Join us as we delve into how strategic policy decisions, next-gen battery technology, & learning from China’s recent success can help the U.S. position itself as a leader in the battery market!
Contact: Betsy Barry
Communication Manager
706.206.7271
betsy.barry@acculonenergy.com
In recent years, the U.S. has undergone a significant policy shift as it attempts to reshape its economic and geopolitical landscape with respect to manufacturing and supply chains. Under the Biden administration, three central objectives have emerged, each targeting different yet interconnected challenges facing the nation. These goals are:
- De-risking from China’s dominance over key manufacturing sectors and supply chains, to address overreliance on products such as lithium-ion batteries and critical materials such as cobalt.
- Revitalizing U.S. manufacturing to restore lost jobs and boost domestic resilience.
- Accelerating the shift to sustainable power sources to mitigate the effects of climate change and comply with global carbon goals.
What does all of this mean for the battery industry? A lot, as it turns out. It is no secret that the U.S. has fallen behind global leaders in the battery industry. China currently dominates the global lithium-ion battery market, holding an estimated 70-90% of market share across the entire supply chain. This includes every stage from raw material extraction and processing to cell production and assembly, creating a significant concentration of control that reinforces China’s leadership in the sector. The vast production capacity that China has developed has led to an overcapacity of around 400% in the global market, allowing Chinese battery producers to achieve economies of scale and a substantial cost advantage over competitors. This edge makes it challenging for other nations, including the US, to compete in the current lithium-ion battery market structure.
Despite the realities of the current global battery market, the U.S. is making strides even though currently, research suggests that it may be impractical for the United States to try to catch up to China in conventional lithium-ion battery production, given China’s established infrastructure, access to resources, and market dominance. Also, the changing priorities of the incoming administration will no doubt impact the US’s place in the energy storage industry worldwide.
Political landscape notwithstanding, one strategy for the US to consider is to shift its focus toward next-generation battery technologies, such as solid-state, high-power lithium and sodium-ion technology. These advanced technologies offer potential breakthroughs in energy density, safety, longevity, and in some cases, a more secure supply compared to traditional lithium-ion batteries, and represent an area where the US and companies like Acculon Energy are full steam ahead in research and development.
To challenge China’s current dominance within the global battery market, the U.S. can learn from China’s advantages from vertical integration. Developing a strategy that addresses all aspects of the battery industry, not just cell manufacturing, but energy storage system component production as well.
Although the U.S. has a good start in the research of these emerging technologies, other countries, especially China and other Asian nations, are making rapid advances and increasing their investments in next-generation batteries as well. To maintain its lead, the U.S. government could prioritize additional targeted funding and incentives to support domestic development and manufacturing of next-generation batteries. Furthermore, establishing protected markets for these US-produced batteries through public procurement could help American companies scale up their production capabilities and establish a foothold in the next-generation battery market. Investment in domestic manufacturing impacts domestic supply chains, creating a productive feedback loop for the U.S. battery industry to emerge as a serious global player.
Speaking of supply chains, the U.S. could learn a thing or two from China, like focusing on the entire battery value chain: China’s global market share dominance is due to its control across every stage of the lithium-ion battery value chain, from mineral extraction and processing to battery cell manufacturing. This vertical integration has given China a significant cost advantage and control. The U.S. can learn from this approach by developing a comprehensive strategy that addresses all aspects of the battery industry, not just cell manufacturing, but energy storage system component production as well.
Interestingly enough, China also provides a textbook example of how a nation lacking expertise in a critical market can partner with foreign incumbent players to encourage gradual tacit knowledge transfer. This is essentially what has happened in the auto industry, whereby global automotive OEMs entered the Chinese market via local joint ventures to capture unmet demand for cars all while spurring the advancement of Chinese automaker’s overall capabilities. Encouraging investment in battery manufacturing in the U.S. from existing Chinese battery manufacturers, at the very least, needs to be weighed across the United States’ carbon, security, and economic goals.
Looping back to policy, China’s massive battery production capacity, exceeding global demand by 400%, has enabled it to flood the market with low-cost batteries, creating a formidable barrier to entry for competitors in the US. This strategy highlights the importance of scaling up production quickly and efficiently to achieve cost competitiveness in the battery market. While the U.S. has made recent investments in battery production, it needs to significantly increase its efforts to match China’s scale. China’s success has been heavily driven by government subsidies and support, which have enabled its companies to build massive factories. This suggests that government intervention can play a crucial role in fostering the growth of the domestic battery industry, which we are also seeing in the US. But while the U.S. has implemented policies to incentivize domestic battery production, the U.S. could mirror China’s aggressive approach to give domestic companies a leg up.
By concentrating efforts on these advanced battery technologies, and by learning from China’s playbook, which has seen it dominate the global battery industry, the U.S. could loosen China’s existing stronghold in lithium-ion batteries and position itself as a leader in the future battery market. This strategy could not only create a competitive advantage for the U.S. but also foster a resilient domestic supply chain less dependent on foreign production, which would ultimately traverse any one administration or political environment, promoting a multi-pronged approach to transitioning to sustainable power sources through advanced energy storage technologies.