The production of electric vehicle batteries is among the greatest vulnerabilities in the global supply chain as China enjoys a near monopoly at the top of a hierarchical network. To adequately counter China’s dominance over the sector, the US should turn to allies in East Asia, think tank Pacific Forum says in a report.
Global battery production is set to surpass one terawatt-hour for the first time in 2023. Much of that growth has taken place in China. Unlike in sectors such as pharmaceuticals, semiconductors, or even critical minerals, the American auto sector has repeatedly failed to develop a viable mass market for electric vehicles (EV). As a result, much of the value chain, including lithium-ion batteries, resides in China or other parts of East Asia. Despite the size of the US market, it houses none of the world's top 10 battery manufacturers.
Recognizing this limitation, the Biden administration included the battery sector as one of the “national security interests” in its supply chain review. Subsequently, the sector became one of the largest recipients of government benefits under the Inflation Reduction Act (IRA) and Bipartisan Infrastructure Law (BIL). Both policies rely heavily on America's technologically savvy partners, such as Japan and South Korea, to succeed. In this third paper of a series on friend-shoring, Akhil Ramesh and Rob York of the Pacific Forum trace the exponential growth of China's battery sector and assess the role Japan and South Korea can play in the diversification of this strategic industry, before concluding with suggestions on how the US can bolster its domestic manufacturing capabilities.
Comments