Automakers are spending billions to produce battery cells for EVs in

As supply chains remain in distress across the globe, automakers are spending billions to move production of battery cells to their home countries to meet what’s expected to be rapidly growing demand for electric vehicles over the next decade.

Automakers from Detroit to Japan plan to simplify supply chains to lower costs, ease logistics and avoid massive disruptions. A global shortage of semiconductor chips has highlighted the industry’s reliance on overseas manufacturers for the parts.

Those based in or that have large operations in the U.S. are also hoping to appease the Biden administration, which has called for companies to bring supply chains to the U.S.

Other than Tesla, the country’s electric vehicle sales leader, automakers have been reluctant to invest in battery cell production until recently. Instead, they’ve relied on suppliers, largely based in Asia, to build such parts. Many, including Tesla, have or plan to partner with battery cell suppliers such as Panasonic and LG Chem to produce the parts.

“There’s the rapid electrification that’s going to happen, plus the Covid-19 semiconductor shortage has really taught us that we need to do more than just rely on battery as a commodity,” said Arun Kumar, a managing director in the automotive and industrial practice at AlixPartners. “You’re going to see this accelerate even more, in our viewpoint, primarily because localization becomes an important factor, if you really think about producing batteries at scale.”

Electric vehicles are powered by battery packs that have modules, which hold the cells. The packs are by far the most important and costly part of an EV. They can also weigh hundreds to thousands of pounds, making shipping more difficult than smaller items such as small semiconductor chips.