US automakers are investing in electric vehicle battery factories. Why?

Over the past year or so, automakers have committed billions of dollars to bolster their battery production. Ford is building a plant in Kentucky. General Motors is working with appliance maker LG to develop a battery plant in Michigan.

Last week, Hyundai announced it was spending $5.5 billion on a battery and electric vehicle factory in Georgia. And this week, Stellantis and Samsung unveiled a plan to build a $2.5 billion facility in Indiana.

If you own an electric car, chances are that at least one crucial component of it comes from China.

“The majority of battery cells are made in China at this point,” said Kristin Dziczek, policy adviser at the Federal Reserve Bank of Chicago. “There are a lot of disruptions in our international supply chains right now,” she said, taking into account the COVID lockdowns in China and the war in Ukraine.

Increasingly, automakers want more control over where they get their parts, especially as demand for electric vehicles increases.

Gil Tal is Research Director at the University of California, Davis, EV Research Center. He said the federal government is also investing in these supply chains.

President Joe Biden is investing more than $3 billion in the battery supply chain. In a way, recent industry pledges may be geared towards helping companies capture big chunks of these federal subsidies.

For automakers to switch from making gas-powered cars and trucks to electric vehicles, it takes a lot of upfront investment in new machinery and factories.

“But bringing the whole supply chain to the United States or having more control of it is a very difficult task. And that will take many years,” Tal said.

In fact, building factories where EV batteries can be assembled is the easy part. “The real issue for these companies is access to raw materials,” said Chris Berry, president of House Mountain Partners.

“Unless you as an automotive player have access to lithium, nickel, cobalt and other battery feedstocks, it’s going to be really difficult to build that supply chain structure,” Berry said.

It might only take three or four years to build a plant, but Berry said obtaining permits to build a new lithium or nickel mine in the United States would likely take more than 10 years.

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