In September, the US Department of Energy announced the latest round of funding to electrify the USA’s battery manufacturing industry. This second round of investment awards over $3 billion dollars to a spectrum of projects, from recycling and raw material processing to the construction of fuel cell manufacturing plants.
This funding package comes shortly after Japan announced a $2.4 billion cash injection for its own battery manufacturing sector, while the European Commission has pledged €3 billion to support “the most sustainable European battery manufacturers”.
Over recent years, the global battery market has become increasingly consolidated, with a handful of Chinese, South Korean and Japanese organisations holding over 90% of the market share. In 2023, China’s CATL produced 37.8% of all battery capacity globally.
This consolidation is closely tied to expansions in electric vehicle (EV) production. Electrical vehicles are the primary market for battery manufacturers – it is no coincidence that ‘The Battery Show’ is being held in Detroit this year, the USA’s ‘Motor City’. With increasing legislative pressure for vehicular electrification, battery prices are being squeezed to reduce EV prices. The cost of not meeting consumer price expectation has recently been felt in European markets, as a fall in EV demand has led to leading European battery maker Northvolt consolidating various production sites.
Consumer demand for low battery prices calls for an economy of scale that market giants in the Far East, such as CATL, BYD and LG, have answered. This growth saw lithium-ion battery prices half from 2014 to 2018, and prices have continued to fall to an all-time low towards the end of 2023.
Keeping up with the competition
For those outside of the dominant market leaders, the question now is how can they compete in an increasingly cost-competitive battery market?
Financial support is one key aspect of increasing competition, and the US, Japan and Europe have all recently announced a swathe of funding packages.
Japan’s focus is on subsidising its established automakers and battery industry, with Subaru and Mazda receiving support for joint projects with Panasonic, while Toyota and Nissan are given funding to fortify their existing production capacity. Toyota also have plans to invest in next-generation battery technology through their subsidiary Prime Planet Energy & Solutions, which focuses on solid-state and ‘prismatic’ batteries for applications beyond private vehicle electrification.
In the US, the recent round of funding (under the ‘Battery Materials Processing and Battery Manufacturing and Recycling Program’ of the Bipartisan Infrastructure Law) is split between some industry giants and a number of innovative start-ups. The funding is also directed to five key focus areas, each receiving a share of approximately $3.2 billion.
In this second round of the program, there is an emphasis on developing a strong material supply chain – with $1.66 billion going to companies working on extracting raw materials, recycling and separation/processing technologies. Notably, recycling projects receive a larger share than raw material extraction – highlighting the importance of the circular economy in the US’s overarching battery strategy.
As a single sector, component manufacturing takes home the largest share of the US’s funding, with the $1.1 billion being split between 11 organisations. As in Japan, while some of this is earmarked for ‘traditional’ cell manufacture (targeting the current EV market), a chunk is also reserved for innovative next-generation products, with new battery types and use-cases in mind.
For example, Forge Battery received funding to scale up their atomic layer deposition process for lithium-ion battery manufacture – with an eye on specialized battery markets, such as trucks, heavy-industry and aerospace. On a larger scale, Form Energy have received support to ramp up production of ‘iron-air’ batteries, intended for short-term grid scale storage – a rapidly growing sector set to enable the renewable energy transition. Also, Group14 Technologies, a world leader in silicon-based anodes, received $200 million to build a silane gas plant – needed to enable production of silicon anodes (amongst other green tech solutions, such as silicon-based solar cells).
What’s happening in Europe?
Focus on these next generation, high value battery technologies is also prevalent in Europe. In addition to the European Commission’s €3 billion pledge, the EU and UK have formally agreed to tariff-free trading on electric vehicles and batteries until at least the end of 2026. Meanwhile, the ‘UK Battery Strategy’, together with the Faraday Institution, recognises key future growth areas in the electrification of heavy good vehicles, ships and aircraft. Current battery technology isn’t practical for these applications, so innovative solutions are needed to meet their challenges.
More specialist, premium battery products can demand a premium price-tag, in contrast to the cost-conscious EV market. For innovators in this space, it has never been more important to protect their work effectively, with intellectual property rights such as patents allowing them to control commercialisation of the technology, and avoid the big players dominating new technologies by undercutting the innovators.
Government funding is playing a key role in starting and scaling innovative battery technology across the US, UK, and Japan, as well as many other countries. This confident public sector investment appears to be rallying private sector investment too, encouraging internal re-investment in battery technology as well as external funding.
As these investments are put to use with new factories, research and infrastructure, the scene is set for the diversification of global battery production, both in terms of geography and technology.
