“The challenge to creating a competitive and sustainable battery manufacturing industry in the United States is immense, and the country needs to move fast.” U.S. DOE “National Blueprint for Lithium Batteries,” 2021

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Executive summary

As the world turns away from fossil fuels to embrace clean energy sources and combat climate change, lithium battery technology is becoming increasingly important to the competitiveness of the U.S. and other countries around the globe.

China currently dominates the global lithium battery supply chain. Upwards of 70% of the total global Li-ion battery manufacturing capacity is controlled by China.

Should China decide to throttle supply or dramatically raise prices, this would hurt the U.S. transportation and logistics sectors, which are quickly adopting lithium battery-powered electric vehicles.

To counter this threat, the Department of Energy is recommending a host of measures intended to bolster domestic supplies of raw materials and increase the country’s lithium refining and battery manufacturing capacities. However, the scale of real actions is far below what’s needed to even start to catch up with China.

U.S. automakers are investing billions in new industrial battery manufacturing plants to ensure capacity for their new passenger electric vehicles (EVs), but other segments, like industrial vehicles, are not.

Even so, it will take years for these facilities and policies to produce enough batteries to meet domestic demand.

The U.S. lagged behind China by 511 GWh/year in 2020, and given the current trend,  will lag behind China by over 1700 GWh/year in 2025. The investment of $1 billion in manufacturing yields an output of roughly 10GWh per year. Incremental investments in U.S. battery production to catch up with China will require $175 billion in the next three years.

A strong, concerted national response that puts the U.S. on the path to battery independence is needed now.


Like steam and the fossil fuels that powered the economies of the last two centuries, batteries are quickly becoming the go-to power source of the 21st century.

Because of climate change and other pressing environmental concerns, the world is embracing electricity as its main power source, especially for transportation, logistics, and consumer products. Batteries of all types will provide the critical bridge between the energy technologies of the past and those poised to power the future. This makes batteries in general, and the most advanced battery type in particular, lithium-ion batteries, critically important to the long-term economic prosperity of all countries, including the U.S.

According to the “National Blueprint for Lithium Batteries” published by the Department of Energy (DoE) in June 2021, “[t]he lithium-ion battery industry appears to be at a tipping point, with costs having decreased nearly 90% since 2010. This technology is disrupting transportation markets worldwide and has the potential to reshape global industries in the decades to come.”

Nowhere is this more obvious than in the market for electric vehicles. Sales of EVs are expected to boom in the coming years. U.S. automakers have stated that by 2030, 40–50%  of new vehicles sold in the U.S. (approximately 28 million) will be electric. This would be a massive increase from today’s paltry 2–4% market share.

And this is true not just for cars but for material handling equipment (MHE), as well. Fully 65% of all forklifts, lift trucks, and other MHE are electric today. While only about 7% are powered with lithium batteries, that number is expected to increase to 48% by 2028. This is because lithium batteries perform better, require less maintenance, and are more environmentally friendly than their lead-acid counterparts.

“There is pressure on companies today to electrify as a response to the global demand to reduce the CO2 footprint of operations,” said Emily Hersh, CEO of Luna Lithium. “Material handling will have to be more and more transparent about their own CO2 footprint.”

And, while portable electronics (smartphones, tablets, and laptops) are the most visible use-case, the demand for lithium batteries created by these products pales in comparison to that generated by the transportation, MHE, and grid-scale energy storage markets.

It is estimated that the U.S. alone will need 500,000 tonnes per year of unrefined lithium by 2034 just to power EVs. The U.S. produces just a fraction of that today. The current global production of lithium in 2020 was about 440,000 tonnes of lithium carbonate equivalent (LCE, contains about 18% of pure lithium), and not all of that is in pure enough form for batteries, according to Chris Doornbos, president, and CEO of E3 Metals Corp, a lithium extraction firm located in Calgary, Canada, which plans to produce battery-grade lithium hydroxide.

While unrefined lithium production is expected to triple by 2025, production is not likely to keep up with demand over the longer term, as countries such as India and states such as California mandate that large swathes of their transportation sectors go all-electric. Renewables also play a role. As utilities turn to renewable sources of electricity such as wind and solar, grid-scale electric storage will be required to balance grid frequency and supply power when these primary generation sources are idle. Most of this storage today (and for the foreseeable future) comes from massive lithium-ion battery farms.

According to the “National Blueprint,” “Bloomberg forecasts 3.2 million EV sales in the U.S. in 2028. With an average EV battery capacity of 100 kWh, 320 GWh of domestic lithium-ion battery production capacity will be needed just to meet passenger EV demand. Benchmark Mineral Intelligence forecasts the U.S. lithium-ion battery production capacity of 148 GWh by 2028,29 less than 50% of projected EV demand alone.

“These projections show there is a real threat that U.S. companies will not be able to benefit from domestic and global market growth, potentially impacting their long-term financial viability.”

China dominates the battery market

While the main producers of unrefined lithium for batteries are, in order of production, Australia, Chile, China, and Argentina, it is China that dominates the global market for lithium-ion battery production. (Half of the world’s lithium reserves are located in Bolivia.)

According to Prabhakar Patil, the former CEO of LG Chem Power, a leading provider of the lithium-ion cells that are used to create the lithium-ion battery packs that go into cars and MHE, the Chinese share of the battery market pipeline—from raw materials extraction to refining to producing battery cells and packs—was 60% in 2018. In just the last two years, they have captured an additional 12% of the global market and will dominate the battery market pipeline for the coming decade or more.

This dominance is not a fluke. Over the past decade, Chinese leaders have spent $60 billion cultivating a domestic transportation market for lithium batteries, according to David Deckelbaum, managing director for Sustainability & Energy Transition at the investment banking firm Cowen. Today, when one travels to China, EVs, including motorcycles and scooters, are everywhere. The closed-loop system they devised created massive demand that was met with domestic resources.

Even though U.S. policy-makers are well aware of China’s market dominance, and companies like Tesla, GM, and Ford have all announced plans to build new battery plants, it will be many years before the U.S. can catch up.

The risk of a Chinese-dominated battery market

The risks to the U.S. economy from dependency on China for batteries, while not existential, are substantial. According to the “National Blueprint,” “[b]attery development and production are strategically important for the U.S., both as part of the transition to a clean-energy economy, and as a key element of the competitiveness of the automotive industry.”

Through sales and servicing, the auto industry contributes $1.1 trillion to the U.S. economy and employs approximately 10 million people, or 5% of all U.S. jobs, the report states. Given that the U.S. is anticipating a five- to ten-fold increase in demand for batteries in the coming decade, any supply disruptions that lead to layoffs could have significant ripple effects throughout the economy.

Again, this applies to MHE vendors and suppliers, as well. Since lithium batteries are purpose-designed for each vehicle type they go into, they cannot be simply swapped out for a battery from another vehicle such as a car. So, if battery components such as cells are in short supply, MHE vendors will struggle to meet customers’ demand for more equipment. Prices could go up, along with wait times for delivery of the equipment they can provide.

We are seeing this dynamic play out today. The semiconductor shortage has idled automotive and truck production at North American assembly plants off and on for the past year.

There also is a national defense angle. The U.S. military, like everyone else, is finding more and more creative uses for battery-dependent technologies. Since the U.S. already relies on the rest of the world for most of its battery needs, without massive investment in domestic battery production and supply chains, the military could find itself short on supply if China decides to hold back production or sell more to other countries. This is why the U.S. added lithium, cobalt, and graphite (all critical lithium battery compounds) to its list of critical minerals of importance for national and economic security in 2018.

Another risk is pricing. With the cost per kilowatt-hour of lithium batteries falling quickly, this is a shorter-term concern, but a concern nonetheless. While China does not have enough domestic supply to corner the global market for raw materials, most of the lithium refining and downstream supply chain is based in China. This means they can influence prices directly. As we’ve seen over the years with oil, relying on a foreign supply of a critical resource can cause a lot of pain for consumers and manufacturers. Of course, throttling the battery markets could backfire by driving away customers in the long run.

What can be and is being done

The battery supply chain is complex. Lithium needs to be mined, pumped from underground, or collected after massive brine pools evaporate. It is then processed into battery-grade lithium and turned into different battery components such as cathodes and electrolyte. These are then combined along with an anode (usually made of graphite), current collectors, electrolyte, and a separator into a cell. Cells are then shipped to battery plants (called gigafactories) where they are assembled into their final form factor. The cells themselves can be cylindrical, square, or pouch.

While the U.S. cannot compete when it comes to producing its own stockpiles of raw lithium, there is a lot the U.S. can do to remain competitive in the global battery markets. This includes developing a greater domestic supply of raw materials and refining capacity to turn those raw materials into batteries, said William Adams, head of Battery and Base Metals Research at Fastmarkets.

“The U.S. is now encouraging the domestic green economy,” he said. “It has set ambitious targets for EV penetration and is encouraging mining of critical metals. It’s just off to a slow start. They are striving forward with mining projects and processing projects, both domestically and abroad, and looking at new technology and recycling. But more is needed.”

Currently, U.S. automakers are planning to spend billions to increase U.S. domestic capacity for cells and finished batteries, so that will help boost local production of batteries. If the U.S. tries to create an all-domestic supply chain, as some advocate, it would not have to rely on China alone for feedstocks. Australia, Chile, Canada, and Argentina, as well as U.S.-based reserves, could all supply U.S. refining plants with enough raw lithium for their needs. (Canada alone could likely produce 250,000 tons by 2035.) But this approach would take many years.

But this is not enough. According to Benchmark Material Intelligence, the U.S. lithium battery manufacturing capacity lagged behind China by 511 GWh/year in 2020. At the current rate of battery infrastructure build-out, the U.S. will still trail China by over 1,700 GWh/year in 2025. One billion dollars of investment in manufacturing generates roughly 10 GWh/year in batteries. To catch up with China’s projected production will require an investment of $175 billion over the next three years.

Experts estimate that China’s state support of battery manufacturers in various forms amounts to $60 billion over the last decade. If the U.S. government decides to subsidize 50% of the total investments required, the expense will likely be on the same scale.

While some may advocate for their implementation, more tariffs would not bolster U.S. domestic supply because the U.S. lacks the infrastructure, the will, and the resources to move much faster than they are today.

A better approach, according to Cowen’s Deckelbaum, is for the U.S. to focus on becoming a demand center. In that way, producers of everything from raw lithium to components would have to work with U.S. companies or risk losing a significant amount of market share. This is the approach the U.S. uses to compete in many other market sectors, from solar cells to electronics.

“You certainly don’t need to have your own feedstock domestically to satisfy your demand requirements,” he said. “If you have the demand requirement there, the market will come to you in the same way we don’t produce our own steel. We haven’t needed to control raw materials for anything else. I don’t know why it would need to be any different for lithium.”

Because U.S. reserves of lithium will continue to be developed, Deckelbaum would like to see a federal oversight board to coordinate battery development across state lines. This entity would engage in similar rules-setting and advisory activities as the Federal Energy Regulatory Commission, which governs pipeline construction in the U.S.

According to a 2020 Institute for Defense Analyses report, “Lithium-Ion Battery Industrial Base in the U.S. and Abroad,” another avenue, given the U.S. is a global leader in battery R&D, is to focus on owning one aspect of the supply chain. Anodes and solid-state batteries in particular are areas ripe for further development. By cornering just one aspect of the global supply chain, the U.S. would give itself a strong bargaining position vis-a-vis the rest of the world.

“Similar to anode technology, solid-state batteries are an area where the United States has an opportunity to break into the battery component and cell manufacturing space,” the report stated.

Policy changes also are underway. In conjunction with the White House, the DoE announced in February 2021 that it would:

  • Free up monies from a $17B loan fund to invest in “manufacturers of advanced technology vehicle battery cells and packs for re-equipping, expanding or establishing such manufacturing facilities in the United States.”
  • Amend the Bayh-Dole Act to ensure any battery research produced using federal dollars is not shipped overseas.
  • Invest in the production of high-capacity batteries and products that use these batteries to support good-paying, union jobs.
  • Provide consumer rebates and tax incentives to spur consumer adoption of EVs.
  • Accelerate the electrification of the nation’s transit bus fleet.

The DOE also recommends that Congress electrify the nation’s fleet of school buses, provide tax incentives and rebates for EV purchases, and establish a cost-sharing grant program to support battery cell and pack manufacturing in the U.S., as well as a host of other legislation. It also recommends that Congress update mining regulations to increase domestic production of lithium and other critical battery feedstocks—something E3’s Doornbos advocates for on a regular basis in Canada.

“For me, if you gave me a royalty break when I’m in production I will take it but it’s not what helps me get to production,” he said. “What I need is financial support and to open up the doors for me to on regulatory permitting.”

The “National Blueprint” also lays out a five-step plan of action, but presents neither timing nor budget, making it more of a wish-list. Their plan calls for the U.S. to do the following:

  • Secure access to raw and refined materials and discover alternatives for critical minerals for commercial and defense applications.
  • Support the growth of a U.S. materials-processing base able to meet domestic battery manufacturing demand.
  • Stimulate the U.S. electrode, cell, and pack manufacturing sectors.
  • Enable U.S. end-of-life reuse and critical materials recycling at scale and a full competitive value chain in the U.S.
  • Maintain and advance U.S. battery technology leadership by strongly supporting scientific R&D, STEM education, and workforce development.

Another area where the U.S. is leading the charge is in lithium battery recycling. Instead of mining raw materials, recycling them—if done correctly—could become more cost-effective, said Nicholas Grundish, the vice president of Battery Technology at EnergyX and a postdoctoral fellow at The University of Texas at Austin.

“What are we going to do with all those spent batteries?” he said. “You can’t just dump them anywhere. If you had a process to revitalize those materials and reuse them, that would be a huge plus for whoever comes out with the most viable technology the soonest.”

Although the issue is becoming front-page news in some sectors, the need to educate stakeholders, from policy-makers to business leaders, on the importance of the lithium battery supply chain to future U.S. competitiveness and environmental safety is sorely needed. The market for lithium batteries is still new enough that policy-makers in particular may not be aware of its critical importance to U.S. competitiveness in the 21st Century. Since this nationwide problem, a national educational program will be needed to support the effort to grow advanced battery manufacturing quickly enough.

Even though fossil fuels will be with us for many years to come, they are widely viewed as energy sources of the past. Clean, carbon-free electricity will power the future. Batteries are a linchpin technology around which success and failure pivot. A robust, resilient, and predictable supply of lithium batteries is now a national priority.

Final thoughts

The threat from Chinese domination of the global lithium supply chain is a real and present danger to U.S. competitiveness, but it is a manageable and known threat. As in the past, U.S. economic resiliency comes from its innovators, researchers, business leaders, and a massive consumer market that manufacturers around the globe covet, not only from raw materials extraction or repatriating supply chains.

Any effort to shut the U.S. off from supplies of lithium batteries due to geopolitical issues, for example, is likely to backfire. Many of the countries now racing to develop lithium battery capacity and raw materials would happily step in to fill the resulting void should China throttle U.S. supplies. Where there is demand, supply typically follows. And the U.S. is a massive market.

In this paper, in addition to the planned government actions listed above, we lay out a number of ways to ensure U.S. competitiveness in the future:

  • Become a demand center for batteries in order to shift the balance of the worldwide market by stimulating EV adoption; build charging infrastructure; electrify industrial machinery; provide rebates to end-users and subsidies to battery manufacturers.
  • Streamline and simplify regulations, incentivize local communities to overcome “not in my backyard” syndrome in order to step up domestic production of lithium and other battery feedstocks and develop a domestic refining capability.
  • Build more gigafactories on U.S. soil.
  • Develop a domestic lithium battery recycling industry.
  • Continue U.S. dominance in battery R&D, STEM education, and workforce development to ensure local development of the new technology
  • Provide subsidies to battery startups to support the ramp-up of manufacturing.
  • Conduct a national educational campaign highlighting the importance of battery manufacturing separate from the climate change narrative.

This list is not exhaustive. There is a great deal of work being done by private enterprises, too, to capture a part of today’s gold rush. In this case, however, the new gold isn’t black, it’s white. The biggest challenge facing the U.S. is time. Catching up to China will take years, but it is doable if the U.S. spends its tax dollars wisely.

This paper was written by Allen Bernarda technology journalist focusing on the intersection of technology and business.