The News
The escalating trade war between China and the US could boost some American battery manufacturers, amid what is otherwise a major setback for the US energy transition that will hit power utilities and electric vehicle makers that rely heavily on technology imported from China.
Grant Ray, vice president of global market strategy at the battery materials producer Group14, told Semafor the company’s silicon-based components are well insulated from rising tariffs on Chinese imports and retaliatory restrictions by China on exports of critical minerals, which Beijing tightened on Monday. Group14’s product particularly cuts out the need for Chinese graphite. Moreover, the company’s manufacturing strategy, which hinges on building relatively small, modular factories rather than multibillion-dollar gigafactories, will mitigate the impact of rising costs for steel and other construction materials.
“We’re perfectly positioned for a much more homegrown and controllable energy resource for batteries,” Ray said.
In this article:
Tim’s view
If the point of US President Donald Trump’s tariff campaign is ultimately to revitalize US manufacturing, few industries should be better poised to take advantage than battery producers. China still dominates global battery production, but the US has been racing to catch up, and investment in domestic battery factories has proven to be one of the strongest tangible outcomes of the Inflation Reduction Act. In 2020, US battery factory investment was about $500 million per quarter, about equal to Europe; by 2024 it was nearly $12 billion.
It’s been clear for years that exposure to Chinese battery supply chains is a glaring weakness in US EV and grid buildout ambitions. Some vehicle manufacturers, like Ford, responded by making deals to partner with Chinese battery companies but maintaining the actual manufacturing on US turf. Meanwhile, a number of startups spotted an opportunity to leverage chemistry to gain a supply security advantage, innovating batteries that needed little or no lithium, graphite, or other minerals whose production and refining are controlled by China. What US entrepreneurs lacked in geology, they made up for in the lab.
They also identified that batteries were ripe for technological innovation in a way that solar panels, which are also dominated by China, aren’t; catching up to China’s economies of scale on solar remains daunting, but running a tech endgame around conventional Chinese lithium-ion batteries is a more promising way for the US to get ahead on clean energy. Higher trade barriers with China, which will drastically increase the price for many batteries, make those bets more likely to succeed.
There have been some steps backward in the US battery industry recently, including cancelled factories in Georgia and Arizona and scaled-back plans in Kentucky. Some alternative chemistry bets went bust. But others are forging ahead, including a $6 billion manufacturing expansion plan announced last month by Wisconsin-based Clarios. Shakeouts and consolidations are natural for any nascent industry, Group14’s Ray said. And between EVs, AI, smartphones, and other battery needs, there’s plenty of room for the industry to grow.
“There is incredible demand for batteries, regardless of what’s happening at the geopolitical level, regardless of whether there’s a recession,” he said. “I don’t think [the onshoring of battery production in the US] is going to be at risk at all.”
Room for Disagreement
Chemistry aside, construction and labor costs remain major hurdles for many battery makers, as the CSO of Lyten, which also uses a new battery chemistry, told Heatmap. And for the large parts of the industry that still rely on materials that will be hard to replicate or mine in the US, manufacturing investments risk being stranded, said Gernot Wagner, climate economist at Columbia Business School: “Sadly, blanket tariffs against Chinese imports just provoke the trade war we now see, which could spectacularly backfire — cutting off US manufacturers from crucial minerals and other components in what has become a truly global supply chain.”
Notable
- Rising prices and supply disruptions for utility-scale batteries could scramble Texas’s plans to beat out California as the epicenter of the US energy storage industry.