Among the high-level market findings of the report are:

• Competitive locations and opportunities for automotive lithium-ion battery (LIB) cell manufacturing are mostly created as opposed to being tied to factors that are inherent to specific regions.

• Established LIB competitors are advantaged due to production expertise, supply chains optimization, and partnerships initially developed to serve consumer electronics applications. Many advantages among LIB incumbents are transferrable to the LIB automotive sector.

• Asia currently dominates automotive LIB cell production with a robust upstream supply chain from processed materials to complete cells. However, cost modeling indicates that the United States and especially Mexico may be competitive under certain conditions.

• LIB pack production may remain proximal to original equipment manufacturer (OEM) end-product manufacturing, but materials and cell production could locate globally in areas where competitive opportunities are strong.

• LIB components are not commoditized: each is particularly important to overall battery performance and technical/quality differentiation is possible.

Fully commissioned LIB cell manufacturing in the US currently represents about 7.3% of the global total: 3,770 MWh out of 51,549 MWh. However, according to the report, there is another 1,200 MWh under construction and 35,000 MWh (Tesla’s GigaFactory) announced for the US. Combining fully commissioned, partly commissioned, under construction and announced capacities—if all fully realized—would give the US a total of 39,970 MWh, or 32% of the comparable global figure of 124,667 MWh, according to the report.

In addition to dominating all lithium-ion battery production, Asia also controls the majority of automotive LIB production, representing 79% of the total—not including announced facilities.

Japan, Korea, and China also benefit from a significant population of key, LIB-specific upstream materials suppliers (for electrodes, separators, electrolytes, etc.) that together constitute supply chain clusters.

The United States, in contrast, hosts a relatively immature supply chain, and most US cell and battery plant operators are relatively new to the industry. Nearly all US LIB capacity is targeted at serving the emerging automotive market.

… While it is possible for newer industry entrants to succeed, new entrants will likely face challenges in establishing cost-competitive, high-volume production. Another potential barrier to entry in automotive markets is the relatively high performance, safety, and reliability requirements of customer automotive original equipment manufacturers (OEMs). OEM quality requirements, as well as their desire for financially stable suppliers, may tilt the playing field in favor of established competitors with strong production track records and proven product performance.

—CEMAC report

The CEMAC report notes in its review of market conditions that across all regions, automotive LIB capacity far exceeds production, with global average utilization estimated at 22% at the beginning of 2014. However, the report also notes, if moderate demand estimates are met, today’s manufacturing capacity (and commensurate underutilization) may rationalize by 2017-2018. Future capacity—e.g., Tesla’s GigaFactory), is not included in that assessment, and thus may further impact overall utilization rates. Click to enlarge.

According to CEMAC’s modeled regional comparison of cell manufacturing costs, China, Korea and Mexico would have the lowest costs, with a US startup having the highest ($278/kWh) costs, and a US transplant company (from Korea) tying with Japan for the second-highest costs at $256/kWh.

(Although there is no significant LIB manufacturing in Mexico, CEMAC included a Mexico scenario for purposes of comparison because it is geographically close to US markets, and Mexico’s labor rates are lower than the United States and equivalent to or lower than labor rates in China.)

Materials and labor constitute the key cost differences across countries; labor costs are driven by location, whereas materials costs are driven by country and company characteristics.

While US materials prices could conceivably be equalized with materials cost leaders like Korea and China … it is not likely that the United States could reduce labor or facilities costs to match those found in lower cost regions. However, these advantages could possibly be offset by improvements in other cost categories.

—CEMAC report

However, the report finds that the US could potentially host competitive LIB cell manufacturing given two assumptions:

• Materials costs are equalized with those of China and Korea; and

• An 8% after tax cost of capital is achieved for US-based facilities.

US cell producers appear to be disadvantaged in the current market, but the United States could become competitive in parts of the value chain with high potential value. Cells represent 27% of the value-added in complete automotive LIB packs, but 34% of the value-added comes from electrodes and other processed materials, an area where the United States could possibly compete. The United States already assembles cells into battery packs for xEVs manufactured domestically, which comprises 39% of total LIB pack value.

—CEMAC report

CEMAC, a part of the Joint Institute for Strategic Energy Analysis (JISEA) based at DOE’s National Renewable Energy Laboratory, works with industry and academia to deliver analyses of clean energy technology supply chains, global trade flows, and other factors that drive manufacturing strategy.

This effort is part of DOE’s broader Clean Energy Manufacturing Initiative (CEMI), which aims to increase American competitiveness in the production of clean energy products and boost US manufacturing competitiveness across the board by increasing energy productivity.