Battery Supply Chain Competition Persists Between the US and China

China has been a major player across the battery value chain. With several mineral extraction, battery manufacturing, and system integration operations, it is poised to lead the battery space for many years. As the adoption of EVs and other energy storage systems accelerates, other global leaders, such as the US, are undertaking efforts at the federal level to study the battery supply chain and decrease dependency on foreign supplies. As the US gets a better grasp on its competitive opportunities, domestic industries could experience a shift in leading chemistries and technologies. 

China’s Competitive Advantage

The battery industry is experiencing a shift away from cobalt-based chemistries to other alternatives that offer lower cost. This has resulted in increased favorability for lithium iron phosphate (LFP) batteries, which are more cost-effective and also have a high safety profile and relatively low maintenance requirements. As if China didn’t already have a strong hold on global refinery and production activities, a shift to LFP could further increase the country’s stake in battery manufacturing. This is because a handful of the world’s leading LFP battery manufacturers, such as Contemporary Amperex Technology, BYD Auto, and Gotion High-Tech, are Chinese companies. 

Still, it’s important to understand the difference in applications when thinking about the emergence of certain chemistries. For example, Tesla will be using LFP batteries in its Chinese Model 3s, which could mean a reduction in EV cost, but as LFP batteries are relatively less energy dense than, say, nickel manganese cobalt (NMC) packs, this could also mean reduced driving range. Lower range in EVs might not make a huge difference for heavily urbanized cities; however, many drivers in the US prioritize higher ranges, so unless LFP pack design is made to be very efficient, NMC and nickel cobalt aluminum batteries may still be the top choice for many EVs. Stationary systems have different requirements, and LFP batteries are a suitable option for many systems in remote areas that are sited in high temperature environments. 

The US Plans for Supply Chain Success

In 2021, the Biden administration announced Executive Order 14017, which directed government agencies to assess global battery supply chains to understand domestic vulnerabilities and opportunities. Since then, the administration has also published a guide on investments and R&D efforts to support bolstering the domestic supply chains. This blueprint outlines major goals that are meant to secure long-term competitiveness for the US as a major player in the battery value chain. Objectives range from mineral extraction, battery cell design R&D, and sustainable methods of recycling and reuse.

Overall, the US has certain advantages and disadvantages in the global playing field. The country has vast natural resources, a large amount of capital, and skilled labor. However, it has a lack of centralized federal approaches to supply chains and a high cost of labor and manufacturing. Historically, the US has relied on private sector market forces to drive development and innovation forward for battery technology. Based on the published blueprint, there appears to be a larger emphasis on the role of the public sector and regulatory frameworks to continue carving out a competitive edge for the US. Going forward, it will be interesting to observe how different countries carry out their own strategies for success.