Gigafactories are critical to achieving energy transition goals and achieving net-zero and decarbonisation targets. The United Kingdom, European Union, and United States are all vying for market share, driven by economic, political, and environmental considerations, such as cost savings, energy security, and sustainability. The project will be a gigafactory, a term coined by Tesla founder Elon Musk to describe his first high-volume plant for producing lithium-ion electric battery cells, deep in the Nevada desert. In conclusion, China is the dominant producer of battery cells globally, with many gigafactories already established or in the process of being constructed. It is no surprise then that there has been a marked increase in the number of gigafactories being built or planned globally, with over 30 planned in Europe alone. By providing an attainable and localised alternative to ICEs, countries will be able to shape market behaviour and foster domestic electric vehicle (EV) production. Growing apprehension about achieving net-zero goals and the potential reliance of the battery industry on China in the future are similar in nature.Įnvironmental: global initiatives to transition away from Internal Combustion Engines (ICEs) towards a more sustainable future have identified gigafactories as a critical element. These include Volvo Cars, BMW and the Volkswagen Group. Political: politicians globally have been vocal in their demands for energy security in response to recent events in Ukraine. The factory develops battery cells for new vehicles that are being developed, in turn, by its customers. Additionally, there are environmental benefits to avoiding long-distance transportation of battery cells in favor of decarbonization activities. Given the weight and transport costs of battery cells relative to internal combustion engines, these economic gains may offset any short-term cost advantages from purchasing cells made in China. This is because there are financial benefits to assembling electric vehicles (EVs) nearby or at the same facility as the process for making battery cells. Three primary motivating factors can be used to broadly categorise the motivations for this global battery arms race:Įconomic: industry professionals generally agree that attracting battery makers to the nation is essential to the success of the nation’s larger automobile manufacturing sector. In consideration of this, the United Kingdom (UK), European Union (EU) and United States (US) are all aggressively competing for market share and are doing so rapidly. Each episode considers the challenges companies and economies are. ![]() Daphne Luchtenberg: McKinsey Talks Operations is a podcast where the world’s C-suite leaders and McKinsey experts cut through the noise and uncover how to create a new operational reality. As a result, the majority of gigafactories are either located in China or in the process of being constructed there. Gigafactories are becoming a major driver of foreign direct investment (FDI), as these modern production facilities are central to global efforts to transition the energy sector away from fossil fuels to avoid climate catastrophe. Batteries included: Building and operating sustainable gigafactories. ![]() Currently, China is the leading producer of battery cells worldwide, accounting for 80% of global lithium-ion battery cell production.
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