The electric vehicle world is abuzz with concern over falling U.S. sales, Tesla recalls and layoffs, and, crucially, the announcement of tariff hikes on Chinese electric vehicles and materials.
But a new report from the Clean Investment Monitor (a joint Rhodium Group and MIT Center for Energy and Environmental Policy Research project) provides some good news. Fueled by federal policies like the Inflation Reduction Act, the CHIPS and Science Act, and the infrastructure law, the increase in domestic production of batteries appears to be enough to meet U.S. demand in the short-term — even without Chinese imports.
- The top line: With tariff increases on Chinese EVs and batteries set to go into effect later this month, U.S. battery and EV manufacturers are scaling their operations rapidly. A new report from the Clean Investment Monitor found that by 2030, supply of batteries for EVs is expected to not just meet but outstrip projected demand. Demand for EVs themselves, though, is still projected to be higher than supply by the end of the decade.
- The nuts and bolts: Announced by the Biden administration last month, the updated Section 301 tariffs under the Trade Act of 1974 will tax $18 billion worth of Chinese goods including China’s “new three” export drivers: EVs, batteries and battery components, and solar panels. Tariffs on imported EVs will skyrocket from 25% to 100%, and those on imported lithium-ion batteries will jump from 7.5% to 25%.
The tariffs on Chinese EVs are much more stringent than those on batteries and battery components, though very few Chinese EVs are even sold in the U.S. The others will phase in over time.
Separately, solar modules too will increase from 25% tariffs to 50% this year to guard against an influx of low-cost Chinese solar materials, as the U.S already struggles with a glut of artificially cheap solar that’s rapidly leading supply to outstrip demand.
Is the U.S. prepared?
China isn’t the only foreign EV and battery supplier from which the U.S. imports EVs and batteries — Europe, Korea, and Japan are other key players. But the high-profile tariff increase has sparked questions about domestic manufacturing capabilities, particularly as China and the EU enter discussions about forthcoming tariffs.
The Clean Investment Monitor report suggests that the manufacturing picture differs for batteries versus EVs.
Assuming all currently operated, under construction, or announced facilities come online as planned, battery supply is actually expected to eclipse projected EV-related demand by 2030.
That said, EV makers have some competition from storage and other battery applications. Rhodium and MIT project that stationary storage additions will amount to roughly 120 gigawatt-hours by 2030, regardless of policy changes. But even so, “announced domestic battery manufacturing capacity [should be] capable of meeting both EV and stationary storage demand, even if factories operate at a 80-90% of nameplate capacity,” the report found.
If EV demand falls short of current estimates, though, the report expects battery production to slow. And even if production remains as projected, these new factories are unlikely to produce batteries remotely as cheaply as China, at least for the foreseeable future.
Meanwhile, announced EV manufacturing capacity is expected to meet demand through 2027, but not through 2030.
“Given the average production timelines for new EV manufacturing facilities…provided they can source batteries, we would expect companies to announce additional domestic production capacity in the next several years if demand continues to track along Rhodium’s projections and the IRA incentives for EV purchases remain in place,” the report said.
Between 2021 and 2023, annual investment into the EV and battery supply chain grew by 184% following the IRA and the infrastructure law. Most capital centered on battery capacity, which is growing at a much faster rate than EV capacity; $128 billion has been invested into battery cell and module manufacturing since 2018.
If all of the announced battery manufacturing facilities meet their construction timelines, they could have a total nameplate capacity of nearly 1,300 gigawatt-hours of cells and modules.
Depending on the political atmosphere and vehicle production rates, the report found, U.S. EVs will require between 360 and 899 GWh of batteries by 2030. If all EV facilities successfully make their construction timelines, they could produce between 3.5 million and 4.4 million vehicles this decade.
Editor’s note: This story was updated on June 4 to clarify that the Clean Investment Monitor is equally a joint project of Rhodium Group and MIT’s Center for Energy and Environmental Policy Research (MIT CEEPR).
