The global motor vehicle industry is rapidly steering away from the internal combustion engine.
Electric vehicles are increasingly attractive for their potential to reduce greenhouse gases and
decrease dependence on oil. Market predictions vary widely, but most projections agree that a
rapidly increasing share of new vehicle sales will consist of hybrid-electric, plug-in hybrid, and
all-electric models. For automakers, the key to this dramatic shift will be lithium-ion batteries.
While 96% of all hybrids available on the world market today run on nickel metal hydride
batteries, within 10 years, 70% of hybrids, and 100% of plug-in hybrid and all-electric vehicles,
are expected to run on lithium-ion (Deutsche Bank, 2009). If the United States is to compete in
the future auto industry, it will need to be a major player in lithium-ion batteries.

Today’s lithium-ion batteries, found in nearly all consumer electronics and made almost
exclusively in Asia, will require additional technological advances before they can be applied
widely to tomorrow’s electric vehicles. Still needed are improvements in safety and durability,
along with cost reductions. The current cost of lithium-ion batteries for vehicle applications is
four to eight times that of lead acid batteries, and one to four times that of nickel metal hydride
batteries (Nishino, 2010).

Although researchers at the University of Texas in Austin made crucial contributions to the
development of the rechargeable lithium-ion battery in the 1980s, U.S. firms at that time
declined to pursue the industry, leaving it to better established electronics companies in Japan.
As a result, the United States for years had almost no presence in lithium-ion batteries. In the late
1990s, when Toyota raced ahead with the first hybrid vehicles, U.S. automakers belatedly
learned the importance of acquiring relevant battery manufacturing capability.

The United States appears committed to learning from past experience and seizing the
opportunity to be a leader in lithium-ion batteries for vehicles. U.S. firms have several
advantages in lithium-ion batteries, including research capacity, a well-established domestic
automotive industry, a large market for vehicles, and the support of government policies.
According to announced capacity expansions, the United States is on track to achieve a 40%-
share of global capacity to produce lithium-ion batteries for vehicles by 2015 (DOE, 2010).
Funds from the American Reinvestment and Recovery Act of 2009 have jumpstarted the U.S.
industry from only two battery pack plants pre-ARRA, to 30 planned sites, all playing key roles
across the value chain, including materials, components, and production of cells and battery
packs.

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