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Tracking the Post-IRA Boom in the US EV Supply Chain

6-month update on US EV supply chain post-IRA.

By Jay Turner, Arzy Abliadzhyieva, Pranathi Chintalapudi

The Inflation Reduction Act is a grand experiment in how the U.S. government can accelerate the clean energy transition and spur the industrial sectors needed to support it. With a group of students, I’ve been tracking just how consequential the IRA has been for the U.S. electric vehicle industry. Six months in, we already have a lot to report.

The IRA, along with the Bipartisan Infrastructure Act, marks a break with earlier climate policies. Since the 1990s, the driving goal for most climate policy was cutting U.S. carbon emissions, either by putting a price on carbon or imposing emission standards on key emitters, like vehicles or the energy industry. But that strategy was an uphill political battle that limited its success.

The big exception to this strategy was the 2009 stimulus bill, passed at the start of the Obama administration. It leveraged the 2008–2009 fiscal crisis to inject $90 billion into the clean energy sector, including tax credits to fund research, support investments, and incentivize deployment of renewable energy and energy efficiency technologies.

The IRA takes that approach to a new level, expanding support for both the production and deployment of clean energy technologies. The Congressional Budget Office estimates that it will inject $374 billion into the clean technology sector over the next decade. Some expect that could catalyze $1.7 trillion in private investments.

The EV industry has hit the ground running

In part, the EV industry has hit the ground running because the IRA extends consumer tax credits to encourage the purchase of clean energy vehicles. But, just as important, the IRA includes extensive programs aimed at encouraging manufacturers to expand the domestic EV supply chain, from mine to factory.

The law expands the Advanced Manufacturing Tax Credit, providing tax credits for the domestic production of battery cells ($35 per kWh), battery packs ($10 per kWh), and 10% of the costs of mining or refining “critical minerals” or producing active electrode materials. This can add up to thousands of dollars in support per vehicle. Most of these incentives remain in place through 2029, before being phased out by 2032.

The IRA also encourages companies to invest in new domestic manufacturing facilities. The Advanced Energy Project Investment Credit Program offers $10 billion in funding to support a tax credit of up to 30% on new production facilities (although there are some limits on taking advantage of the manufacturing tax credit and the investment tax credit). $3 billion of that is allocated specifically to the Advanced Technology Vehicles Manufacturing Loan Program. These programs come on top of the $7 billion allocated by the Infrastructure Investment and Jobs Act to support battery and critical mineral supply chains in the U.S.

We’ve been tracking the response to the Inflation Reduction Act in the EV industry, inventorying publicly announced projects based on planned capital investments, production targets, employment goals, location, and types of government support. The estimates below are based on publicly announced projects (including factories, refineries, and mines) with specific production targets and timelines.

The IRA has accelerated the boom in domestic EV supply chain investments. Investments in the domestic EV industry grew after the passage of the Bipartisan Infrastructure Act in 2021 and then accelerated with the Inflation Reduction Act. More than 25 major projects have been announced in the past six months, adding up to a potential $32 billion in capital investment and 20,000 new jobs.

US EV manufacturing is now on track to reach 4.5 million vehicles per year by 2030, with more projects in the pipeline. Surprisingly, almost all of this EV manufacturing capacity is accounted for by projects announced prior to the IRA. Once preliminary plans announced by Ford, Honda, Volvo, and BMW are finalized, however, production levels will approach the Biden administration’s goal of 50% EV sales by 2030.

The boom in domestic battery manufacturing now outpaces plans for EV manufacturing. Domestic battery manufacturing is on target to reach 950 GWh by 2030, including 250 GWh in new manufacturing capacity announced since the IRA became law. Assuming that each new EV has a 75 kWh battery pack, that is enough manufacturing capacity to support more than 12 million cars per year.

New investments in manufacturing, however, far outpace investments in upstream mining or materials processing. Despite the IRA’s support for domestic mining, new projects to expand domestic mining of battery-relevant materials trail far behind investments in manufacturing capacity. GM’s recently announced plans to invest $650 million in domestic lithium mining are for a project that pre-dates the IRA. Redwood Materials’ planned large-scale projects could help meet some of this demand. But manufacturers will likely have to rely on free-trade partners to source materials that comply with the IRA’s critical materials sourcing requirements.

Post-IRA investments have been concentrated in Republican-led states. Whether measured by capital investment, target employment, or the amount of federal support awarded to date, states led by Republican governors have claimed an outsized share of the new EV projects.

Explore the EV supply chain with our dashboard. This interactive dashboard is a window into the developing U.S. EV supply chain. Let us know what you think and what we are missing.

By Jay Turner, @_jay_turner

Related Story: What Does America’s EV Supply Chain Look Like? We Mapped It!

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