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Why carmakers are pouring billions into new electric vehicle battery factories

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A red Ford truck on an assembly line.

The U.S. is ramping up EV production since supply chain issues are causing delays. Bill Pugliano/Getty Images

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

Last week, Hyundai announced it’s spending $5.5 billion on a battery and electric vehicle plant 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 at least one crucial component in it came from China.

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

Increasingly, car companies want more control over where they get their parts, especially as electric vehicle demand grows.

Gil Tal is director of research at the University of California, Davis, EV research center. He said the federal government is investing in those supply chains too.

President Joe Biden is putting more than $3 billion into the battery supply chain. In a way, the industry’s recent commitments may be angled to help companies grab big slices of these federal grants.

For automakers to transition from making gasoline-powered cars and trucks to EVs requires a lot of upfront investment in new machinery and factories.

“But bringing all the supply chain into the U.S. or having more control on it is a very tall order. And it will take many years,” Tal said.

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

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

It might only take three or four years to build a factory, but Berry said getting the permits to build a new lithium or nickel mine in the U.S. would probably take closer to 10 years.

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