A battery module for an EV or hybrid car sits on the production line. Advanced batteries are essential to scaling domestic EV manufacturing and strengthening US economic competitiveness. (Shutterstock/IM Imagery)

Getting Out of Our Own Way: Overcoming Barriers to Scaling Domestic EV Production

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America’s EV industry faces policy uncertainty, supply chain weaknesses, and Chinese competition that threaten domestic battery production and long-term economic competitiveness. 

Advanced batteries have become key building blocks of the 21st-century economy. They are now deployed in drones, data centers, consumer electronics, the energy grid, and of course, electric vehicles (EVs).  

As we emphasized in our first piece, it is this last category—EVs—that are responsible for the majority of demand for advanced batteries. If the United States wants to have viable domestic manufacturing of advanced batteries, it needs a thriving EV sector; it’s that simple.  

Unfortunately, there are still an array of economic, technical, and political obstacles to scaling EV production in America and achieving the many downstream benefits it would provide for the US job market and the country’s economic competitiveness. We lay out those challenges in this piece. Our third and final piece in this series will outline the most efficient, politically viable policy measures that will likely be needed to overcome them.  

The Uncertain Economics of the American EV Market

For more than a century, the American auto industry excelled at designing, manufacturing, and marketing vehicles powered by the internal combustion engine. Unfortunately for Detroit, and America writ large, the traditional engine is now being replaced by batteries, electronics, and software. The challenges to building a competitive vehicle are now defined by chemistry, computing, and supply chains—all areas where America enters the competition with significant disadvantages vis-à-vis China.  

An EV’s battery alone accounts for 30 to 40 percent of its total cost. Producing those batteries requires a complex set of supply chains, stretching from lithium mines and nickel refineries to cathode and anode materials, separators, electrolytes, and precision manufacturing equipment. China spent two decades building that ecosystem while the United States dithered. 

During the Biden administration, Republicans and Democrats recognized the importance of de-risking battery and mineral supply chains and created economic incentives to encourage the private sector to do so. The CHIPS and Science Act, the Bipartisan Infrastructure Law (BIL), and the Inflation Reduction Act (IRA) measures were all intended to reduce reliance on China through on-shoring and ally-shoring of manufacturing and supply chains in key areas,........

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