The Golden State of California in the United States has taken one of its first steps to achieve this goal by introducing legislation that will require all new light-duty vehicles sold on its soil to be zero-emission vehicles (ZEVs) by 2035.
This legislation was further bolstered when President Biden set a goal for 50% of all vehicle sales to be electric by 2030. Even if that objective has not yet been codified into law, it is likely just a matter of time until equivalent legislation is implemented at the federal level.
There has been a gradual transition toward electric vehicles (EVs) among consumers in the US, and this has occurred even in the absence of mandates from the government. However, the change has been slow.
“People are holding on to their cars slightly longer year over year. It has been a growing trend. Right now, people are holding on to their cars for about 12 years,” Kristin Slanina, Chief Innovation Officer of ParkMyFleet said. The pace at which customers replace their old cars is clearly a factor in why the shift from gas-powered vehicles to electric vehicles has been slower in many cases than expected.
Nonetheless, there are also many factors that have convinced some consumers to take the leap. In part, this shift in purchasing behavior can be attributed to consumers’ growing concern about climate change. It is not the only factor driving this change, though. The following benefits also play a role:
Adopting California’s innovative zero-emissions rules is essential for the realization of a greener, more sustainable future. However, sadly most consumers who want to shift to zero-emissions cars continue to face a multitude of barriers to entry, like:
The main impediment, however, is a dearth of EV-friendly infrastructure.
The lack of infrastructure is also currently making it challenging for companies who use larger vehicle models than passenger cars to switch to electric fleets.
“Commercial fleet electrification requires a system-wide transition that extends far beyond the vehicles themselves: it requires a parallel path of substantial infrastructure development to happen alongside vehicle production. It’s going to take collaboration between policymakers, automakers, charging infrastructure providers, and utilities to make sure that infrastructure is in place. While we plan the purchase of production slots for ‘just in time’ acquisition and deployment of vehicles, these are the ‘stars that must align’ in the coming years, so to speak, to be able to scale a commercial fleet at an efficient rate,” Bill Cawein, Manager of Technology & Integration at FedEx Express, said.
Yet, the outlook remains optimistic. In 2022, 7.8 million electric cars were sold globally, a 68% increase from 2021. Incredibly, the global market for electric vehicle batteries is anticipated to reach almost $155 billion in the next five years, signaling continued explosive growth. In 2022, $128 billion of announced investments and $73 billion in planned projects related to electric vehicle plants, battery plants, and battery recycling highlighted that the upward trend was continuing, especially in the southeast of the US.
However, this prediction pales in comparison to the situation on the ground. In the United States, 10% of all new cars that are sold are electric, and 55 gigawatt-hours (GWh) of battery capacity for electric vehicles is created annually. This is inadequate to match the rising demand for EVs. To keep up, the US is predicted to produce almost 1000 GWh of EVH battery capacity per year by 2030.
“I do think that change is on the way, and that we will eventually reach a point where all cars are zero-emission vehicles,” Kristin Slanina noted. “Automobiles first appeared in the 1800s. The vehicle market did not quickly transition away from horse and carriage until the early 1900s. I am often reminded of an image I saw of 5th Avenue in New York City. Two photos shot 10 years apart were placed next to each other in this image. Initially, there was only one automobile and all the other vehicles were horses and carriages, but it was reversed in the second shot. That is how the switch to electric automobiles will seem 100 years from now. That being said, I don’t think electric vehicles are the end game. We need to keep innovating.”
There is no paucity of investment in the EV battery industry in the United States. In fact, recent investments have significantly impacted the economic and corporate landscape. Automakers and their suppliers, including LG Energy, SK Innovation, Panasonic, and Samsung, will spend over $38 billion to increase EV battery manufacturing in the United States by the end of 2026.
One of the largest battery facilities in the world, Tesla’s “Gigafactory” in Nevada opened its doors seven years ago. The firm makes batteries for energy storage systems for homes and businesses as well as for Tesla’s electric vehicles. Tesla’s Gigafactory has contributed to the reduction of battery prices, making electric vehicles more accessible to consumers. It has also set an example and encouraged other EV firms to take a risk and invest more money in the development of advanced batteries.
General Motors (GM) is one of those businesses. GM recently revealed its intention to invest $35 billion in EVs and autonomous vehicles (AVs) by 2025. It is aiming to create a new generation of batteries that will offer better performance and range at cheaper costs to propel this progress.
GM has made a few clever investment decisions to position itself as a major player in the US’s EV battery manufacturing industry. In order to have access to lithium, a key component of most electric vehicles’ batteries, it declared in January 2023 that it would invest $650 million in Lithium Americas. This was probably the smartest decision it could have taken in terms of business development, and it should pay off greatly in the long run. Although geologists estimate that there are 88 million tonnes of lithium reserves on Earth, it is difficult to mine, and the mines that do mine it frequently face ESG (Environmental, Social, and Governance) and ethical challenges. For example, lithium mines consume and pollute large amounts of water (thousands of gallons per minute), and some mines abroad (like those in the Democratic Republic of the Congo) use child labor and engage in unsafe labor practices.
Given everything said above, securing a company’s lithium supply is a particularly good idea, even if doing so costs $650 million. By securing its lithium supply through Lithium Americas, GM is avoiding some of those ESG issues by guaranteeing that it will have enough lithium available for the production of up to 1 million electric vehicles annually and that a substantial portion of its lithium will be mined in the USA.
Despite GM’s investment in lithium, many experts are advising that EV-battery companies need to invest more heavily in the R&D of batteries that do not require lithium and cobalt to function, and barring that, more resources need to be invested in producing recyclable lithium-ion batteries. “I’m a firm believer in diversification, and that includes batteries. Having battery types with various and more common materials creates a more robust EV ecosystem,” Kristin Slanina said.
American companies are not the only ones preparing to benefit from the EV-battery boom in the USA.
Northvolt, Europe’s largest contender in the global battery industry, initially focused on the European market as a start-up. However, the Swedish company, which receives backing from VW, BMW, and Goldman Sachs, is now considering joining American corporations in their efforts to expand their EV battery production to the United States.
Northvolt’s interest in the USA is partially as a result of the Inflation Reduction Act, a crucial piece of green technology legislation in the United States that aims to facilitate the investment of $2.8 billion in EV companies to produce batteries for electric vehicles in the United States.
The relocation of electric vehicle battery production from Europe to America is no longer just a hypothetical scenario, but a reality already in motion. According to a recent assessment by the European NGO Transport & Environment, more than two-thirds (68%) of planned lithium-ion battery manufacturing in Europe may be postponed, downsized, or cancelled. Major players like Tesla and Italvolt are among those with the most at stake, as they consider shifting their investment focus to the United States. Tesla’s Giga Berlin plant faces the largest risk of delay in Europe, as the business prioritizes cell manufacture in the United States to take advantage of Inflation Reduction Act’s incentives. On the other hand, Italvolt, whose CEO has a past with the failed Britishvolt project, risks being pushed aside in favor of its California-based sibling project, Statevolt.
Due to several key considerations, it is expected that southern and southeastern US states will exceed other locations as the primary battery manufacturers for electric vehicles and EV batteries. These states benefit from their advantageous proximity to major ports, such as the Port of Savannah in Georgia and Port Houston in Texas, which enable the import and export of finished goods and raw materials, lower transportation costs, and enhance accessibility.
The southern and southeastern states have also put in place beneficial policies and regulatory frameworks to encourage investment and assist the electric car sector’s growth. For example, Georgia offers tax incentives to makers of electric vehicles and EV batteries to bolster the EV industry and the jobs it creates. In addition, these states have invested in the R&D infrastructure required to support the electric car and EV battery sectors. This includes significant research programs at Tennessee’s Oak Ridge National Laboratory and the Alabama Transportation Institute.
Certain technical schools and universities in the southern and southeastern states provide specialized training programs in sectors such as battery manufacture, mechanical engineering, and robotics. These qualities, along with the region’s extensive industrial history and abundant and affordable talent pool, make it especially favorable.
With an infusion of investment, even from countries in Europe that have traditionally produced their own EV batteries inside their borders, the United States will undoubtedly become a hotspot for EV-battery research. Yet, innovation can only occur in the presence of strong and capable leaders, and leaders in the EV-battery business face a variety of leadership challenges.
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Kristin Slanina is the Chief Innovation Officer at ParkMyFleet. She is in charge of creating end-to-end electric vehicle (EV) and sustainable energy mobility hubs that include on-site power generation, storage, software, infrastructure, and battery recycling. She is a recognized subject matter expert and annually speaks at many conferences.
Bill Cawein is the Manager of Technology and Integration at FedEx Express. His most recent work in fleet electrification has been instrumental to FedEx’s sustainability goal. FedEx aims to have a carbon neutral pickup and delivery operation by 2040.
Tim Fetzer is a Director at Stanton Chase Nashville with over 10 years of global search experience. Tim has successfully completed searches for various management roles in sales for DAX 40 companies, financial institutions, and start-ups. He has a Bachelor of Business Administration from Hult International Business School in London. Tim is from Germany and has lived in several countries.
Click here to learn more about Tim.
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