America's Dependence On Overseas Batteries Has To Stop

Apr. 05, 2021 1:20 PM ET by Jay Traugott Industry News / 16 Comments

Political opposition is nothing compared to this.

Automakers are racing to launch new electric vehicles. Last weekend, the GMC Hummer EV SUV was revealed and the Audi Q4 e-tron is due later this month. General Motors has already committed itself to an all-electric future and the Volkswagen Group, Audi's parent company, is expected to do the same. Jaguar and Volvo have already done so as well.

While not everyone is on board with battery electrics taking over from combustion-engined vehicles, there's still some political opposition. But that's nothing compared to what could be the biggest hurdle. The Washington Post reports President Biden's extremely ambitious $2.25 trillion infrastructure plan, which includes pushing the country at a greater pace towards electric vehicles, could be hindered by a weak battery supply chain.

There may not be enough batteries to go around. A shortage is already happening and this could get worse if South Korean battery suppliers, SK Innovation and LG Energy Solution, can't resolve a disagreement over a battery plant in Georgia. It could close in the near future if there's no resolution. Ford and VW are planning to sell a combined 340,000 EVs over the next few years, and keeping the plant open is critical.

Basically, LG accused SK of stealing trade secrets and the US International Trade Commission sided with LG. Biden has only until April 11 to overturn the ITC's decision. The bottom line is that Biden must ensure a consistent, long-term battery supply chain in order for his EV goal to be achieved. However, the dispute between those two manufacturers is not the only problem.

The US lacks China's ability to grab rare minerals, such as lithium and cobalt, that are required for batteries. China currently owns 40 percent of the world's cobalt and over 90 percent of what's dug up goes back to China. Some startup companies, eager to receive government funds, are proposing everything from digging up those minerals from the ocean surface to altering battery chemistry completely. The first issue will be problematic for environmentalists, many of whom hold key roles in the White House and Biden's cabinet. The latter offers no guarantee of success.

The main takeaway here is that the battery business is a rough and tough one with very tight margins and major risk. That's why resolving the LG-SK dispute is a must. And that's only the first step towards the US divorcing itself from overseas battery suppliers.