The rise of China as a global leader in battery manufacturing has been a dominant trend in recent years. With more than 80% of battery manufacturing capacity located in China, countries like the U.S., Europe, and Japan have been playing catch-up. However, recent data compiled by economic analyst Joey Politano reveals a significant increase in U.S. lithium-ion battery production since the passage of the Inflation Reduction Act (IRA).
The IRA, a landmark climate- and jobs-focused bill, provided incentives for developing and manufacturing green energy technologies domestically. As a result, U.S. battery production has surged by 25% since 2023. This growth is evident in the U.S. Census’ Manufacturers’ Shipments, Inventories, and Orders (M3) survey and the Bureau of Labor Statistics’ producer price index for battery manufacturing.
The International Energy Agency (IEA) also reports a shift in global investments in clean technology manufacturing, with the U.S. and Europe making significant strides. The U.S. alone invested $40 billion in EV battery manufacturing between 2020 and the third quarter of 2023. This surge in investment has led to the installation of more than 20 gigawatts of battery capacity on the U.S. electric grid in recent years.
While the focus is often on electric vehicles, the battery industry’s impact extends beyond cars. The U.S. has seen a rapid increase in the installation of utility-scale batteries for power grid backup, with projections indicating a potential doubling of battery capacity by 2025. This growth underscores the importance of domestic battery production in ensuring energy security and resilience.
The IRA’s role in driving this growth cannot be understated. By incentivizing EV manufacturing and battery production within North America, the act has spurred the establishment of battery factories across the U.S. This has not only created jobs but also positioned the U.S. as a competitive player in the global EV market.
However, the future of the IRA and EV incentives remains uncertain, particularly with the incoming administration’s plans to repeal certain provisions. The geopolitical implications of falling behind in the EV race, especially against China, underscore the importance of maintaining domestic battery production.
As the U.S. continues to ramp up its battery manufacturing capabilities, the focus on technological innovation and competitiveness will be key to staying ahead in the global market. By leveraging the success of recent initiatives like the IRA, the U.S. can secure its position as a leader in the burgeoning electric vehicle and battery industries.