have been laid bare.
If the U.S. wants to buy lithium for batteries today, zero percent is produced in the USA.
Nickel sulfate for batteries, zero percent is produced in the USA.
Cathode material, zero percent is produced in the USA.
So at the moment, the supply chain up to the battery cells does not exist.
That's not a healthy national security strategy for what is going to be one of the biggest growth industries of the 21st century
As of 2021, Benchmark Mineral Intelligence values the lithium-ion battery market at 50 billion dollars and expects it to reach 200 billion dollars by
2030. But the U.S.
still lags behind in mining and manufacturing.
Australia is the largest producer of raw lithium by a long shot, followed by Chile, China and Argentina.
Other key battery elements include graphite, nickel, manganese and cobalt, which are mined in large quantities in China, Indonesia, South Africa and
the Democratic Republic of Congo.
Most of these materials are then shipped to China, which handles 80 percent of the world's raw mineral refining, 77 percent of the world's
battery cell manufacturing and 60 percent of the world's battery component manufacturing.
Japan and South Korea are still manufacturing leaders too, but China has quickly surpassed them in recent years.
The problem for America is not a lack of resources.
For example, the U.S.
Geological Survey reports that the U.S.
actually has more lithium reserves than China, the mines just haven't been built here.
That's because until recently, domestic automakers just hadn't really committed to EVs and the policies weren't there to support them.
China, on the other hand, decided over a decade ago that it wanted to be the world leader in electric cars and went on to heavily subsidize EVs and
EV infrastructure for the automakers, consumers and battery companies themselves.
You can get up to $10,000 dollars back on the purchase of a vehicle.
The government is encouraging its state banks to lend very liberally to EV startups, hundreds of millions of dollars of easy loans,
incentives for investment up and down the ladder.
The Chinese government has said we want to be the world EV dominator, whatever it takes.
And while some of China's subsidies have phased out recently, quotas are now driving the country's EV sales.
So essentially what they tell automakers, whether they're global or Chinese, is that if you want access to this massive Chinese market, you
must produce a certain percentage of electric vehicles every year.
These policies guarantee a robust battery market, giving Chinese companies up and down the supply chain the assurance they need to mine for raw
materials and manufacture on a massive scale.
Until 2019, China also effectively required EV makers who wanted subsidies to use Chinese batteries, giving rise to domestic giants like
CATL, which now power some of Tesla's Chinese-made Model 3s.
Specific states, most notably California, do have strong policies promoting EV adoption, yet others have almost no support, and federal policy has been
unreliable from administration to administration.
There's been a lack of concerted, directed efforts from the federal government to push the energy transition along in the transport industry.
And what happens when there's sort of mixed messaging from that level is that there's doubts raised about, is the EV market really going to grow in
the U.S.? Should we set up shop?
Is it worth long-term returns if we make this move?
Due to this historical uncertainty and the established dominance of the East Asian battery giants, there are currently only a handful of companies
producing lithium-ion batteries at scale in the U.S., none of which are American-owned.
When we look across the landscape, there's really the work that Tesla does with Panasonic.
Some of the U.S. manufacturers work with LG.
And then there's the facility that's being built in Georgia, the SK facility, which would electrify 330,000
vehicles a year.
Korean-owned SK innovation is building out the plant in Georgia, and many industry experts believe that it could play an especially important role in
the domestic battery landscape.
In the U.S., Panasonic only provides batteries to Tesla, and LG works primarily with General Motors.
But the SK factory represents nearly half of the country's "non-captive" EV battery capacity, meaning that its batteries are not tied up in
long-term contracts with specific automakers.
The great thing about the SK facility is that they will be producing for multiple companies, which really is needed in the U.S.
because we don't have enough batteries.
But those plans hit a snag in February, when the International Trade Commission imposed a 10 year ban on SK, following an intellectual property
dispute with Korean rival LG Chem.
President Biden could choose to overturn this ruling and a number of industry experts say that he should, given the dearth of battery
manufacturing in the U.S., which basically ensures that automakers will struggle to deliver on their bold targets in the coming years.
Every week there's another announcement.
Another OEM talks about their long-term plans for moving to electric mobility.
Currently, there is not enough battery production going on to support even half of what we're talking about at this point.
Some say that the battery problem is already holding them back.
And even Elon Musk went on record and said, we would be producing the Tesla Semi if it wasn't for the fact that we don't have enough batteries.
What the battery manufacturers need to see, Moores says, is more specific plans from the automakers about exactly what they need and when they need
it.
If the entire automotive industry came out and gave a detailed plan of, we want to build this amount of electric vehicles and we will need this amount
of volume of batteries, then there will be a battery gold rush in North America.
In this environment, the uncertainty over the future of SK's Georgia factory has become a lightning rod of concern for some electric vehicle
proponents, as well as for Georgia state officials like Wilson, who say that the factory would help transform the state's economy.
And so the size and the scope of this project, at 2,000 plus jobs and 1.67 billion dollars of investment,
that is going to change really the fabric of that part of the state.
It is the largest investment ever in the state's history and really the largest number of jobs that we've announced in any one project.
Though the International Trade Commission did find SK Innovation guilty of misappropriating trade secrets from its Korean competitor LG Chem, some say
this dispute ought to have been settled through the courts, which could have awarded monetary damages.
Instead, LG took the case to the ITC, which cannot arrange settlements but can place a ban on imports, as it's done for SK Innovation's battery
components.
The Korean prime minister went on record to say he was personally embarrassed by this dispute.
I think it is embarrassing, because I think it could be sorted quite quickly between the two companies if they wanted.
But the only companies, the only people that will be hurt the most from this is actually the U.S.
automotive industry.
Right now, the SK facility is nearly complete and is on track to be up and running by the fourth quarter of 2021.
It has a contract with Ford to produce batteries for the company's electric F-150 truck and a contract with Volkswagen for its new line of
EVs. The ITC ruled that it will allow SK to continue making batteries for Ford over the next four years and for Volkswagen over the next two years,
giving the companies time to transition to alternative domestic suppliers.
But many say the decision, if it stands, would still cause delays as well as stifle competition.
A number of manufacturers have had to sort of dial back their EV goals just because they're not able to get their hands on battery packs.
And now add on top of that, you have one of the major suppliers not being able to manufacture in the U.S.
Europe is surging ahead.
China is surging ahead with lots of different battery companies, lots of different technologies and huge capacities at the same time.
Does the U.S. want a similar environment or does it want to stifle its battery industry?
If so, it needs healthy competition.
So where do we go from here?
First, experts say that we need to build out a domestic supply chain that starts with mining for raw materials here in the U.S.
and ends with getting the battery giants to set up shop here in the U.S.
Already, Tesla has secured the right to mine lithium on 10,000 acres of land in Nevada.
Large graphite deposits in Alaska are being explored.
And in 2019, the USGS released a critical minerals strategy calling for faster permitting and better mapping to locate deposits of key minerals and
metals. Many environmentalists worry about the impact of these mines on natural resources, but also acknowledge the importance of these materials
for an electric future.
It's a tension that the Biden administration will have to navigate, as EV proponents push for aggressive government action.
The federal government almost needs to approach this like the creation of the interstate system, that they need to step in to lower barriers for
investment. You're getting into processing and you're getting into mining.
Margins are so low, it really is tough for companies to make that initial investment.
Many like Wilson, are heartened by what they've seen and heard so far from President Biden, including the executive order that he issued in February,
which directs the Secretary of Energy to evaluate the supply chain risks for EV batteries and submit policy recommendations for addressing said
risks.
Now you're seeing governments talking about batteries and lithium and other rawmaterial components as important as oil.
So lithium-ion batteries are now very geopolitical.
The executive order from President Biden shows that batteries are at the top of the agenda for governments around the world.
And that means, watch this space because it's just about to get real.
There's a wave of new startups developing techniques to recycle lithium-ion batteries in the U.S.
and hopefully recover the grand majority of materials for use in new batteries.
But for now, this tech remains too expensive.
It is cheaper to mine for lithium rather than recycle it from existing battery packs.
So that is projected to go on for the next at least 10 years or so.
So in the immediate future, there will probably continue to be a battery shortage in the U.S.
as automakers ramp up production of EVs to comply with fuel economy standards
For the next five to 10 years, we are still looking at EVs being in a push adoption rather than a pull adoption, right.
It's being driven by emissions regulations and policy that are forcing the hand of automakers to electrify more and more of their fleet just to meet
the emissions regulations or the fuel economy regulations.
Chandrasekaran predicts that as battery costs continue to decline, 2025 will be a tipping point for the industry.
By then, he says that we can expect to see more organic consumer demand, ending the need for subsidies like tax breaks for EV customers, though
regulations like strict vehicle emission standards will likely continue to drive the industry forward.
And as the domestic and global EV market grows, the battery manufacturing industry is projected to diversify alongside it.
Wood Mackenzie projects that the Asia-Pacific share of battery manufacturing over the next 20 years is going to decline from 90 percent to
60 percent. Still a majority, but at least a healthy piece of the pie for the rest of the world.
So look for this to become a matter of national security for the Biden administrationto throw some weight behind getting more battery
manufacturing capability right here in North America.