China’s companies like CATL, BYD, and others currently dominate the EV battery market. Still, according to a Goldman Sachs report shared by Financial Times, the West has a fighting chance. Its’ not gonna be cheap or easy, though.
The U.S. and European EV makers rely mostly on Chinese battery suppliers and mining companies to supply the critical minerals for Li-Ion battery production. This could be hard to change, but not impossible, said Financial Times citing a Goldman Sachs report. It would require a barrage of measures, including protectionist policies, which could turn messy if it leads to an economic war with China.
It would not be possible without developing new battery chemistries that require fewer minerals from China. Battery recycling would also need to rise significantly to make up for the needed materials. Even so, achieving a self-sufficient supply chain would require more than $164 billion of new capital spending by 2030.
A fat part of this ($78.2 billion) would go into actual battery production, with another $60.4 billion spent on battery components and $13.5 billion on mining key raw materials such as lithium, nickel, and cobalt. Refining those materials would take $12.1 billion.
The U.S. is already better positioned to take on the Chinese battery manufacturers, thanks to the Inflation Reduction Act. Although it will not reduce inflation anytime soon, this framework will boost the U.S. manufacturing of electric vehicles and batteries. Thanks to the new sourcing requirements, the act will further impede material and battery imports from China. It’s the epitome of the “carrot and stick” tactic.
According to Goldman Sachs analysts, the demand for finished batteries could be met without China within three to five years. This sounds like an overly optimistic statement, but we should not underestimate the new investments in the U.S., including those by South Korean conglomerates LG and SK. The Koreans are projected to win big from the IRA, with their market share ballooning from 11% in 2021 to more than 55% in the next three years.
It would not be possible without developing new battery chemistries that require fewer minerals from China. Battery recycling would also need to rise significantly to make up for the needed materials. Even so, achieving a self-sufficient supply chain would require more than $164 billion of new capital spending by 2030.
A fat part of this ($78.2 billion) would go into actual battery production, with another $60.4 billion spent on battery components and $13.5 billion on mining key raw materials such as lithium, nickel, and cobalt. Refining those materials would take $12.1 billion.
The U.S. is already better positioned to take on the Chinese battery manufacturers, thanks to the Inflation Reduction Act. Although it will not reduce inflation anytime soon, this framework will boost the U.S. manufacturing of electric vehicles and batteries. Thanks to the new sourcing requirements, the act will further impede material and battery imports from China. It’s the epitome of the “carrot and stick” tactic.
According to Goldman Sachs analysts, the demand for finished batteries could be met without China within three to five years. This sounds like an overly optimistic statement, but we should not underestimate the new investments in the U.S., including those by South Korean conglomerates LG and SK. The Koreans are projected to win big from the IRA, with their market share ballooning from 11% in 2021 to more than 55% in the next three years.