COVID-19 has affected us all to some degree, from orders to shelter in place to maintain social distance.
For the electric vehicle (EV) industry, it has had various impacts, including affecting research and development, the supply chain and specifically, the production of its batteries.
For years, the U.S. has fallen behind its competitors in EV battery production, but will COVID-19 act as a catalyst in the move of battery manufacturing from China to the U.S.?
In recent years, moving manufacturing out of China has been on the docket for many companies. A Bank of America survey revealed “two-thirds of global sectors in North America have either implemented or announced plans to pull at least a portion of their supply chains out of China”, including the automotive industry.
For most industries, including the EV battery industry, the factory shutdowns as a result of COVID-19 could serve as an eye-opener to the U.S.'s reliance on China. A move to the U.S. for EV battery manufacturing would provide more eco-friendly jobs, increase national energy security, reduce foreign dependence and help the U.S. firmly establish itself as the world leader in the transition to EVs.
Bringing EV battery manufacturing to the U.S. is easier said than done.
Most EV batteries are lithium-ion. The majority of this battery production currently takes place in China. Yayoi Sekine of BloombergNEF reported that in 2019, of the 316 gigawatt-hours of lithium cell manufacturing capacity worldwide, China led the way globally with 73%, compared to only 12% to the next largest producer, the U.S.
With this large of a gap, it would take a concerted effort over the coming years to move production primarily to the U.S., but it can be achieved.
To better understand how a change like this could happen, it’s important to look at where the main elements of lithium-ion batteries come from. You guessed it, lithium is a large component of EV batteries.
For years dating back to the early 1990s, the U.S. led the entire world in lithium production, but for the last 25-plus years, that hasn’t been the case. With the advent of EVs, mining companies across the U.S. have worked to improve their positions as top producers but have fallen short.
There are currently four countries that dominate in lithium production: Australia (51,000 tons), Chile (16,000 tons), China (8,000 tons) and Argentina (6,200). Because of privatization and secrecy, lithium production numbers aren’t public and are just an estimate in the U.S., but we do know the U.S. is far behind. It’s not that the U.S. can’t become a leader in lithium production, it just hasn’t done so in recent years.