Chapter 1: The Resurgence of Battery Production

The surge in electric vehicle (EV) demand is revitalizing economies previously impacted by the decline of traditional automotive manufacturing. A prime example of this transformation is seen in Lordstown, Ohio. The General Motors (GM) Lordstown Assembly Plant, operational since 1966, produced over 16 million vehicles before its closure in 2019 left many without jobs and the local economy in disarray. Congressman Tim Ryan notably termed this event “the new Black Monday.”

Now, Lordstown is witnessing a new wave of investment, shifting focus from gas-powered vehicles to electric alternatives. The former GM plant is now under the ownership of Lordstown Motors, an emerging EV company aiming to manufacture their all-electric pickup truck there, contingent upon securing sufficient funding.

GM is also returning to the area, but this time with a different agenda. In collaboration with LG Chem, they are constructing a $2.3 billion facility dedicated to battery production for their future electric models, including the electric Hummer and Cadillac Lyriq. This plant is projected to become operational early next year, creating around 1,100 jobs.

Just a few years back, the idea of such plants was almost unfathomable. Tesla made headlines in 2013 with the announcement of its ambitious “Gigafactory” in Nevada, a $5 billion investment at a time when EVs constituted a mere 0.3% of global sales, casting doubt on its viability. However, the gamble proved successful, as the facility now employs over 7,000 workers, with similar factories emerging worldwide.

GM has revealed plans for a second factory in Tennessee, expected to be operational by late 2023, mirroring the production capacity of Tesla's Gigafactory. In parallel, Tesla is nearing completion of a massive battery plant in Germany, while VW Group has announced plans for six factories across Europe, with the first expected to launch in 2023 and the last by 2030.

The industry is showing signs of rapid expansion. As the popularity of electric vehicles continues to escalate, the demand for batteries is set to increase significantly. According to S&P Global, global battery production capacity surged by 40% between 2018 and 2020, with projections indicating that it will more than triple by 2025.

Investors are also taking note of this potential. Despite the economic turmoil caused by the pandemic, investment in the battery storage sector more than doubled from $2.8 billion in 2019 to $6.6 billion in 2020, as highlighted in a Mercom Capital report. A notable funding round included $600 million for Northvolt, a Swedish battery manufacturer with major contracts from Volkswagen, Scania, and BMW. Earlier this year, Northvolt raised an additional $2.75 billion to further enhance its production capabilities.

While electric vehicles are driving the battery revolution, other sectors are also contributing to the rising demand. As variable energy sources gain traction within the electricity grid, batteries are increasingly essential for balancing supply and demand. In 2010, battery storage capacity in the US was virtually negligible, providing a mere 59 MW of power. The Energy Information Administration now anticipates that capacity will quadruple in 2021, adding 4.3 GW to the grid. Remarkably, two-thirds of new solar energy projects are being developed with integrated storage solutions.

The economic implications of the battery industry extend well beyond production facilities. The EV Metal Index from Mining.com highlights significant growth in the minerals required for battery manufacturing, such as lithium, nickel, and cobalt. Not long ago, the US had only one large-scale lithium mine, the Silver Peak mine in Nevada. Now, several companies are actively pursuing large-scale mining operations throughout the country. Bloomberg data reveals that lithium miners raised an impressive $3.4 billion in capital in the first quarter of 2021 alone. Additionally, a burgeoning battery recycling sector is emerging, with multiple companies establishing plants in North America and Europe to reclaim materials from retired batteries.

While numerous countries are striving to attract investments in the burgeoning battery sector, some are taking more proactive steps than others. As of early 2021, China dominated the battery production market, controlling over three-quarters of global capacity. However, other regions are gearing up to capture some of this market share. The European Union (EU) is particularly focused on developing its battery industry across the entire value chain.

Since its formation in 2017, the European Battery Alliance (EBA) has made significant strides in promoting the battery sector within EU member states. Thanks to their investments, S&P Global projects that the EU will command 25% of global battery production capacity by 2025, up from just 6% today.

The stakes are substantial: the EBA anticipates that the battery market will reach a valuation of $300 billion annually by 2025. Furthermore, they project that supported projects will generate 3–4 million jobs within the same timeframe. The EBA is acutely aware that establishing a strong foundation early on is crucial for long-term industry growth. Once an industry takes root in a specific location, it becomes increasingly difficult to shift later. Countries that fail to capitalize on the current battery production expansion risk being permanently sidelined.

In light of this, the outlook for the US market appears less optimistic. While US battery production is expected to grow significantly, it will lag behind the overall market growth rate. Consequently, the US's share of the global battery market is predicted to decline from 9% today to 6% by 2025.

Recognizing these challenges, the US Department of Energy has unveiled a comprehensive strategy aimed at developing the domestic battery industry. This initiative emphasizes the necessity for a homegrown industry that not only processes raw materials but also manufactures batteries. However, without more substantial financial backing, the US is likely to continue ceding ground to foreign competitors in Europe and Asia.

This video explores the battery boom-bust cycle, providing valuable insights and lessons for the electric vehicle industry.

This video discusses the future of battery technology in emerging economies, highlighting trends and forecasts from the Faraday Institution.

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