Case 5The Lithium‐Ion Battery Industry*

During the early part of 2018, the Tesla Gigafactory near Reno, Nevada, was ramping up its production of lithium‐ion batteries (LIBs) as it sought to be “the highest‐volume and lowest‐cost source of lithium‐ion batteries in the world.”1 Within the plant, the cells were produced by Panasonic Corporation and then assembled into battery packs by Tesla. At full capacity, the plant would produce 35 gigawatt hours (GWh) of lithium‐ion cells—equivalent to about one‐third of the world's total output in 2017.2

The project was part of a surge of investment in production capacity for LIBs in anticipation of the growing demand for electric vehicles (EVs) and for stationary storage of electricity. Tesla's projected annual output of 500,000 cars by 2019 would alone require the entire battery output of the gigafactory. However, while the Tesla/Panasonic gigafactory had attracted massive media attention, the main center of activity was China. In mid‐2017, planned additions to lithium‐ion battery capacity in the United States amounted to 36.6 GWh; in China, planned new capacity was 320.9 GWh.3

Given the pace at which auto makers were introducing new models of plug‐in EVs, and governments were planning the phasing out of petroleum‐fueled vehicles, there seemed little doubt about the likelihood of a massive growth in the demand for LIBs. Indeed, a key concern among auto manufacturers was the ability of the battery industry to meet the anticipated growth in ...

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