🌱 Why is there a boom?
In 2019, only two electric vehicle (EV) battery factories were operating in the U.S. and another two were under construction. Now, around 30 factories are planned, under construction, or already in operation in the U.S. Following the chip shortage in the pandemic, concerns over China’s dominant role in the supply of lithium-ion batteries played into companies’ 2021 decisions to produce closer to home. The Inflation Reduction Act of 2022 (IRA) has also been a driving force.
🌱 How much is being invested?
Nearly $100 billion will be invested in the construction of cell and module manufacturing facilities in the U.S. by manufacturers. Together, they “promise to deliver an annual capacity of over 1,200 gigawatt-hours before 2030”. This is estimated to provide batteries for roughly 18 million EVs.
🌱 What is the IRA’s role?
The IRA incentivizes the domestic production of batteries. The act aims to reduce reliance on China for batteries and help reach Biden’s goal of having 50% of new vehicle sales in the U.S. be electric or hybrid by 2030. Under the IRA, “[v]ehicles can qualify for the full $7500 EV tax credit if they meet certain battery sourcing and production guidelines”. Moreover, producers can receive payouts in the form of advanced manufacturing credits from the U.S. Treasury.
🌱 What qualifies for tax credits and advanced manufacturing credits?
To qualify for half the tax credit of $3750, the IRA “requires that 60% of the value of battery components be produced or assembled in North America in 2024”. This will be increased to 100% as of 2029. To qualify for the other half of the tax credit, “50% of the value of critical materials must be sourced from the U.S. or a free trade agreement country in 2024”. This will be increased to 80% from 2027 to 2032. Per kilowatt-hour of capacity produced, battery cells qualify for a $35 advanced manufacturing credit and battery modules qualify for a $10 credit. Moreover, producers can be reimbursed 10% of the costs they incur for the production of electrode active materials (such as anodes and cathodes).
🌱 What plans do GM and Mitra Chem have?
Mitra Chem is a battery materials startup, planning to “build more affordable and accessible EV batteries”. General Motors (GM) is now leading a $60 million Series B funding round for the startup. The two plan to “develop advanced iron-based cathode active materials, like lithium manganese iron phosphate, to power batteries compatible with GM’s EV architecture”. GM has previously “pledged to invest $13.5 billion in four battery factories in the U.S. [with] a collective capacity of 165 gigawatt-hours annually by 2026”. It is also collaborating with the “startup SolidEnergy Systems to build a high-capacity, pre-production lithium-ion battery” and working with Posco Chemical to build a $400 million battery materials facility in Canada.
🌱 What are Northvolt’s plans?
Northvolt is a Swedish lithium-ion and EV battery producer. It recently raised $1.2 billion in funding to build new factories in Europe and North America. A part of these funds “were classed as 'dark green' under the European Union's sustainable finance framework”. The funding included investments from Baillie Gifford, BlackRock, Chow Tai Fook Enterprises, GIC, Goldman Sachs, Swedbank Robur, Volkswagen, and several Canadian pension plans. Northvolt has several factories in Europe and a facility in the U.S. It recently invested EUR 600 million to build a plant in Germany and is said to be “finalising plans to build a multibillion-dollar battery factory in Canada”.
Read more about the construction boom here:
Read more about GM’s and Mitra Chem’s plans here:
Read more about Northvolt’s plans here:
- https://sifted.eu/articles/northvolt-1-2bn-convertible-blackrock-news