Biden's Expansion of Electric Vehicle Batteries Is Imminent – Regardless of Trump's Preferences
Aggressive Investment in Battery Tech by Biden Administration and Automakers Boosts Clean Energy Transition
Biden's Expansion of Electric Vehicle Batteries Is Imminent – Regardless of Trump's Preferences
2022, President Joe Biden signs the Inflation Reduction Act, marking the biggest push against climate change in American history. President-elect Donald Trump has vowed to dismantle it, labeling it as part of the “green new hoax.” However, due to the IRA's allocation of billions to clean energy projects nationwide, particularly in the battery sector – many of which are in red states – Trump's promise might be difficult to keep. In this area, his influence is limited.
Much of the $400 billion allocated by the IRA for clean energy and some funds from the Bipartisan Infrastructure Law have been distributed as large-scale loans and grants. These cannot be nullified by Trump. As Simon Moores, CEO of Benchmark Mineral Intelligence, stated to Our Website, "For the battery industry, $110 billion has been provided and cannot be rescinded. The majority will be operational during Trump's second term, so whether President-elect Trump agrees or not, he will oversee the U.S.'s significant battery growth."
This, however, does not guarantee uninterrupted growth of the growing U.S. electric vehicle industry under the incoming president. One concern is the potential removal of the $7,500 tax incentives for EV purchases, maintaining their affordability. A more significant issue might be Trump's proposed 60% tariffs on Chinese goods. While many EVs sold in the U.S. are domestically produced, most of their battery components and materials originate from China. Implying these tariffs could dramatically increase prices, hampering U.S. EV sales and maintaining China as the go-to manufacturer for batteries (as well as EVs, solar panels, and wind turbines).
Decreasing U.S. reliance on critical minerals and materials sourced from China – several of which are also crucial for military hardware – is one reason the Biden administration allocated funds for bolstering a domestic supply chain for battery materials. This includes lithium and graphite refining, anode and cathode production. This is a budding sector, yet promising.
The primary takeaway is that the United States remains a significant market for our business."
General Motors, Hyundai, Toyota, Honda, Ford, Rivian, Stellantis, Tesla, Volvo, and battery component companies like Redwood Materials are leveraging government funds to construct new U.S. EV and battery plants, with an estimated 40 factories in development to start operation in 2025. Notable examples include Panasonic's $4 billion battery plant in Kansas, Honda's $3.5 billion battery partnership with LG Energy Systems in Ohio, and Hyundai's $5.5 billion "Metaplant" in Georgia, which will manufacture EVs, plug-in hybrids, and hybrids, along with their lithium-ion batteries, starting in early 2025. Unlike the recent announcements, Hyundai did not authorize the plant due to Biden's green energy initiative.
“We chose to invest in America during the Trump administration,” Hyundai's future CEO, Jose Munoz, told Our Website during the transition period. “We decided to invest in what we call the Metaplant before the IRA. The primary takeaway for us is that the United States remains the most significant market for our company.”
Battery Boom in Red States
Despite Trump's pledge to halt federal climate action and dismantle numerous environmental regulations, this battery investment aligns with several aspects of his domestic agenda. Specifically, bringing manufacturing jobs back to the U.S., and keeping the country strong against China. Plus, it's advantageous that many new battery factories are popping up in red states Trump won during the election – with 19 out of 25 plants located in Republican Congressional districts. General Motors alone has committed over $4 billion to battery investments, all in states Trump won during the 2024 election.
“GM has developed an electrification powerhouse, producing millions of battery cells with precision and quality in the United States, in places like Michigan, Ohio, and Tennessee,” said Kurt Kelty, vice president of the automaker's battery and cell pack division.
For companies building these plants, it's not just about securing government money. Kelty – a Tesla veteran who built up its U.S. battery operations – noted that investing in domestic manufacturing reduces costs and bolsters GM's global competitiveness by lessening reliance on imports. “The investments we've made and will continue to make towards battery innovation, vertically-integrated cell development, and local production with a skilled workforce, will strengthen GM's position,” he said.
Significantly underscoring the surge of major battery investments into Republican states, the Biden administration on Monday approved a $9.63 billion federal loan for three joint-venture plants Ford and SK are developing in Kentucky and Tennessee.
Tesla, with its heavy reliance on Chinese manufacturing and materials, serves as an intriguing case study. Elon Musk's electric vehicle company, operating the largest battery factory in the U.S. (located in Nevada), initiated its Shanghai production operations in early 2020. This move granted Tesla access to affordable Chinese components and batteries from firms like CATL, the world's leading battery manufacturer, as well as cheaper labor. Currently, around half of Tesla's vehicles are sourced from China, which also exports a significant portion. Despite initial booming sales in China, they've started to slow down. Competition from BYD has intensified, with BYD now outperforming in China and likely to surpass Tesla to become the world's top electric vehicle seller in 2024. (It's worth noting that BYD's cars are not yet available in the U.S. due to a 100% protective tariff imposed by the government on Chinese electric vehicles.)
Musk's influence on Trump is unpredictable: The Tesla CEO benefits greatly from federal EV rebates and programs aimed at reducing carbon pollution, areas that Trump also aims to reduce. Given his financial backing of Trump, Musk would undoubtedly appreciate cheaper component costs and battery materials for Tesla's electric vehicles. No automaker has profited more from government aid, from the $465 million loan given to Tesla for its first plant in 2010 to the more than $10 billion in revenue generated from selling pollution credits under U.S., EU, and California programs.
"It might seem like Democrats and Republicans are polar opposites when it comes to EVs and batteries, but they're more aligned than you might think. And the unlikely alliance between Trump and Musk ensures this."
Hyundai's Muñoz and Benchmark's Moores remain optimistic that Musk can persuade Trump to avoid drastic policy changes.
"While it's true that the IRA might be dismantled, we're transitioning from a publicly funded industry to a privately funded one for the battery space. So, although it might appear that Democrats and Republicans are at odds, with EVs and batteries they're more aligned than you might think. And the unlikely alliance between Trump and Musk ensures this."
Mastery of Minerals
To manufacture batteries in the U.S., obtaining necessary materials is crucial. Tesla co-founder JB Straubel identified an opportunity in this area. In 2017, he established Redwood Materials, focusing initially on recycling old lithium batteries to recover high-value metals for new batteries, with ambitions to become a leading supplier of battery components like anodes and cathodes. Based in Carson City, Nevada, the startup received a $2 billion low-interest loan from the Biden Administration to enhance domestic production of battery materials and components. Straubel, who set up Tesla's Gigafactory in Nevada before starting his own venture, plans to invest $5 billion towards materials recycling plants in Nevada and South Carolina.
"Early on, I saw the opportunity to help design this for the entire industry." Straubel said during Benchmark's conference in Los Angeles last month. "This is a significant opportunity across the entire electrification industry – for cars, trucks, and even stationary power – to develop and reintroduce these materials. I saw a huge gap. There were no [U.S.] companies owning that."
Presently, batteries produced in the U.S. rely entirely on materials sourced from China, including refined lithium, graphite, and cobalt, as well as cathode and anode material. The U.S. lags significantly behind, hence the Biden administration's funding of various battery materials and recycling projects, including $3 billion allocated in September for 25 projects in 14 states (12 of which Trump won in the recent election).
"We're not going to beat China at what China is good at, but we can excel at things we excel at and innovate to compete in many other areas."
There's a broad consensus that the U.S. must significantly boost domestic sourcing of critical minerals like lithium, cobalt, nickel, and graphite, not just for low-carbon technologies but also for military equipment. During his first term, Trump signed the Energy Act of 2020, prioritizing domestic sourcing of critical minerals, and Biden expanded this focus to include sourcing from allies.
Eliminating existing federal programs enacted under Biden would only widen the U.S.-China gap, as China manufactures more than half of the world's batteries, solar panels, and wind turbines, according to the Carnegie Endowment for International Peace. This near-term shortsightedness and long-term risk, economically and environmentally, are criticized by billionaire investor Tom Steyer.
He advocates continued support for affordable next-generation materials for batteries and digital manufacturing to help the U.S. match China's lower production and labor costs. "We're not going to beat China at what China does best, but we can excel at what we do best and innovate to compete in many other areas." Steyer said in an interview with Our Website.
Rather than dismantling the IRA, Redwood's Straubel hopes that Trump will make necessary adjustments. Specifically, he'd like to see changes focusing on refining key materials and components, not just EV rebates and incentives for battery pack assembly.
"Perhaps we should approach this strategically and consider, 'How can we align with the new administration's objectives while also benefiting the entire industry and the U.S. strategically?'" suggested Straubel. "I believe there's a path that could enhance the IRA's effectiveness in achieving its initial goals without dismantling it entirely and leaving chaos or disarray in its wake."
"They have substantial production capabilities at home, yet few are profiting greatly in China."
Biden's initiative to finance battery production isn't quite finished yet. In its final stages, his administration continues to distribute funds, such as a $6.6 billion loan for Rivian's EV plant in Georgia and $7.5 billion for two Stellantis joint-venture battery plants in Indiana.
Although they might increase the cost of domestic EVs, Trump's tariffs could potentially lure Chinese battery manufacturers to establish plants in the U.S. The U.S. market is crucial for their expansion. "They have substantial production capabilities at home, yet few are making a significant profit in China," said Michael Dunne, an analyst with extensive experience in Chinese auto manufacturing. "Therefore, they require access to Europe and the United States."
Robin Zeng, the head of China's CATL, the world's leading battery manufacturer, recently expressed interest in establishing a significant U.S. plant to produce cheaper batteries for electric vehicles if the Trump administration approves it.
"Initially, when we considered investing in the U.S., the U.S. government rejected our proposal," Zeng, with an estimated net worth of $23 billion according to Our Website, revealed to Reuters last month, citing national security concerns. However, during his campaign, Trump stated in August, "If China and other countries wish to sell vehicles here, they must construct plants here and hire our workforce."
Zeng is optimistic about this. "I do hope that, in the future, they welcome foreign investments."
- The Inflation Reduction Act, signed by President Joe Biden in 2022, allocated billions to cleantech projects, including the battery sector, with many projects located in red states, which Trump won during the election.
- General Motors has committed over $4 billion to battery investments in states Trump won, following the allocation of funds from both the IRA and the Bipartisan Infrastructure Law.
- Tesla, despite its heavy reliance on Chinese manufacturing and materials, could potentially benefit from Trump's proposed tariffs on Chinese goods due to the increased costs of EV batteries, leading to a possibility of Chinese battery manufacturers setting up plants in the U.S.
- Elon Musk, Tesla's CEO, and Hyundai's future CEO Jose Munoz, expressed optimism that Musk can persuade Trump to avoid drastic policy changes, as they believe Democrats and Republicans are more aligned on EVs and batteries than people might think.
- JB Straubel, Tesla co-founder and Redwood Materials CEO, received a $2 billion low-interest loan from the Biden Administration to enhance domestic production of battery materials and components, aiming to reduce the U.S.'s reliance on materials sourced from China.