North American EV battery capacity plans grow tenfold after incentives, Energy Department says

Planned annual electric-vehicle battery capacity in North America rose more than 10 times between early 2021 and the middle of this year, according to the U.S. Department of Energy. That would be enough to power about 14 million light-duty EVs annually by 2030, the U.S. Energy Department said.

Annual lithium ion battery cell production capacity in North America is expected to reach about 1,400 gigawatt-hours in 2030, according to a report by the Argonne National Laboratory, owned by the Department of Energy. That compares with about 120 GWh that were projected for 2030 in January 2021.

The sharp rise in planned capacity comes as battery suppliers invest in massive factories to match automakers’ EV demands — and after the Biden administration passed federal incentives to spur development of a robust EV supply chain.

Here are four takeaways from the report.

Incentives in the 2022 Inflation Reduction Act and the 2021 Bipartisan Infrastructure Law pushed automakers and battery manufacturers to add capacity in North America.

Between the passage of the infrastructure law in November 2021 and the Inflation Reduction Act in August 2022, planned battery cell capacity in North America by 2030 rose to 587 GWh from 298 GWh. The act’s passage appeared to have an even greater impact, with planned capacity doubling between August 2022 and July 2023.

“Legislation in the IRA in particular has been a catalyst,” said Robert Winans, vice president of supply chain at Panasonic Energy.

Both pieces of legislation incentivize local production of EVs, batteries and parts. For example, EVs will only be eligible for Inflation Reduction Act tax credits if they contain enough locally sourced components. Those that contain battery components or critical minerals sourced from China will be ineligible.

Nevada is the state with the most battery cell manufacturing capacity, largely because of the 38-GWh factory Panasonic Energy and Tesla jointly operate there. The facility is expected to grow even further in the coming years, with Panasonic planning to expand production by 10 per cent by 2026.

But other states are getting in on the action. Michigan projects to have 166 GWh of capacity by 2030, more than any other state. More than 100 GWh of capacity are also planned in Nevada, Georgia, Kentucky and Tennessee, according to the Department of Energy.

Despite the fast pace of growth between 2021 and 2023, battery capacity plans have largely stalled this year. About 1,391 GWh of North American lithium ion battery cell production is projected for 2030, only slightly more than the 1,351 GWh that was expected Jan. 1.

The slowing of battery capacity growth mirrors the slowdown in U.S. EV sales growth in recent months. Lower-than-expected EV sales have forced automakers to reassess their electrification strategies. General Motors, for example, on July 23 said it would delay plans to build electric pickups at a plant in Michigan and would defer Buick’s first EV, originally slated for 2024.

The Department of Energy’s data makes clear the important role Canada will play in the development of North America’s EV supply chain. About 136 GWh of lithium ion cell capacity is projected for Ontario by 2030, more than any U.S. state except Michigan and Nevada. Meanwhile, there are plans for 69 GWh of production in Quebec, placing it ahead of states including California, Arizona and Illinois.

Canada is seen by some automakers and battery companies as a safe bet relative to the U.S., where potential changes in federal policy after the November presidential election could lead to fewer incentives. That was one of the reasons Honda chose to invest about $11 billion (all figures in USD) to build EVs and battery cells in Canada, Honda Canada President Jean-Marc Leclerc told Automotive News Canada in April.

“It’s guaranteed money,” Leclerc said, referring to the roughly $3.5 billion in incentives the company received from the governments of Canada and Ontario.