Manufacturing & Gigafactories Developed 2022 · C6 4 min
The U.S. Battery Supply Chain: Building an Industry to Compete with China
The US battery supply chain has become a strategic priority as policymakers try to reduce dependence on Chinese manufacturing. This case study takes the view of an investment bank allocating client capital into the electric vehicle space, and asks how recent legislation, past government investment and private-sector competition should shape decisions about the American and Chinese markets.
The strategic backdrop
Before the Infrastructure Investment and Jobs Act and the Inflation Reduction Act, the future of EV supply chains looked set to rest with China, and to a lesser extent Europe, thanks to their early and far-reaching investments. The new US laws changed that calculus by creating the prospect of a large domestic market and the building blocks of a competitive supply chain. The underlying growth is clear. Consumer electronics alone drove roughly 50 GWh of annual lithium-ion demand in the early 2010s, a figure that grew about tenfold to near 500 GWh a year by 2021 as passenger EVs became the dominant application. By mid-2022 there were just under 20 million passenger EVs globally, around 1.5% of the world fleet, leaving substantial room to grow. Forecasts to 2025 show the US closing some of the gap to about 15% of global EV sales, while China and Europe together still command close to 80%.
How the supply chain is structured
The case walks through the lithium-based supply chain in three stages. Upstream covers mining and extraction of lithium, cobalt, nickel and graphite. Midstream adds processing to battery grade, plus cathode and anode powder, separator and electrolyte production, and cell manufacturing. Downstream covers pack assembly and end-of-life recycling and reuse. Graphite dominates the anode across all EVs, while common cathode chemistries include NMC, NCA and LFP, with NMC leading today. This structure matters because competitive advantage is not spread evenly across the stages, and a country can lead one part while depending on others.
What the rankings and numbers reveal
A BloombergNEF ranking of the top 30 countries scored performance across five themes: raw material availability, cell and component manufacturing, local EV and storage demand, infrastructure and innovation, and environmental, social and governance factors. The report's central message was that success now depends on more than one metric. Resource-rich countries such as Indonesia, Chile, South Africa and the Democratic Republic of the Congo scored well on raw materials but slipped overall because of weaker showings elsewhere. China topped the ranking for the third year running, holding around 75% of cell manufacturing capacity and 90% of anode and electrolyte production. The US placed third, down from second the year before, though it improved sharply in raw materials from eleventh to sixth place while still leaning heavily on free-trade partners such as Australia.
Where China's dominance comes from, and its limits
China's grip on the midstream and downstream traces back to a 2009 commitment to produce 500,000 EVs by 2015 and five million by 2020, supported by programmes that deployed government-fleet vehicles across cities with subsidies of roughly 8,800 US dollars for a full battery electric vehicle and 7,300 for a plug-in hybrid. With demand assured, Chinese firms invested heavily in processing, and China now refines about 68% of nickel, 40% of copper, 59% of lithium and 73% of cobalt worldwide, while producing most mineral-rich cell components. The important caveat is that China does not dominate upstream extraction. Australia and Chile handle around 70% of lithium mining, the Democratic Republic of the Congo about 70% of cobalt, Indonesia leads nickel at 30%, and Chile and Peru together account for 40% of copper. China extracts under 10% of the world's lithium domestically, so its processing edge depends on international partnerships. Recycling is the next frontier: China has begun reuse and recycling programmes for an estimated 720,000 tonnes of batteries expected to reach end of life by 2025. For an investor, the takeaway is that US policy has opened a genuine opening, but China's integrated midstream and downstream position remains the benchmark to beat.
Key Takeaways
US legislation, notably the Inflation Reduction Act, created the conditions for a domestic EV supply chain to challenge China.
Lithium-ion demand grew roughly tenfold from about 50 GWh a year in the early 2010s to near 500 GWh by 2021.
The supply chain divides into upstream mining, midstream processing and cell making, and downstream packs and recycling.
China leads BloombergNEF for a third year, holding around 75% of cell capacity and 90% of anode and electrolyte output.
China refines about 68% of nickel, 59% of lithium and 73% of cobalt, yet extracts under 10% of the world's lithium at home.
Upstream extraction is led by Australia and Chile for lithium, the DRC for cobalt and Indonesia for nickel.
Around 720,000 tonnes of Chinese batteries are expected to reach end of life by 2025, driving early reuse and recycling programmes.
Disclaimer: This case study was developed and presented by BatteryMBA participants as part of the Case Study Track. Views, analysis and recommendations are the authors' own. BatteryMBA does not take responsibility for the accuracy or completeness of the content and it should not be relied upon as investment, engineering or legal advice.
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