At the heart of most electric vehicles is a rechargeable lithium battery. The supply chains of these batteries span from mining raw materials all the way to manufacturing the finished product. This supply chain is well established in places like China, Norway, and Sweden, but not so much in the United States.
In its latest effort to lock down the battery’s American supply chain, on Tuesday, General Motors announced a giant investment of $650 million into Lithium Americas as part of an agreement to develop a mine in Nevada.
General Motors isn’t the only company working to secure the supply chain.
Late last month, Tesla poured five times the money into a Nevada electric vehicle (EV) battery plant. The $3.6 billion plant will be dedicated to making lithium-ion cells as well as a facility to produce the brand-new Tesla Semi.
And last week, battery darling, Our Next Energy (ONE) announced a massive $300 million Series B round. Following its 2022 rounds, the startup has a $1.2 billion valuation and the majority of its funding money will be used to get its $1.6 billion gigafactory up and running.
ONE is an energy storage technology company. According to TechCrunch, so far, ONE’s efforts have been focused on finding low-cost and highly available materials for its battery chemistries. ONE’s gigafactory will pump out lithium-iron-phosphate cells, better known as LFPs. The LFP battery platform is the key to electrifying cars like SUVs and sedans and the company has also optimized its high-capacity LFP chemistry for commercial fleets, in an effort to “power the next century.”
Gigafactories get their name from the fact that their annual capacity exceeds 1 gigawatt-hour (GWh), or 1 billion watt-hours. To put that number in perspective, a typical household in the U.S. consumes 30-kilowatt hours (kWh) of electricity daily, or 30,000 watt-hours, while the U.S. generates several million GWh of electricity per year.
Gigafactories produce “cells” or individual batteries. An EV battery pack contains thousands of cells and usually has a capacity of 50–100 kWh. A gigafactory with 1 GWh capacity operating to its fullest extent could theoretically produce enough batteries each year to power 10,000 to 20,000 EVs. Over the next two years, ONE’s plant will produce 20-gigawatt hours, or enough for at least 200,000 EVs.
Factories for these cells are expanding rapidly and between 2021 and 2026, U.S. capacity is expected to increase fivefold, according to data and estimates by Benchmark Mineral Intelligence. That’s only the beginning as by 2031, the engine will rev up by another 86%.
“Batteries are a fundamental component of the global energy transition economy," said Peter Gajdoš, Partner & Co-Head of The Climate Technology Investment Team at Fifth Wall who led ONE’s round along Franklin Templeton. “ONE is firmly at the forefront of driving this systemic shift. We believe ONE’s next-generation mobility and stationary storage applications are a game changer and are set to transform the $100B+ battery market.”
ONE’s $300 million equity financing is joined by $220 million in grants from the state of Michigan for a total of more than $500 million to fund ONE's battery cell factory. Michigan’s investment in the battery company is one way the state is hoping to dominate the EV supply chain, guaranteeing its automotive legacy a place in our fossil fuel-free future. In fact, the Motor City state invested a total of $2 billion in EV battery manufacturing this month.
As CNBC reports, Michigan, Georgia, and Kentucky will dominate the sector in 2030, leading North America’s total build-out of EV battery manufacturing to go from 55 gigawatt-hours per year in 2021 to almost 1,000 gigawatt-hours per year by 2030. That’s enough to manufacture upwards of 10 million cars a year. As the Federal Reserve Bank of Dallas calculates, this massive leap is thanks to automakers’ planned $40 billion investment in battery gigafactories.
As Axios breaks it down, this is the doing of the Inflation Reduction Act (IRA), priming the U.S. to be a global EV competitor.
Aside from reducing America’s dependence on China in relation to EV supply chains, the IRA’s lucrative incentives for U.S.-made cells have spurred a $73 billion private company investment in U.S. battery plants in 2022 alone. Skyrocketing is an understatement for the surge, as it more than triples 2021’s $24 billion investment, which was already a large step up from the measly millions some previous years saw.
China currently hosts about 90% of the EV battery supply chain. America’s investments are a mass effort to disrupt that and so far, as Axios columnist Joann Muller puts it, they’re “shattering expectations.”
Thanks to the IRA’s $35 per kilowatt-hour tax credit, if a company produces 70-kWh batteries for 1 million vehicles, its total credits would be worth $2.45 billion a year. Clearly, states like Michigan and big manufacturers like GM and Tesla have caught on to the tax credits. Tesla alone expects to earn $1 billion in tax credits throughout 2023 and as its Nevada plant reaches full 500-gigawatt capacity, the credits could be worth a staggering $17.5 billion a year.
GM’s Nevada investment comes almost exactly a year after its $6.5 billion commitment to Michigan, with $2.5 billion used to build an electric-vehicle plant. According to GM, its latest investment in raw materials is its largest to date. In November, the company said it expects to generate more than $50 billion in revenue from sales of its 30 EV models. This investment may increase that number.
But GM isn’t the only traditional gas-car manufacturer recognizing the financial incentives of going electric, and doing it domestically. Ford Motor and its Korean joint venture-partners, like LG Energy and SK Battery Innovation, also hope to reap the benefits of the credits.
Ford has committed more than $30 billion toward EVs through 2025. In fact, this year, the automaker plans to spend more on EVs than on gasoline-powered vehicles, allowing EVs to amount to 40% of its global sales.
At the heart of Ford’s EV fleet is a $11.4 billion Tennessee/Kentucky vehicle assembly plant — its first new one in 50 years, which will comprise two battery plants making advanced lithium-ion batteries. $7 billion of that investment is going toward EV component manufacturing, making it the largest single manufacturing investment in the company’s 118-year history.
The end goal of all this investment is to ensure enough cells are available in the U.S. as the car industry electrifies itself. As TechCrunch reports, GM and other automakers have made joint venture agreements with battery manufacturers to bring production to the states for this very reason.
While these big automakers have the capital and capabilities to lead the charge, smaller startups are playing a very vital role and investors are noticing. Michigan-based Our Next Energy has a goal to establish a local supply chain in the region. Last year, the company launched its first plant ONE Circle, with the mission of increasing renewable energy access across the surrounding Michigan community, building the future of electrification in the state, and securing Michigan as a “powerhouse of automotive,” creating over 2000 new green jobs.
ONE’s latest round marks a strategic fundraising shift “from a startup funded by venture capital to a manufacturer fueled by growth capital,” Mujeeb Ijaz, CEO & Founder of ONE, said in a statement.
“That’s important in this environment where urgent demand for U.S.-based cell manufacturing is on the rise, supported by the Inflation Reduction Act, in a true public-private partnership.”
ONE exemplifies how the IRA is emboldening startups to broaden from R&D ventures and compete with largely Asia-based giants like LG Energy Solutions, CATL, and SK Innovation, as manufacturers. This transition comes as manufacturers like LG are swelling their North American production, with nearly half of their global battery production capacity to be situated in the region by 2025.
ONE’s battery is different from others because they say its combined chemistry uses one chemistry for energy storage (leveraging lithium, manganese, and oxygen), and another for power delivery (using lithium, iron, phosphorus, oxygen, and carbon).
As demand for battery materials explodes, there’s a worry that we won’t have enough essential minerals like lithium, nickel, and cobalt. A recent MIT analysis concludes that the world’s reserves of the materials needed for EVs and other clean energy infrastructures are sufficient for even the highest-demand scenarios. Still, as Charlotte Hamilton, cofounder and CEO at startup Conamix said via Business Insider, these raw materials remain expensive.
“The real difficulty and the technological elephant in the room is that there’s really no technology currently that can deliver dramatically lower costs on the battery side and enable widespread adoption of electric vehicles,” she said, adding “Existing technologies are exciting, but it’s very hard to get them much lower in cost. It really takes new materials before you get dramatic price reductions in electric vehicles.”
That’s why ONE’s model uses less to keep the price down: 60% less graphite and 20% less lithium than the industry standard. By this year, ONE hopes to embark on full-scale production.
Conamix is also tackling the price conundrum. The Ithaca, New York-based company uses sulfur for the cathode (or positive end) of its lithium-ion battery, cutting out the need for pricey nickel and cobalt. The startup says that sulfur provides the highest energy for the lowest cost, and it doesn’t hurt that the abundant element is domestically sourced and a natural byproduct of oil and gas.
Similarly, Washington-based startup Group14 Technologies aims to replace the graphite component entirely with a silicon composite material, which it says is more powerful. Like ONE, Group14 is focusing on a decarbonized manufacturing strategy and domestic production. This year it will open a plant in Moses Lake, Washington. Along with California-based Sila Nanotechnologies — a startup also in the business of next-generation batteries — the two are expected to bring hundreds of jobs to the region.
Behind these startups are big names, as the double-factory follows Group14’s $400 million Series C round led by Porsche, plus Mercedes-Benz will be their first customer, using Sila’s anode materials for use in its G-Class series of electric vehicles.
This is Group14’s second factory in the state, with the first in Woodinville, just outside of Seattle. The Moses Lake plants are the result of the Department of Energy awarding the startup pair $200 million. The Moses Lake project is among 20 in 12 states. Together these projects received a total of $2.8 billion in grants from the Bipartisan Infrastructure Law to expand domestic battery manufacturing for EVs.
In total, the law invested $7 billion in EV manufacturing and throughout 2023, the results of many of these grants will be coming to fruition. Paired with tax credits from the IRA, big bucks from investors, and ambition from automotive giants and new startups alike, the country is attempting to take over the EV supply chain. As the administration deploys $135 billion to build out EV infrastructure — from charging to manufacturing — time will tell if the majority of electric cars on those roads are American-made.
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