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Battery Show Panels Mull Options to Strengthen U.S. Battery Supply Chains in Wake of Inflation Reduction Act Passage

As one of the longest running and biggest automobile shows in North America, the North American International Auto Show (NAIAS) — or the Detroit auto show, as it is known more colloquially — has traditionally been one of the key events for car makers every year.   This year, however, another concurrently held event taking place roughly 30 miles west of the NAIAS gathering may have commanded at least as much attention as the Detroit auto show — for good reason, as followers of ARPN will understand.

Billed as “North America’s largest and most comprehensive advanced battery manufacturing trade show,” the Battery Show held September 13th through the 15th, drew a record crowd of 15,000 people, which, according to organizers is almost 50 percent higher than pre-pandemic levels.

One big factor, says Gabrielle Coppola for Bloomberg’s Hyperdrive newsletter, was federal legislation — the just passed Inflation Reduction Act (IRA) with its impactful energy provisions.

Citing industry representatives who see an uptick in interest in “an industry that’s growing, where there’s substantial government support,” Coppola writes:

“Battery upstarts are salivating over the goodies in the bill, particularly the tax credits for manufacturing components here in the US.”  

She adds:

“While US startups are loving the carrots in the IRA, others are unhappy about the sticks. The auto industry lobbied against content rules that will limit how many EVs will be eligible for consumer tax credits. Korean trade officials have objected to their US counterparts on behalf of Hyundai, Kia and battery manufacturers who fear excluding Chinese-sourced materials and imported cars will put them at a disadvantage.”

Mulling several options on how to move forward, panelists discussed ideas ranging from creating a U.S. “white list”similar to the Chinese governments four “White Lists” created in the middle of the last decade outlining approved suppliers from which OEMs would have to purchase batteries in order to qualify for government subsidies, to the implementation of a “battery passport” similar to what has been proposed in Europe, where a consortium of 11 car makers and battery producers has received more than $8.5 million in government funding to “develop a common classification and standards for gathering and disclosing data on batteries.”

As Coppola outlines, such a system would not “explicitly ban Chinese suppliers, but if you exclude nickel from Indonesia or cobalt from the Democratic Republic of Congo, it could have that effect,” but U.S. automakers are skeptics when it comes to the passport idea for a number of reasons.

The United States’ nascent battery manufacturing efforts are still very much dependent on China, and as followers of ARPN well know and industry experts have already outlined, the process of decoupling from Chinese supply chains is fraught with challenges, not least because, in Coppola’s words, “for all the gold-rush mentality and rhetoric about the power of American innovation, companies are anxious that if the US goes too far in its bid to cut out China, their products could be vulnerable to retaliation.”

One thing, however, is clear —  all the challenges notwithstanding, the Inflation Reduction Act’s energy provisions send a signal to investors that the U.S. is serious about building the secure, responsible industrial base our economy and national security needs, and, provided stakeholders act comprehensively and decisively, may jump-start the effort …to reclaim critical mineral chains.”