According to calculations by analysts from Global Data, China, the world’s largest car market, will account for around 60 percent of the world’s electric vehicles by 2030. An important reason is the dominance of the Asian state in battery technology. The leading role in the international supply chains hinders much-needed investments in battery production in North America or Europe to strengthen the automakers producing there. Global Data believes that while the tax breaks announced for the US make sense, they come too late to close, or at least curb, China’s lead in the electric vehicle market. According to this, China now has a technological lead of around ten years in the race for increasing electrification and will clearly dominate the electronics market by the end of the decade, as the country controls 70 percent of the global supply chain for battery production. The early investments in the development and production of lithium-ion batteries paid off here.
“China invested heavily in this area early on and can now reap the rewards. Six of the top 10 battery makers in the world are Chinese companies, which collectively account for 56 percent of the global battery market, and the country is on track for 25 percent of all car sales to be electric cars by 2025,” said a Global-Data analyst Amalia Maiden, “Meanwhile, the Biden administration introduced a $7,500 tax credit for EV purchases in the United States with the Inflation Reduction Act (IRA). While this is a significant step forward for the US, it will not provide enough incentive for consumer market growth to compete with China’s 10-year lead.”
Another problem is the infrastructure on the gigantic US market, because here the large state lags behind not only China but also Europe. For many years, electric mobility in the USA meant almost exclusively Tesla, because the other domestic manufacturers relied more than ever on combustion engines. It looks correspondingly thin in the USA with a charging infrastructure that, according to Global Data, is twelve years behind China. “The lack of early investment in EV charging infrastructure is a key setback for the US,” says Amelia Maiden, “the nation prefers longer travel times. Consumer concerns about battery length and reliability are hampering EV sales and market growth.” Only in the past two years have major US automakers General Motors and Ford increasingly transitioned their brands to electric models.
The Inflation Reduction Act (IRA) now offers manufacturers in the United States the opportunity to expand the electric vehicle market and reach new customers who are looking for more affordable electric vehicles. However, like other states, the $7,500 tax break only applies if the electric vehicles are assembled in the United States, and only those models are supported where at least 50 percent of the battery components come from the United States. Global Data research shows that since the announcement of the US EV tax credit, a third of EV-related deals have involved batteries, showing just how important the battery issue will continue to be in the future.
Volkswagen, for example, recently started local production of the electric ID4 at its US plant in Chattanooga. So far, the vehicles from Zwickau have been imported into the USA – that’s over now. It can be assumed that other group models such as the Audi Q4 Etron or the VW ID Buzz will soon be manufactured in the VW plant in Tennessee in order to continue to be attractive to US customers. Mercedes also relies on local US production for its EQS crossover along with battery production, and BMW manufactures most of its SUV models in Spartanburg anyway. “The opening of our new battery plant in Alabama is an important milestone on our journey to an all-electric future. With a holistic approach, which also includes a local cell procurement and recycling strategy, we underline the importance of our US location, where Mercedes-Benz has been successful for decades,” says Mercedes CEO Ola Källenius, “we are proud of it, too create new, future-proof jobs to build all-electric SUVs ‘Made in the USA’ at a facility that has been an integral part of our manufacturing family for 25 years.”
Amelia Maiden: “The motivation for the EV tax credit is clear: to boost investment in US resource mining and battery production and capitalize on this lucrative and geopolitically sensitive market. By 2035, electric vehicles will account for 67 percent of light vehicles worldwide, and this market growth will be key to helping countries meet their climate targets and reduce their net emissions.”
