The onshoring of battery manufacturing for electric vehicles (EVs) in the United States has seen significant growth in recent years. In 2019, there were only two battery factories in operation, but today there are about 34 planned, under construction, or operational factories across the country. This trend has been fueled by several factors, including the Inflation Reduction Act (IRA) signed into law by President Joe Biden in 2022.
One reason for the surge in onshoring EV battery production is the IRA’s incentives for automakers and consumers to produce domestically. The IRA aims to reduce the US’s dependence on China for batteries and achieve Biden’s goal of making 50% of all new vehicle sales electric or hybrid by 2030. To qualify for the full $7,500 EV tax credit, vehicles must meet certain battery sourcing and production guidelines outlined in the IRA.
The IRA requires that a certain percentage of battery components be produced or assembled in North America, starting at 60% in 2024 and increasing to 100% in 2029. Additionally, a percentage of critical materials used in the batteries must be sourced from the US or a free trade agreement country. These requirements have prompted automakers and battery manufacturers to invest billions of dollars in domestic cell and module manufacturing.
Collectively, these companies have committed to delivering an annual capacity of nearly 1,200 gigawatt-hours of batteries before 2030. This would be enough to power approximately 18 million EVs based on previous predictions from Tesla. The investment in battery production is part of a larger trend of private investment in clean energy and technology manufacturing, which has totaled $245 billion according to Atlas Public Policy’s Clean Economy Tracker.
Several automakers have announced plans to invest in domestic battery production. BMW is investing $1.7 billion to ready its Spartanburg, South Carolina plant for EV production and build a battery assembly facility nearby. Daimler and Paccar are partnering with Accelera and EVE Energy to build a battery cell production plant in Mississippi. Ford has created a joint venture with SK On to build three battery plants in the US, while General Motors has a joint venture with LG Chem to build three battery plants through its Ultium Cells partnership.
Other automakers investing in domestic battery production include Honda, Hyundai, Mercedes-Benz, Stellantis, Tesla, Toyota, Volkswagen, and Volvo. Battery manufacturers such as AESC, Gotion, Kore Power, LG Energy Solution, Northvolt, Our Next Energy, Panasonic, and SK Battery America are also building or planning factories in North America.
Overall, the onshoring of battery manufacturing for EVs in the US has been driven by government incentives, automaker commitments, and the desire to reduce reliance on China for batteries. These investments will not only boost domestic battery production but also contribute to the growth of the clean energy and technology manufacturing sector in the country.