Business

Biden’s EV Battery Boom Is Coming — Whether Trump Wants It Or Not

December 17, 2024

Aggressive funding for battery tech by the Biden administration and big bets by carmakers will keep the clean energy transition moving. But Trump’s China tariff plans could complicate access to critical battery materials.

_By_{Alan Ohnsman}_{, Forbes Staff}

In2022, President Joe Biden signed the Inflation Reduction Act, the single biggest effort to combat climate change in American history. President-elect Donald Trump has pledged to gut it, deriding it as part of the “green new scam.” But because the IRA has already pumped billions of dollars into clean energy projects across the country, especially battery-related ones — much of it to red states — he’s unlikely to pull it off. On this matter, there is little he can do to slow Biden’s agenda.

Much of the $400 billion of IRA funds for clean energy, and some from the Bipartisan Infrastructure Law, have already been disbursed as multibillion-dollar loans and grants that Trump can’t undo. “For the battery industry, $110 billion has been handed out and can’t be repealed,” Simon Moores, CEO of London-based Benchmark Mineral Intelligence, told Forbes. “The vast majority will come online during the Trump 2.0 years, so whether President-elect Trump likes it or not, he will oversee the great U.S. battery boom.”

But that’s no guarantee that America’s growing electric vehicle industry will keep surging under the incoming president. One challenge is the potential elimination of $7,500 tax credits for EV purchases that help keep them more affordable. A bigger one may be Trump’s threat of levying 60% tariffs on Chinese goods. While many electric vehicles sold in the U.S. are built here, the vast majority of their battery components and materials come from China. And if Trump goes through with his tariffs, that would cause costs to skyrocket — stalling U.S. EV sales and keeping China the world’s dominant maker of batteries (not to mention EVs, solar panels and wind turbines).

Elon Musk’s influence over Trump’s policies on batteries and clean energy is unclear.

PHOTO BY BRANDON BELL/GETTY IMAGES

Cutting U.S. reliance on critical minerals and materials sourced from China – many of which are also important for military hardware – is why the Biden administration also doled out funds to build up a domestic supply base for battery materials, including refining of lithium and graphite and production of anodes and cathodes. It’s nascent, but promising.

The key point for us is that we continue to believe America is the most important market for our company.”

General Motors, Hyundai, Toyota, Honda, Ford, Rivian, Stellantis, Tesla, Volvo and battery components companies like Redwood Materials are capitalizing on the government funds by building new U.S. EV and battery plants, with an estimated 40 factories under construction that begin opening in 2025. These include Panasonic’s $4 billion battery plant in Kansas, Honda’s $3.5 billion battery venture with LG Energy Systems in Ohio and Hyundai’s $5.5 billion “Metaplant” in Georgia that will produce EVs, plug-in hybrids and hybrids as well as their lithium-ion batteries starting in early 2025. Unlike some of the more recent announcements, the South Korean auto giant didn’t greenlight that plant because of Biden’s green energy push.

“We decided to invest in America during the previous Trump administration,” Jose Muñoz, who becomes Hyundai Motor’s new CEO in January, told Forbes. “We decided to invest in what we call the Metaplant before the IRA. The key point for us is that we continue to believe America is the most important market for our company.”

Red State Battery Boom

Despite Trump’s pledge to halt federal climate action and roll back myriad environmental regulations, all this battery investment aligns with other parts of his domestic agenda. Namely, bringing more manufacturing jobs back to the states, and keeping the United States strong against China. And it certainly doesn’t hurt that many of the new battery factories are popping up in red states that he carried in the election – with 19 out of 25 plants in Republican Congressional districts. General Motors alone has committed more than $4 billion to battery ventures, all in states Trump carried in the 2024 election.

Hyundai Motor’s Metaplant opens in Ellabell, Georgia, in early 2025.

“GM has built an electrification powerhouse, which is churning out millions of battery cells with precision and quality made here in the United States in places like Michigan, Ohio and Tennessee,” said Kurt Kelty, vice president of the automaker’s battery and cell pack unit.

For the companies building these plants, it’s not just about getting government money. Kelty, a Tesla veteran who helped build up its U.S. battery operations, said investing in U.S.-based manufacturing helps drive down costs and boosts GM’s global competitiveness by reducing 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.

Underscoring the rush of big battery investments into Republican states, the Biden administration on Monday finalized a $9.63 billion federal loan for three joint-venture plants Ford and South Korea’s SK are building in Kentucky and Tennessee.

Nearly half of Tesla’s vehicles are sourced from China

Tesla is a good case study for a company deeply reliant on Chinese manufacturing and materials. Elon Musk’s EV maker, which currently operates the largest battery factory in the U.S., in Nevada, opened its Shanghai production operations in early 2020. That gave it access to low-cost Chinese components and batteries from companies like CATL, the world’s biggest battery maker, as well as cheaper labor. Now, nearly half of Tesla’s vehicles are sourced from China, many of which are exported, though its once booming sales there are slowing. Competition from BYD has grown especially fierce, which now outsells in China and is likely to pass Tesla to become the world’s top EV seller in 2024 for the first time. (Its cars aren’t available in the U.S. only because the government has enacted a 100% protective tariff against Chinese EVs).

Musk’s influence over Trump is a wild card: The Tesla CEO is one of the primary beneficiaries of the federal EV rebate, as well as programs aimed at curbing carbon pollution that Trump similarly wants to cut. The world’s wealthiest man, who threw hundreds of millions of dollars behind the president-elect, certainly would like to see cheaper components costs and battery materials for Tesla’s electric vehicles. No carmaker has benefited more from government aid, from the $465 million loan Tesla got from the Obama administration in 2010 for its first plant to the more than $10 billion it’s booked from selling pollution credits under U.S., EU and California programs.

“It may feel like the Democrats and Republicans are on the opposite sides of the argument, with EVs and batteries they are more aligned than you think. And the unholy alliance between Trump and Musk ensures that.”

Hyundai’s Muñoz and Benchmark’s Moores are holding out hope that Musk will convince Trump not to make policy changes that are too dramatic.

“It’s true the IRA may be dismantled, but for the battery space we’re now shifting from a publicly funded movement to an industry-funded one,” Moores said. “So while it may feel like the Democrats and Republicans are on the opposite sides of the argument, with EVs and batteries they are more aligned than you think. And the unholy alliance between Trump and Musk ensures that.”

Mineral Mastery

To build batteries in the U.S., companies need the materials to do so. That’s where Tesla cofounder JB Straubel has seen an opportunity. In 2017, he founded Redwood Materials, which started out recycling old lithium batteries to recover high-value metals to make new ones, with ambitions to also become a dominant supplier of battery components like anodes and cathodes. Based in Carson City, Nevada, the startup got a $2 billion low-interest loan from the Biden Administration to expand domestic production of battery materials and components. Straubel, who set up Tesla’s Gigafactory in Nevada before striking out on his own, is pouring $5 billion into materials recycling plants in Nevada and South Carolina.

“One of the opportunities I saw early on … was to help architect that for the whole industry,” Straubel said at Benchmark’s conference in Los Angeles last month. “This is a fundamental opportunity across the whole electrification industry – for cars, trucks, even stationary power – to architect that business ecosystem, figure out how to technically refine and reintroduce these materials. I just saw this huge gap. I mean there were no [U.S.] companies owning that.”

Right now, batteries made in the U.S. fully rely on materials from China including refined lithium, graphite and cobalt, as well as cathode and anode material, as there’s virtually no domestic alternative. The U.S. is far behind here, which is why the Biden administration has funded a range of battery materials and recycling projects, including $3 billion doled out in September for 25 projects in 14 states (a dozen of which Trump won last month).

“We are not going to be better than China at what China’s good at. We can be better than China at the things that we’re good at and we can innovate our way into competing in a lot of other things too”

There’s broad political agreement that the U.S. needs to dramatically scale up domestic sourcing of key minerals like lithium, cobalt, nickel and graphite, not just because they’re needed for low-carbon technologies but also because they’re essential for military equipment. During his first term, Trump signed the Energy Act of 2020, which prioritized domestic sourcing of critical minerals, and Biden expanded that to include procuring them from allies.

Redwood Materials is building a $1 billion plant to make cathode and anode material for electric car batteries that opens in 2025.

Redwood Materials

Elimination of existing federal programs enacted under Biden would only put the U.S. even farther behind China, which manufactures more than half of the world’s batteries, solar panels and wind turbines, according to the Carnegie Endowment for International Peace. It’s short-sighted in the near term and dangerous long term, economically and environmentally, said billionaire investor Tom Steyer.

He wants to see continued support for cheaper, next-generation materials for batteries and digital manufacturing to help the U.S. match China’s lower production and labor costs. “We are not going to be better than China at what China’s good at. We can be better than China at the things that we’re good at and we can innovate our way into competing in a lot of other things too,” Steyer told Forbes.

Rather than scrapping the IRA, Redwood’s Straubel is hopeful that Trump will make adjustments that improve the law. In particular, he’d like to see modifications to prioritize the refining of key materials and components, not just EV rebates and incentives for battery pack assembly.

“We could be more strategic and say, ‘Okay, how can we match what the new administration is trying to achieve with a more strategic approach, a balanced effort that actually benefits the whole industry and benefits the U.S. strategically?’” Straubel said. “I think there is a path that could make the IRA even more effective at some of its original goals and still be very effective to the whole industry and to the Trump administration without just slashing and burning it and leaving things in chaos or disarray.”

“They have massive capacity at home, and no one’s really making a lot of money in China”

Biden’s push to fund battery manufacturing isn’t over yet. In its final weeks, his administration is continuing to dole out funds, including 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.

While they would raise the costs of domestic EVs, Trump’s tariffs could also encourage Chinese battery makers to come build plants in the U.S. too. The U.S. market is core to their own growth. “They have massive capacity at home, and no one’s really making a lot of money in China,” said Michael Dunne, a long-time analyst studying Chinese auto manufacturing. “So they do need access to Europe and the United States.”

Robin Zeng, who leads China’s CATL, the world’s largest battery maker, recently said his company would set up a major U.S. plant to make cheaper batteries for electric vehicles if the Trump administration permits it.

“Originally, when we wanted to invest in the U.S., the U.S. government said no,” Zeng, with a net worth Forbes estimates at $23 billion, told Reuters last month, ostensibly over national security risks. But during the campaign, Trump said in August, “If China and other countries want to come here and sell the cars, they’re going to build plants here, and they’re going to hire our workers.”

Zeng is encouraged by that. “I do hope that in the future they are open to investments.”