Beware the great battery industry fallacy

BATTERIES, batteries, batteries. The race to attract this industry of the future – and power the electric vehicles that will rule the roads – is as frantic as the rush for AAA cells after an eight-year-old opens their birthday presents.

An orgy of subsidies under the Inflation Reduction Act is building so-called “gigafactories” across the United States, while the United Kingdom is agonising over the collapse of its only big battery project. One sign of battery-induced insecurity is the number of startups wrapping themselves in the flag, with names such as the failed Britishvolt or American Battery Factory.

The logic of “batterymania” is straightforward. In the future, all cars will be electric. Electric vehicles must have a battery. Ergo, a flourishing auto industry needs battery plants. This is true as far as it goes and batteries will certainly be a large business. But what the mania ignores is many years of experience that shows batteries are a bad business: low margin, capital intensive, dirty and hemmed in by hard physical limits on technological progress. Investors and countries piling into this industry are going to get burnt.