autoevolution
 

The IRA Will Turn U.S. Li-Ion Battery Factories Into Giant Money Printing Machines

The discussions around the so-called Inflation Reduction Act have been centered so far on the EV tax credits. Besides that, the legislation brings huge incentives for parts and materials that go into batteries, solar, and wind energy products. EV battery makers are the big winners here, with $35/kWh tax credits.
The IRA will turn U.S. Li-Ion battery factories into giant money printing machines 7 photos
Photo: Julita/Pixabay.com
Robots build structural battery packs with 4680 cells at Tesla gigafactoryRobots build structural battery packs with 4680 cells at Tesla gigafactoryRobots build structural battery packs with 4680 cells at Tesla gigafactoryRobots build structural battery packs with 4680 cells at Tesla gigafactoryRobots build structural battery packs with 4680 cells at Tesla gigafactoryRobots build structural battery packs with 4680 cells at Tesla gigafactory
This explains why so many carmakers have lately announced new battery factories in the U.S. Ford, General Motors, and Tesla all started partnerships with battery companies to bring production to the U.S. According to Section 45X of the IRA, which covers the “Advanced manufacturing production credit,” battery cell manufacturers will get a $35 credit for every kWh of battery produced in the U.S.

There’s a caveat, though, as the tax credit excludes the batteries made with minerals sourced from a “foreign entity of concern,” like China. Fear not. There were also announcements from last week about various carmakers partnering with Canadian mineral companies. The Canadians never played such an essential role in Li-Ion battery materials. Currently, China is the number one provider of everything battery-related, from lithium and cobalt to nickel and others. But now, Canadian mineral suppliers got the upper hand, and the IRA provisions are the main reason.

Besides that $35/kWh for the battery cell manufacturers, the IRA also gives battery module producers a $10/kWh tax credit. This means that for Tesla’s Giga Nevada, Panasonic will get the $35/kWh credit and Tesla the $10 per kWh. At 35 GWh per year battery capacity, Panasonic bags $1.05 billion, while Tesla gets $350 million a year. Now imagine the Giga Texas battery production, planned at 100 GWh per year when it ramps up.

While these credits go to the manufacturers, they could significantly reduce the production costs for Li-Ion batteries made in the U.S. The sweet spot of battery production is below the $100 per kWh at the battery pack level. According to Sandy Munro, Tesla might already be there. A $45/kWh tax credit could significantly cut the battery costs to the point where EVs become more affordable than gas vehicles. That is, if the EV battery makers will pass on the savings to automakers and if these are willing to share their profits with the customers.

The IRA is a complex act, and experts are still trying to comprehend all the implications. But the fact that so many battery factories are planned in the U.S. is almost entirely on IRA. This will bring a significant competitive advantage and help lessen the U.S. dependence on China. This might not be as shiny as the EV tax credit because it doesn’t go directly to consumers. But it will nevertheless shape the U.S. EV market for the years to come.
If you liked the article, please follow us:  Google News icon Google News Youtube Instagram X (Twitter)
About the author: Cristian Agatie
Cristian Agatie profile photo

After his childhood dream of becoming a "tractor operator" didn't pan out, Cristian turned to journalism, first in print and later moving to online media. His top interests are electric vehicles and new energy solutions.
Full profile

 

Would you like AUTOEVOLUTION to send you notifications?

You will only receive our top stories