Tesla is the United States’ only shot at critical new technology.
Tesla is a company that its critics love to hate. A swarm of short sellers have bet $10 billion that the electric carmaker will fail. They tweet incessantly about Tesla’s loss-making operations and even fly drones over its facilities to verify production figures. Elon Musk, Tesla’s erratic CEO, has berated these short-sellers as “haters.”
Betting against Tesla’s prospects may profit short-sellers, but it could end up dashing America’s only hope to build supply chains for a technology that will reshape the future economy: the lithium-ion (li-ion) battery. Originally commercialized by Sony in the 1990s, these batteries’ high-energy density, long recharging cycles, lightweight structure, and relative safety make them ideal for powering everything including laptops, smartphones, and electric vehicles.
The potential of electric vehicles to transform global transport will make li-ion batteries even more integral to the global economy. But such vehicles are still costly compared to their gas-guzzling predecessors. That’s because li-ion batteries are expensive and constitute a serious proportion of their total cost. Buy a Tesla Model 3, for instance, and an estimated one-third of the $35,000 price tag is from the battery. So the commercialization of electric vehicles depends largely on lowering the cost of batteries.
The good news is that the industry consensus has li-ion battery costs falling over the next decade from the current $176 per kilowatt hour of electrical energy to less than $100/kWh, the threshold when electric vehicles reach cost parity with gasoline cars. At that point, the li-ion battery could well become as important to global transport as the oil that powers cars today.
Should that happen, it would propel a transition away from oil and toward a more sustainable energy future. That future could see the global electric vehicle stock rise from 3.1 million in 2017 to 228 million by 2030, causing a 6,700 percent increase in demand for li-ion batteries to power vehicles and creating a market that is expected to be valued at $100 billion by 2025.
But if demand jumps as sharply as analysts believe, li-ion batteries will require enormous scaling up of manufacturing to lower per-unit cost. That means countries that control li-ion battery supply chains will entrench their advantages in a crucial aspect of the new transportation economy.
Supply chains may seem abstract, but they are vital to the global economy. A supply chain concentrated mostly in a single country could allow for the emergence of effective monopolists over particular inputs. This situation would magnify that country’s ability to set prices, establish technical standards, lock down access to raw materials, and even exert geopolitical influence by controlling supply. It’s also in any country’s national interest to develop domestic high-tech industries, especially in future growth sectors such as li-ion batteries.
If the United States intends to establish a dominant presence in the li-ion battery supply chain, then Tesla is its sole hopeIf the United States intends to establish a dominant presence in the li-ion battery supply chain, then Tesla is its sole hope. As the world’s largest electric vehicle manufacturer, the company now houses the only significant U.S.-based production of li-ion batteries for vehicles. The Tesla Model 3 batteries are assembled at the company’s Gigafactory in Nevada, which the company claims is the “highest-volume battery plant in the world,” with an annualized production of 20 gigawatt-hours.
That’s certainly an impressive feat for a single company. But on a global scale, Tesla is just one player among many. In 2018, the li-ion battery production capacity of the United States (attributable almost exclusively to the Gigafactory) accounted for less than 10 percent of the global market, with China claiming 61 percent of global capacity (the rest of Asia, mainly South Korea and Japan, added another 21 percent), according to MacroPolo, the Paulson Institute’s think tank.
By comparing production with consumption figures—the United States holds 20 percent of the global electric vehicle stock, while China has 47 percent—it becomes even more apparent that America punches way below its weight.
The picture gets even worse for the United States when one considers the midstream inputs used to assemble the final battery cells. Of the four main components in a li-ion battery, China manufactures 65.7 percent of the anodes, 64.3 percent of the electrolytes, 44.8 percent of the separators, and 39 percent of the cathodes. U.S. companies, however, barely register.
Source: foreignpolicy
