Investments in North American battery manufacturing drive supply chain capacity and scale at home

American automakers and battery partners are supercharging domestic battery manufacturing to meet sustainability and EV goals

President-elect Donald Trump will likely revisit many of the Biden administration’s clean energy policies. But these have already had a massive impact on the automotive industry.

The priorities of automobile original equipment manufacturers (OEMs) operating in the US shifted to electrification after President Biden’s 2021 executive order mandating that 50 percent of all new vehicle sales be battery electric, plug-in hybrid electric, or fuel cell electric vehicles (BEVs, PHEVs, and FCEVs respectively).

The vision of the executive order is to increase market share of zero-emission EVs to gain important climate benefits and promote local clean-energy jobs. Yet consumer adoption of EVs requires affordably priced offerings and widely available charging infrastructure.

The most expensive component in an EV is the battery, so the pivot by the US federal government and automotive OEMs toward domestic manufacturing capacity aims to drive EV prices down and get vehicles to market faster with lower costs.

The US federal government and many state administrations support the transition from internal combustion engine (ICE) vehicles and have funded a variety of tax credits and incentives. The Inflation Reduction Act (IRA) and Bipartisan Infrastructure Law, both passed in 2022, provide funding to assist automakers and partners to scale manufacturing capacity, establish a domestic battery supply chain, and build a national charging infrastructure.

In large part due to these incentives, business leaders have identified the US as the top location for setting up gigafactories. According to a recent Capgemini survey, 54 percent of automotive, battery, and energy executives are building or planning to build at least one gigafactory in the country.

Tax credits, grants, and partnerships drive investment

To support BEV retail sales, the federal government established an EV sales tax credit program in 2008. This popular initiative offered tax credits up to $7,500 for new EVs, with few restrictions. Due to battery supply-chain constraints during the COVID-19 pandemic, leading automakers committed to local production of lithium-ion batteries for BEVs. The 2022 IRA supports this strategy by encouraging sourcing of critical minerals and assembly in the US, rather than relying solely on external supply chains.

The IRA also introduced revised retail-sales eligibility rules and other incentives:

• Manufacturer’s suggested retail prices cannot exceed $80,000 for vans, sport utility vehicles, and pickup trucks, or $55,000 for other vehicles.
• A certain percentage of the critical mineral and battery components must have been extracted or processed in the US or a country with which it has a free-trade agreement.
• Used vehicles are now eligible for tax credits up to $4,000 for sales up to $25,000.
• New income limits restrict who qualifies for the new and used vehicle retail sales incentives.
• Commercial vehicles are now eligible for sales incentives ranging between $7,500 and $14,000 depending on gross vehicle weight ratio (GVWR). There are no battery or mineral sourcing requirements.

The revised incentives were designed to encourage the purchase of domestically manufactured clean-energy vehicles and batteries. The new eligibility limits target the broad “middle of the market” and now include used BEVs and commercial BEVs.

Since the passage of the IRA, leading automobile manufacturers have redoubled their battery manufacturing and sustainability commitments, investing billions of dollars and constructing massive campuses dedicated to producing lithium-ion batteries for EVS and PHEVs in the US.

Tesla. Before the passage of the IRA, Tesla opened its gigafactory in Nevada in 2017 with partner Panasonic Energy. The factory can produce 37 gigawatt hours of output and provides more than 11,000 jobs. Tesla also plans to build at least two new manufacturing facilities with Panasonic Energy to produce Tesla’s new 4680 battery cells by 2030. The 4680 design is touted as being less expensive. Tesla is also investing in a lithium refinery in Texas in Corpus Christi. It is expected to provide 50 gigawatt hours of battery cells to support sales of up to one million EVs annually.

Ford. With an incentive from the Michigan Economic Development Corporation’s Michigan Strategic Fund, Ford is increasing production at an existing assembly plant and building BlueOval Battery Park Michigan, a 1.8-million-square-foot facility that’s on track to produce approximately 20 gigawatt hours annually starting in 2026. These projects are expected to create or retain 5,000 jobs.

Meanwhile, Ford is also working with SK Innovation, an energy and chemical company based in Seoul, South Korea, on a joint venture called BlueOvalSK. They are building three large EV battery plants – two in Kentucky and one in Tennessee – which are expected to produce 129 gigawatt hours annually.

With production slated to begin in 2025, BlueOvalSK’s $11.4 billion investment is expected to create 11,000 new jobs: approximately 6,000 in Tennessee and 5,000 in Kentucky.

General Motors. GM has invested in three battery plants with partner LG Energy to manufacture its Ultium brand batteries in Ohio, Tennessee, and Michigan, with approximately 1,700 jobs created in each location. Through the LG Energy partnership, GM plans for over 130 gigawatt hours of EV battery cell output when all plants are at full capacity. GM has recently announced a fourth battery assembly plant in partnership with Samsung SDI in Indiana that will produce 30-gigawatt hours of output, bringing the automaker to 160-gigawatt hours total.

Stellantis. Stellantis’ vision includes a commitment to build five gigafactories (three in Europe, two in North America) to achieve at least 400 gigawatt hours of capacity by 2030. This capacity will underpin its plan for 50 percent BEV mix in North America by 2030, whereas the goal for Europe is 100 percent BEV. In North America, Stellantis and Samsung SDI are investing in a venture named StarPlus Battery to build two battery gigafactories in Kokomo, Indiana, which will generate 67 gigawatt hours of output and 2,800 jobs, and a proposed third battery manufacturing plant in Belvidere, Illinois, which will provide between 4,000 and 5,000 jobs.

Mercedes-Benz. Mercedes-Benz built a battery manufacturing plant in partnership with Envision AESC in Bibb County, Alabama, which provides 600 jobs. This is just a few miles from its assembly facility in Tuscaloosa. This plant is part of its global network of battery manufacturing, producing a total of 200-gigawatt hours of output for the automaker around the world. The company is also investing in Boston-based start-up Factorial, which plans to sell commercial solid-state batteries by the end of the decade.

BMW. BMW is building a battery manufacturing plant in Woodruff, South Carolina, close to its Spartanburg assembly plant. The “Plant Woodruff” investment will create 300 jobs and produce 30 gigawatt hours of output. BMW is working in partnership with AESC, which is also building a facility in Florence, to supply the auto company with battery cells to support its “local for local” manufacturing approach.

VW. VW created a wholly owned subsidiary named PowerCo that is building a North American battery manufacturing plant in St. Thomas in Ontario, Canada, which will produce 90 gigawatt hours of output and create up to 3,000 jobs.

Toyota. Toyota is investing nearly $14 billion into the construction of a seven-million square-feet EV battery plant in North Carolina, which will create more than 5,000 jobs. The automaker says the mega site will generate a total of more than 30-gigawatt hours annually after the phased launch of multiple production lines is complete in 2030.

Honda. Honda has entered into a joint venture with LG Energy Solution named L-H Battery Company to manufacture batteries in Jeffersonville, Ohio. This will produce 40 gigawatt hours of output. The location will provide 2,200 jobs and is near Honda’s auto manufacturing facilities in Ohio.

Hyundai. Hyundai Motor Group and LG Energy Solution formed a joint venture to manufacture battery cells in Bryan County, Georgia, which will produce 30 gigawatt hours annually and provide 8,500 jobs. Hyundai has also formed a joint venture with SK On to manufacture battery cells in Bartow County, Georgia, which will provide 3,500 jobs and deliver 35 gigawatt hours of battery cells per year.

The EV transition is a marathon, not a sprint 

Importantly, strategic decisions to build domestic battery manufacturing will pay the US economy and consumers dividends in the long run. A US battery supply chain that can serve the public will help automakers build a range of vehicles at more price points and make them available to consumers faster. This will help to drive sales and minimize the need for heavy incentives, ultimately bringing EV pricing in line with ICE vehicles.

And while short-term demand for EVs has cooled from a period of “early adopter” buzz, sales continue to increase. In H1 2024, EV sales were up 7.3 percent compared with H1 2023, and the US BEV market share stood at 8 percent (CarEdge) compared with 7.6 percent BEV market share in 2023.

Accelerating EV battery gigafactory manufacturing

Building out a gigafactory is complex and the right tools can drive productivity, efficiency, and sustainability in operations. Our Capgemini team has developed market-tested solutions that can help automakers and battery partners leverage leading technologies to reduce waste, increase productivity, and monitor sustainability. Our teams have the skills and resources – gigafactory accelerators, battery passports, and laboratories dedicated to battery-cell innovation – to help our clients manufacture at scale.

Buckle up, America. It’s time go electric!