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Bernstein expects demand for electric car batteries to rise; Will the IRA budget be sufficient?

Bernstein expects demand for electric car batteries to rise;  Will the IRA budget be sufficient?

By Michael Elkins

When US President Joe Biden signed the Inflation Reduction Act (IRA) into law in August, he called it a “historic move to fight inflation, cut costs, and create jobs that companies can’t move abroad.” The law is designed to do many things, not least combat climate change through clean energy and electric vehicle (EV) tax incentives.

Under the new law, US battery manufacturers can get up to $45/kWh per battery produced from the Advanced Manufacturing Production Credit (AMPC). The IRA will also offer EV subsidies under CVC of up to $7,500 per EV depending on vehicles that meet the requirements for 1) critical minerals ($3,750), and 2) battery components ($3,750).

Now, many car companies transitioning to electric vehicles are looking for a new supply of electric car batteries made in the United States. An analyst at Bernstein expects demand for electric vehicle batteries in the United States to rise from 36 GWh in 2021 to 839 GWh by 2030, reaching 50% of xEV sales penetration by 2030.

However, he believes that the current IRA budget may not be sufficient. According to a note from the analyst, โ€œAssuming $45/kWh AMPC for battery and unit cell manufacturing beginning in 2023 and ending by the end of 2032, we would estimate total balances for battery manufacturers at nearly $100 billion. Either the US would have to raise Its budget for AMPC or batteries produced after 2027 may not receive any credits that would reduce the competitiveness of the U.S. For CVC, the $7.5 billion budget means subsidies for 1 million electric vehicles ($7,500 per vehicle) which is 7% Only from annual US PV solar sales of 15 million units.โ€

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