In August 2022, U.S. President Joe Biden officially signed the Inflation Reduction Act (IRA), which plans to invest $369 billion and will focus on supporting the development of clean energy industries such as electric vehicles and photovoltaics. This bill clearly has the advantage of learning and borrowing from China's new energy vehicle industry policy.

SES Power is located in China, and we are closely monitoring the impact of the bill, as many of our key customers are located in the U.S. and Europe, and many of our products are high energy, high output lithium battery systems that use high quality square aluminum-case phosphate cells. system.

Let's talk about this topic today.

A: Review of China's new energy vehicle industry policy

First, let's review China's new energy vehicle industry policy. China's new energy vehicle policy is a combination: new energy vehicle subsidy policy + technology route white list.

● New Energy Vehicle Subsidy Policy

The development of new energy vehicles in China started with the "Ten Cities, One Thousand Vehicles" demonstration project in 2009.

In 2010, new energy vehicles were listed as one of the seven strategic emerging industries in China.

In June 2012, the State Council clarified that the central government will subsidize the purchase of pilot

In 2014, it was proposed that "the development of new energy vehicles is the only way to become an auto power" and the vehicle purchase tax was exempted.

In 2017, the state began to raise the threshold of the recommended model catalog and dynamically adjust it, and began to subsidize the slope back.

Â- In the first half of 2020, affected by the new crown pneumonia epidemic, the fiscal policy subsidy for new energy vehicles was extended to 2022

● White List

In order to guide and regulate the development of the automotive power battery industry, in March 2015, China's Ministry of Industry and Information Technology formulated clear industry norms and standards, which is known as the "white list of power batteries" in the industry, and only new energy vehicles using batteries on the "white list" can get subsidies.

China's financial subsidies and battery whitelist have effectively promoted the Chinese auto industry's continued investment in new energy vehicles and laid the foundation for China's battery industry chain to dominate the world.

B: U.S. IRA's policy is actually copying China

After talking about China's policy, do you feel a very familiar taste? Yes, in SES Power's opinion, the US is actually copying China's homework:.

● According to the IRA, only electric vehicles assembled in North America are eligible for the tax credit.

● New electric vehicles are eligible for a $7,500 tax credit, and used new energy vehicles are subsidized at $4,000.

● New energy vehicles put into service before 2024 need to ensure that the raw materials for their batteries come from the United States, or free trade agreement countries, and this ratio will be increased to 80% each year.

This provision is similar to China's "power battery white list", which can be called the U.S. version of the "power battery white list".

These policies are completely learning from China, but the effect of the policy is obvious, it directly gave birth to a wave of investment in battery and electric vehicle super factories in the United States. Many market research firms believe that the investment is expected to exceed $40 billion in the short to medium term.

The U.S. domestic battery industry was relatively weak in its early years. With 15 battery projects in the U.S. since the beginning of 2021, capacity is expected to more than quintuple by 2026, and by 2031, capacity is expected to grow another 86%. Most of the newly announced superfactories are located in the same geographic area, also known as the "U.S. Battery Belt"

We have seen Japanese and Korean battery companies and U.S. vehicle companies being very active in the U.S. battery belt, so there has been a lot of news in this area in recent times.

Obviously, the U.S. hopes to use the energy of this program to develop an independent battery industry chain for the United States, because if we do not develop this "white oil", we will be left behind in the new energy wave.

C: Europe's brewing program

After talking about the United States, in fact, we can see that Europe has a similar policy. Europe has built or is building a total of 38 battery super factory, the total annual output is expected to 1TWh, equivalent to the production of 16.7 million pure electric vehicles, investment of more than 40 billion euros.

With the successive completion of these factories, the production of electric vehicle batteries in Europe will also be significantly increased, and is expected to produce 462GWh in 2025, increasing to more than 1TWh in 2030.

The EU has invested a total of nearly 20 billion euros in 70 projects to ensure battery autonomy (including the development of independent supplies of key raw materials such as lithium, nickel and graphite).

VW expects battery demand in Europe to be 240 GWh/year by 2030. To ensure battery supply, the VW Group wants to work with partners to build six battery plants in Europe. the Stellantis Group plans to increase its battery capacity to 250GWh by 2030.

D: IRA and global competition should be viewed fairly

The battery industry in the US and Europe are doing a great job, so how should we look at the IRA scheme and the global competition that the Chinese battery industry is facing?

SES Power believes that

● Firstly, there is no excuse for wanting to develop your own industry when you are at a disadvantage and want to grow in the new era.

● Secondly, China's industry chain, which has a first-mover advantage, is very likely to be replaced if it positions itself too high. Because the technology and cost advantage will not remain unchanged, it will have the risk of spillover.

● Finally, an effective strategy is to participate in global competition, and building factories in Europe and the U.S. is a participation strategy worth considering. Only by constantly running and iterating will there be hope for continued leadership.

From local manufacturing in China to exporting manufacturing bases in China, this is the inevitable trend of globalization of the industry chain. sES Power does not have the strength similar to BYD, CATL, etc., but our products have a wide pool of customers in the European and American markets, such as lead-acid replacement products (12V100Ah, 12V200Ah, 24V100Ah, etc.), high-current (2000A) starter lithium battery, UPS high-voltage lithium battery system (up to 860V), 3Kw~20Kw off-grid, grid-connected, islanded lithium battery energy storage system, wall-mounted form of home energy storage system 48V100Ah, 48V200Ah, stacked energy storage system (single unit of 51.2V100Ah, supporting up to 15 stacks), etc.

Only with enough preparation can we embrace a bright future!

If you have any questions about lithium batteries, you are welcome to contact us.