Who Will Win the Age of Battery Nationalism?
Ford’s announcement signals a late U.S. bid to compete head-to-head with Europe and China
For Ford, the fear of a Kodak moment came January 28, when Mary Barra, CEO of rival General Motors, announced that as of 2035, her company aimed to be making only electric vehicles (EVs) for the consumer market. GM would continue to manufacture a heavy pickup or two with gasoline engines. But for GM, Barra said, the age of combustion was effectively over.
Exactly a week later, Ford CEO Jim Farley — who took the helm of the decidedly EV-skeptical company in October — announced he will double spending to develop EVs and autonomous vehicles. In remarks yesterday, Farley made clear he wasn’t going to watch Ford go the way of Kodak, swamped and made obsolete by new technology.
To be sure, Barra was herself making the same calculation, as have VW, BMW, and virtually every major automaker in the world — all diving into EVs under the threat of being eclipsed by Tesla and the electrification of the automobile industry.
But in recent months, the competition has much more clearly become geopolitical. In a nascent age of EV and battery nationalism, Europe is aggressively building a lithium-ion battery manufacturing industry alongside a slew of coming EVs. With Brexit now in force, the U.K. is competing with its own coming factory. China has been the most forceful of any combatant nation, putting the entirety of its formidable state and corporate resources behind a determined effort to dominate EVs, from the mines to the vast supply chain of parts companies to batteries and the vehicles themselves.
Notice of a U.S. intention to fight has come in a flurry over the last two weeks: On January 25, President Joe Biden gave the first signal, announcing a massive boost to the EV industry, saying he would replace the federal government’s fleet of 645,000 combustion vehicles with EVs and renew the $7,500 federal EV rebate that had expired for GM and Tesla because they had reached the sales threshold. Biden has also said the government will build 500,000 charging points around the country, a key requirement if a mass EV market is to develop.
It is not quite the scale of the decadelong Chinese effort, but combined with the GM and Ford announcements and the towering existing status of Tesla, a picture emerges of a credible U.S. bid in the EV and battery war. “After the GM EV shot heard around the world, Ford had to make an aggressive move or be left out of the EV party,” Dan Ives, an analyst with Wedbush Securities, told me. “This was an impressive move by Ford and ultimately speaks to the green tidal wave on the horizon under Biden. Biden in the White House changes the game, and Ford needed to make a major EV move.”
Given that Tesla is by far the biggest single player in the new industry, it may seem improbable that the U.S. finds itself at least a distant third behind in the game of EV and battery nationalism, depending on how you count. But it is less surprising when you consider the decadeslong history in which the U.S. has relinquished the leadership of the auto, electronics, and semiconductor manufacturing industries to Japan, South Korea, and China. John Goodenough, an American who teaches at the University of Texas, shared the Nobel Prize for his 1980 invention of the nervous system of the lithium-ion battery. But the battery was commercialized in Japan by Sony.
Over the last decade, China has moved to dominate the latest big, tech-led industry: EVs and the lithium-ion batteries that power them. Among Beijing’s moves has been to capture much of the global raw mineral supply used by the industry, according to a recent report by Securing America’s Future Energy, a Washington, D.C., think tank. China has contracted for about two-thirds of the cobalt production of the Democratic Republic of Congo, the world’s leading producer of the metal. It has contracted for 67% of both Chile’s and Australia’s production of lithium, as well as 41% of Argentina’s planned output.
Europe is in the game, too, but as a mark of who is in charge, Europe’s largest new battery plant is being built by CATL, China’s largest lithium-ion battery company. This is no small thing: The battery is the heart and single most valuable component of an EV. China already makes far more EV batteries than any other country, but its plans for 2030 are astonishing: China plans to have about 2,078 GWh of battery-making capacity, compared with 554 GWh for Europe, according to Benchmark Mineral Intelligence. North America, including Canada and Mexico, will have 382.
CATL is the Chinese company to watch. Currently, LG Chem, the South Korean company, has greater capacity than CATL. But by 2025, CATL plans to be the world leader with some 263 GWh of capacity, compared with around 180 for LG. The U.S. as a whole is currently at 41 GWh, mostly at Tesla’s gigafactory in Reno, Nevada, and is forecast to grow to about 128.
CATL goes back only a decade. It is a spinoff of Japan’s TDK and has been led from the beginning by Robin Zeng Yuqun, a reclusive trained physicist who is rarely seen in public settings. In 2015, China went ultra-nationalist in its quest to own the EV and battery space and decided to cut off South Korean battery leaders LG and Samsung SDI from the market and to cultivate a Chinese lithium-ion industry. In order to be part of that transformation, Zeng split off completely from TDK and made CATL wholly Chinese, which made the EVs into which his batteries went eligible for generous government subsidies. Foreign automakers, if they wanted to sell their vehicles in the Chinese market, were pressured to equip them with Chinese batteries. Only CATL had the expertise and capacity to serve them. “That’s how they became one of the most powerful battery companies in the world,” said Mark Newman, global battery analyst for Sanford C. Bernstein. Today, Zeng is worth $33 billion, according to Forbes, and he is pushing into Europe.
So how does the U.S. play the contest when it’s far in the rear? Laggard U.S. demand for EVs is a key reason for its failure to keep up with the construction of battery factories, Newman said. Last year, 46% of global EV sales were in Europe, 39% in China, and just 12% in the U.S. Tesla’s gigafactory accounts for most of the country’s lithium-ion production. LG has a plant in Holland, Michigan, and a new one going up in Lordstown, Ohio. SK Innovation, another South Korean company, is building a battery factory in Commerce, Georgia. That isn’t much, and apart from Tesla, the factories are all coming from overseas.
Will there be any more pure U.S. battery players? Brian Johnson, a technology analyst for Barclays, thinks so. Last evening, he wrote in a note to clients that he expects Ford to go into battery-making. Driven by the fast-moving events around EVs and batteries, Ford, he wrote, will either make the batteries in-house, buy a battery-maker, or form a joint venture. If so, one option is a bid for Solid Power, a Colorado-based solid-state battery startup in which Ford is already an investor.
For the U.S., creating a battery manufacturing industry has become a strategic imperative, says Robbie Diamond, president of Securing America’s Future Energy. “This is a pure economics and national security issue,” Diamond told me, “and will wake some people up.”