U.S. policymakers and automakers just got a wake-up call from China’s announcement that the country requires a special export permit for battery-grade graphite, effectively limiting exports. While other crucial minerals such as lithium and cobalt are receiving more attention, graphite is just as essential for the production of batteries for electric vehicles, and the Chinese government currently controls more than 90% of the world’s supply. Not only must the U.S. work to secure a more reliable supply of graphite to build a domestic battery supply chain and meet our clean energy goals, but we must also prioritize innovative battery materials that will improve performance and remove dependence on unstable supply chains.
Even before China’s latest move to restrict exports, electric battery supply chains were under increasing pressure. By 2035, global demand for graphite will require 97 new mines and more than $12 billion in capital for new mining projects. While the US and our allies should invest in battery-grade graphite capacity, it is unlikely that the US will be able to meet the growing demand for battery materials through new mining alone. It can take several years to identify, prepare and start a new mine. We have no choice but to invest in innovative battery materials.
Policymakers are already building domestic battery supply chains. Through the bipartisan infrastructure bill, the U.S. Department of Energy created the Office of Manufacturing and Energy and Supply Chains (MESC) last year. MESC, in turn, has announced billions of dollars in investments in the battery supply chain, including next-generation alternatives to graphite such as nanocomposite silicon. These materials, produced domestically, will play a critical role in insulating U.S. automakers from the unpredictability of overseas graphite sourcing.
More than just a simple alternative to reduce dependence on Chinese supply chains, silicon offers significant performance improvements over older materials. This enables longer driving range with shorter charging times, addressing two key concerns for potential EV buyers.
This is not to say that we can completely move beyond graphite, at least in the short term. To meet the growing demand for electric vehicles over the next decade, we still need all the graphite we can get.
U.S. policymakers should embrace market signals that encourage both the onshoring of existing materials and innovation to develop new materials.
As a first step, the revised 30D Clean Vehicle Tax Credit, passed as part of the Inflation Reduction Act, includes domestic and related procurement requirements for the production of battery materials and prohibits content from foreign entities of concern. Although this is a solid foundation, 30D does not cover the entire clean vehicle value chain. Other market signals are also important, including Senator Bill Cassidy’s foreign pollution tax, which would boost clean manufacturing and strengthen trade partnerships with America’s allies.
Meanwhile, automakers are taking swift action to secure a stable supply of crucial minerals. Auto giants in the US and Europe are already working with innovators on joint research and development for EV batteries. Here too, time is of the essence. While it may take many years to open a new graphite mine, manufacturers that accelerate their transition to next-generation materials will be able to take advantage of the relatively limited supply in the near term.
America’s role as a global leader in manufacturing, innovation and clean energy transformation depends on the security of our industrial supply chains. To beat China while bringing better-performing electric vehicles to market, we must leverage innovative, domestically produced battery materials that transcend the status quo – and free ourselves from the impact of restrictive trade policies.
China’s restrictions on graphite exports are a clear wake-up call for policymakers, automakers and investors. It’s time to double our support for the next generation of graphite. American innovators are already at work.
Gene Berdichevsky is the CEO of Sila.
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