PotentialforUSCompetitivenessinEmergingCleanTechnologies

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1Executivesummary

Challengeandopportunity:Theclimatecrisispresentsoneofthecentury'sgreatestchallengesasnationsaroundtheworldracetolimitglobalwarmingto1.5oCandaverttheworstimpactsofclimatechange.However,inchallengeliesopportunity--achievingaglobalnet-zeroemissionseconomyisestimatedtorequireinvestmentof~$100to150trillionby2050.1Beyondinvestment,newbreakthroughsandbusinessinnovationsincrucialareassuchaszero-carbonfirmpower,transportation,heavyindustry,andcarbonremovalwillbepivotalintheefforttomitigatetheclimatecrisis.

AsaglobalenergyandtechnologyleadertheU.S.hasanopportunitytopositionitselfasadominantplayerintheemergingtechnologiesneededtoenablethetransitiontoanet-zeroeconomy.Buildinganearlyleadinthetechnologiesofthefuturewillcreatedomesticjobs,driveexports,andexpandU.S.geostrategicinterestsincriticalareas.Further,buildingaleadingpositioninemergingcleantechnologieswilloffsettheeconomicandsocietalimpactsasthepositionofhigh-carbonindustries,suchasfossilfuels,changesinanet-zeroeconomy.

Animpact-orientedapproach:Thisstudyhasprioritizedsixemergingcleantechnologiestobuildabalancedportfoliothatcanunlocksignificantcarbonabatementpotential,driveimportanteconomicactivity,andenabledecarbonizationinarangeofcriticalareas.Thesetechnologiesinclude:

?ElectricVehicles(EVs)

?Cleansteel

?Low-carbonhydrogen(H2)

?ElectrochemicalLongDurationEnergyStorage(LDES)

?DirectAirCapture(DAC)

?AdvancednuclearSmallModularReactors(SMRs)

ThesixtechnologiesabovewereselectedfromabroaderlistwiththeoverarchinggoaloffocusingontechnologiesthatcouldbothplayasignificantroleintheenergytransitionandholdpotentialfortheU.S.tobuildormaintaindurablecompetitiveadvantage.Whilewefocusedonthesesixtechnologies,werecognizethecrucialroleofmoreestablishedcleantechnologiessuchaswindandsolar,aswellasbroaderclustersoftechnologiessuchasenergyefficiencyandelectrification.

Tofocustheanalysisonthemostimpactfulsegmentsofeachtechnology'svaluechain,fromrawmaterialstofinalsalesandsupport,weassessedeachusingathree-phaseapproach:

1.Prioritizevaluechainsegmentswithlargemarketpotentialandpathwaystobuildcompetitiveadvantage

2.EstimatecurrentandfuturemarketvalueacrossthreeIEAscenarios(StatedPoliciesScenario(STEPS),AnnouncedPledgesScenario(APS),andNet-ZeroEmissionsScenario(NZE))andprioritymarkets;quantifypotentialsocietaleffectsfromjobgrowthandimpactoncommunitiesthathaveeitherbeenhistoricallydisadvantagedorwillbeimpactedbytheenergytransition;andassesscurrentstateofrelativeU.S.competitiveness

3.Identifykeyenablerstobuildormaintaincompetitiveadvantageinhigh-valuesegments

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ClimateFinanceMarketsandtheRealEconomy:SizingtheGlobalNeedandDefiningtheMarketStructureto

MobilizeCapital

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Sizeoftheopportunity:TheunprecedentedlevelsofinvestmentneededtoachievenetzeroemissionspresentanopportunityfortheU.S.tobuildonitshistoryofinnovationandbecomealeaderinemergingdecarbonizationtechnologies.Thesixtechnologiesaboveareestimatedtohaveacumulativedomesticmarketof$9to10trillionthrough2050.PreliminaryestimatesofpotentialU.S.exportsacrossthesetechnologiesin2050indicates~$330billioninannualexportvalue,morethanthe~$200billionofU.S.fossil-fuelrelatedexportsin2021.2Beyondtheeconomicvalueprovided,collectivelythetechnologiesanalyzedherecouldenableapproximately20Gt/yringlobalemissionsabatementifadoptedatscaleby2050astheworldmovestowardsanetzeroeconomy.Allmarketvaluesandabatementpotentiallistedbelowarecumulativenumbersfrom2022to2050undertheAPSscenariounlessotherwisenoted.

?EVs:Asoneofthemostmaturetechnologiesassessed,EV’spresentthelargestU.S.globalSAM,$25–30TincumulativeEVsales

oTheU.S.domesticmarketisalsoestimatedtobeconsiderable,withtotaldomesticmarketof$7–8TinEVsalesthrough2050

oEVsarealsowell-positionedtocontributetowardsnet-zero,unlocking5–7Gt/yrofabatementpotentialby2050

?CleanSteel:Theglobalcleansteelmarketisestimatedtobe20,000–25,000Mt(milliontons)cumulativelythrough2050,reflectingamarketof$10–15Tfromglobalsteelsales

oOfthis,theU.S.domesticmarketisexpectedtorequire600-700milliontons,representingamarketvalueof$400-480M

oGlobaldeploymentofcleansteeltoreduceemissionsfromsteelproductsisestimatedtounlock~1Gtinabatementpotentialby2050

?H2:Cumulativegloballow-carbonH2demandisestimatedtobe~1–2Bmetrictons,reflectingatotalU.S.SAMvalueof~$3–4Tforhydrogenproduced

oTheU.S.isexpectedtoconsume200–250Mmetrictonsthrough2050,reflectingadomesticmarketof$300–400B

oLow-carbonH2isestimatedtounlockupto3–5Gt/yrinannualabatementpotentialin2050insupportofanet-zeroemissionseconomy

?LDES:GlobalLDESdeployedatscalehasapotentialcumulativeU.S.SAMof$3–4Tthrough2050

oU.S.domesticdeploymentpotentialisestimatedtobe300–350GWthrough2050,drivingadomesticmarketopportunityof$1.0–1.2T

oLDESisconsideredacriticalenablersinceitsupportstheintegrationofrenewableresourcesintoanet-zeroenergysystem.Forthisreason,theabatementpotentialwasnotquantified

?DAC:CumulativeglobalDACdemandisestimatedtobe~3Gt,reflectingacumulativeglobalmarketvalueof$3–4T

oTheU.S.marketforDACprojectsisexpectedtobesubstantial,with~1.9Gt/yrcapacityreachedby2050andadomesticmarketthrough2050of~$1T,calculatedasvalueofsalesofcarboncreditsandCO2forutilization

oUnderaggressiveglobaltargetsfordecarbonizationDACisestimatedtoenablenegativeemissionsofupto5-7Gt/yrby2050

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MonthlyUSInternationalTradeinGoodsandServices,December2021

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?AdvancedNuclearSMRs:Approximately180-220GWofadvancednuclearSMRsareexpectedtobedeployedgloballythrough2050,representing$550–700BinCapExdeployedthrough2050

oTheU.S.isexpectedtobeoneofthelargestdriversofthisexpansion,representing45–55GWor$140–180Binvestmentopportunitythrough2050

oTheglobaldeploymentofadvancednuclearSMRsmayunlockupto~0.5Gt/yrinabatementpotentialby2050toenableanet-zeroenergysystem

TheU.S.’spotentialfordurablecompetitiveadvantage:TheU.S.hastheopportunitytobuildcompetitiveadvantageinspecificvaluechainsegmentsacrossthesixtechnologiesevaluated.Ingeneral,adynamicprivatesectorandstrongR&DlendtheU.S.acompetitiveedge,thoughplayersinAsiaandtheE.U.oftenleadtheU.S.inthevolumeofIPorresearch.

?EVs:TheU.S.,fueledbyastrongstartupandresearchbase,leadsinsoftwareandafter-salesservicesandbatterychemistrythatitcanleveragetobeacriticalsupplierforglobalEVs

oTheU.S.isnotablybehindininvestingtoscaleinnovationsacrossrawmaterialsandmanufacturingsegments,whereAsianplayersinvestheavily

?CleanSteel:TheU.S.ispositionedtogrowcleansteelmanufacturingdomesticallybyleveragingcapabilitieswithinexistingsteelmakersandaleadingCCUSindustry

oHowever,alackofdedicatedU.S.-basedOEMsandIPleadershipinEuropeandAsiasuggesttheU.S.isnotcompetitiveintheexportofcleansteel-relatedequipment

oAdditionally,withoutanycarbontaxpolicies,theU.S.holdsalimitedpositionintheofftakeofcleansteelproducts,whichwillsuppressgrowthacrossallothersegments

?H2:Strongdomesticpolicies,infrastructure,anestablishedO&Gindustry,andabundantnaturalresourcespositiontheU.S.toremaincompetitiveinlow-carbonH2

oTheU.S.isaleaderinblueH2andhassomeadvantageingreenH2,butfacesstrongcompetitionfromwell-establishedEUplayersandfromlow-costChineseelectrolysers

?LDES:U.S.-basedcompanieshavebuiltanearlyleadintheelectrochemicalLDESspace,althoughtheylagChinese,SouthKorean,andJapaneseplayersinresearchandIP

oLong-termadvantagewilldependonwhichplayerscanquicklyreducecostsbymasteringtheadvancedmanufacturingprocessesneededtoefficientlybuildbatterymodulesatscale

?DAC:TheU.S.iswellpositionedtoleadDACdevelopmentatscaleduetoabundantgeologicalstorageformationsandpotentialinaffordablerenewablesandlow-carbonenergy

oSynergisticO&GindustrytechnologycanhelptheU.S.maintainthisadvantagewhileU.S.-basednext-generationOEMsbuildgreaterexpertiseandadvantagethroughnewIPandinnovation

oHowever,thelackofDACoffsetqualitystandardsandafederalmarketplacelimitstheDACmarket,potentiallyslowingprogressofU.S.playersrelativetoothersliketheE.U.

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?SMRs:TheU.S.iswellpositionedtoleadintheadvancednuclearSMRspace,withsignificantprivateinvestmentandearlyleadershipinIPandresearch

oThoughtheU.S.doesnotcurrentlyhaveaclearadvantageinstrategicallyimportanturaniumenrichment,significantdisruptionsinthehighlyconcentratedspaceledbyRussiacreatesavaluableopeningfortheU.S.tobuildastrongposition

Enablersofadvantage:Severalkeyenablersofcompetitiveadvantagewereidentifiedacrossallsixtechnologies.Enablersincludebothpushfromthesupplysideandpullfromincreaseddemand,toaidU.S.companiesinbuildingdurablecompetitiveadvantageacrosstechnologies.

Demandpull:Enhancecompetitivenessbycreatingamorefavorableenvironmentfordomesticplayerstogrow.Examplesinclude:

?Decreasegreenpremiums:Increasedemandbyeitherreducingthecostofthetechnologyorincreasingthecostofemittingalternatives

?Increasevolumesdeployed:Increasetotaltechnologydeploymentthroughdirectprocurementsordeploymenttargets

?Ensureaccesstoexportmarkets:Increasedemandfordomesticcompanies'exportsbyclearingnon-tariffbarriers

Supplypush:BoostcompetitivenessbybuildingeconomiesofscalethroughinvestmentinmanufacturingandmaintainleadinproductqualitythroughR&D.Examplesinclude:

?Streamlinedeployment:Reducebarrierstodeploymenttode-riskinvestmentinprojects,increasingnumberofprojectsdeployedanddrivingcostsdownthelearningcurve

?De-riskprojectandinfrastructureinvestment:Increaseaccesstocapitalforrelevantprojects/infrastructure,decreasingtechnologycosts

?Maintainleadinquality/costthroughinnovation:PromoteR&Dtomaintaintechnologicalcompetitivenessinproductqualityand/orcost

Specificrecommendationsaregivenforeachtechnologyatboththeoveralltechnologylevelaswellasattheindividualvaluechainsegmentlevel.

Nextsteps:ThisanalysisfocusedonthehighestpriorityareaswithpotentialfortheU.S.tobuilddurablecompetitiveadvantageandidentifiedthemethodstodoso.Thenextsteptotranslatethisanalysisintoactionistoformulatespecificpolicyandinvestmentproposalsandworkwithrelevantstakeholderstobuildsupportforimplementation.Throughwell-craftedpolicyandstakeholdersupport,theU.S.couldbecomeadominantplayerintheemergingtechnologiesneededtoaverttheworstimpactsofclimatechange.

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2TableofContents

1Executivesummary1

2TableofContents5

3Introduction6

4ElectricVehicles8

5CleanSteel21

6Low-carbonHydrogen32

7ElectrochemicalLongDurationEnergyStorage43

8DirectAirCapture51

9AdvancedNuclearSMRs63

10DetailonMethodology74

11Summaryandnextsteps83

12AbouttheAuthors84

13Acknowledgements84

14Acronyms/Glossary85

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3Introduction

Anestimated$100-150Tinvestmentisneededthrough2050totransitiontoalow-carboneconomy2,demonstratingtheaggressivegrowthoftheglobalcleantechnologymarket.InvestmentofthismagnitudecreatesanopportunityfortheU.S.tobuildonahistoryofinnovationandbecomealeaderacrossemergingtechnologiesfordecarbonization.Toachieveleadershipandtruedifferentiation,theU.S.muststrategicallyinvestininnovationandscaletechnologiesneededtoreachnetzeroemissionsgoals.TheU.S.shouldtargetinvestmentandgrowthinthevaluechainsegmentsofthesetechnologiesthatofferthelargestopportunitytobuildandprotectacompetitiveedge.

ThiscollectiveactionposesanincredibleopportunityfortheU.S.,especiallygiventhecountry’shistoryofinnovationandinvestmentinscalingcleantechnology.Torealizethepotentialvaluefromcleantechnologydeploymentandsustainthiscompetitivepositionintothefuture,theU.S.muststrategicallyinvestandinnovateintheserapidlygrowingtechnologies.Byfocusingoncleantechnologyvaluechainsegmentswiththehighestpotentialandcapitalizingonexistingstrengthstobuildormaintaindurablecompetitiveadvantage,theU.S.cancaptureitsfairshareofthismarketwhileadvancingglobalclimategoals.

Doingsowillalsogeneratelong-termsocietalbenefitsfortheU.S.AstrongU.S.positioningincleantechnologiesisrelevantforenvironmentaljusticeandwillprovidejobstocreatearesilientworkforcethatcanbenefitpartsofthecountrymostaffectedbytheenergytransitionorcommunitiesthathavebeenhistoricallydisadvantaged.Transitioningtocleantechnologiescandecreasenegativeenvironmentalimpactsofcurrenttechnologies,whileboostingtheeconomyofsurroundingcommunities.

Therearealsothegeostrategicandnationalsecurityaspects:Manyofthesetechnologieshavedirectdefenseapplicationsandincreaseddomesticenergyoutput(e.g.,ofSMR,low-carbonH2)willenhanceenergysecurity.Further,growingcleantechnologiescanhelpoffsettheroughly$200BannualfossilfuelexportsfromtheU.S.astheglobalenergysectortransitions2.

Toselecttechnologies,welookedattechnologieswiththehighestpotentialimpactintermsofcarbonabatementandeconomicbenefit,andthosethatareimmatureenoughforpolicyandinvestmentdecisionsmadenowtohaveasignificantimpactontheirtrajectory.Thesixtechnologiesselectedforfurtheranalysiswere:

?ElectricVehicles(EVs)

?Cleansteel

?Low-carbonhydrogen(H2)

?ElectrochemicalLongDurationEnergyStorage(LDES)

?DirectAirCapture(DAC)

?AdvancedNuclearSmallModularReactors(SMRs)

Foreachofthesixtechnologies,marketsize,abilitytobuildcompetitiveadvantage,andjobcreationpotentialwereanalyzedacrossthevaluechaintodetermineprioritizedsegmentsforbuildingormaintainingcompetitiveadvantage.MarketpotentialwasestimatedusingthreedifferentIEAscenariosthatrepresentdifferentcommitmenttoemissionsreduction(net-zero,announcedpledges,andstatedpolicies).Foreachvaluechainsegment,marketsizeswerecalculatedfortheU.S.,keyexportmarkets,andthetotalglobalmarket.

CurrentU.S.competitivenesswasassessedusingsevendimensionsthatincludefactorslikeintellectualproperty,existinginfrastructure,andlowoperationalcosts(seeFigure3.1).TheU.S.

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wascomparedtoothermajorglobalplayersusingdatapointslikepatentactivityandprivateinvestmentsforeachtechnology.Throughthisanalysisandinterviewswith80+experts,weidentifiedkeychallengestotheU.S.buildingandmaintainingcompetitiveadvantage.Finally,wecraftedrecommendationstoaddressthesechallengesandenabletheU.S.tocaptureitsfairshareoftheseemergingclimatetechnologies.Seesection9forfurtherdetailsonourmethodology.

3.1Contextforproposedrecommendations

Throughoutouranalyses,wefocusedonwhatactionscouldbuildormaintaindurableU.S.competitiveadvantage,especiallyforprioritizedsegments.Interviewswithmorethan70experts(seeSection12–AcknowledgementsforPartnerOrganizations)informedoursummaryofkeychallengesforadoptionandrecommendationsforstrategicinvestmentsandpoliciestheU.S.couldputinplacetoaidintransitiontothesecleantechnologies.RecommendationspresentedinthisstudyarenotexhaustiveandshouldbeconsideredasasetofexampleactionstoaddresskeychallengestobuildingormaintainingU.S.competitiveadvantage.Weencourageandwelcomeadditionalrecommendationsforpolicyandinvestmentactionstobuildupontheinformationinthisreport.Wediscussourkeyfindingsindetailinthefollowingtechnologydeep-divesections.

Figure3.1–7DimensionsofcompetitiveadvantagetoassessU.S.competitiveness

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4ElectricVehicles

Electricvehicles(EVs)consistofconsumerandcommercialplug-inbattery-electricvehicles.Theyarefunctionallysimilartoatraditionalinternalcombustionengine(ICE)vehicle,withthepowertrainreplacedbyaninductionelectricmotorpairedwithalithium-ionbatterypackandcorrespondingelectroniccontrolsystems.Thisstudyfocusesprimarilyonthepassengercarswithsomeevaluationoflight/medium-dutytransportationsectors.Itexcludesheavy-dutytransportationandvehicleswithhybrid-electricpowertrains.

Electricvehiclesareexpectedtobethefastest-growingsegmentoftheautomotivesector,fueledbyincreasingconsumeradoption,arobuststartupecosystem,andstrongcommitmentsfromlegacyautomakerstotransitiontoEVpowertrains.Passengercarswerethefourth-largestexportcategoryfortheU.S.in2021,accordingtotheCensusBureau’sForeignTradeData3,andEVsareexpectedtobecomeanincreasinglykeypieceofmaintainingandgrowingtheseexportsastheworldelectrifies.

4.1Overviewofvaluechainsegmentsconsideredforthisstudy

TheEVvaluechainisdistinctfrommanyothersinthisstudybecauseitisanon-commodity(vs.electricity,steel,orhydrogen,forexample),aconsumerproduct,andanevolutionofanexistingindustryversusanentirelynewmarket.AdetailedviewofthefullEVvaluechainanalyzedis

includedonappendixpage67.

Figure4.1-ElectricVehicleValueChainPrioritizationResults

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MonthlyUSInternationalTradeinGoodsandServices,December2021

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Inassessingareasfordeep-diveanalyses,thestudyfocusedonfourkeyareas:

1.Rawmaterials:Vehicleelectrificationwilldriveamassivedemandincreaseforbatteryminerals,withtheIEAprojecting10-foldgrowthinbattery-drivenmineraldemandby

2040inthe“businessasusual”STEPSscenario,anda40-foldincreaseintheSustainableDevelopmentScenario.Thisdemandwillbeconcentratedinthegrowingneedforlithium,nickel,graphite,cobalt,andcopper,andwillbeakeypartofoverallEVsupplychainsecurity.

2.Batteryandpowertrainmanufacturing:Vehicleperformanceandpricearepredominantlydefinedbythissegment,andsuccessfullydeployingdifferentiatedvehicleswilldependonbothbatterymanufacturingitselfandtheupstreamproductionofmaterialsincludingelectrodes,electrolytes,andseparators.

3.OEM:Byfarthelargestsegmentintermsofrevenue,representing~60%ofoverallvalueacrossmodeledsegments,thesuccessofnewandlegacyOEMswillbecriticaltocapturingvalueinEVs,asthemanufacturerplaysakeyroleindesigning,integrating,andproducingacompellingmarketoffering.

4.Softwaredevelopmentandafter-salesservices:Thedevelopmentanddeploymentofadvancedcarfeatures,includingAdvancedDriverAssistanceSystems(ADAS),autonomousvehicle,andconnectedcarofferings,areincreasinglyintegratedwithEVsandkeytoproductdifferentiation.

4.2Sizeoftheopportunityindomesticmarketandexports

ThedomesticmarketisexpectedtobethelargestopportunityforU.S.-basedEVmanufacturersinthenearterm,followedbyCanada,Europe,andChina.TheU.S.ServiceableAddressableMarket(SAM)forelectricvehiclesisexpectedtobe~$27Tincumulativevaluethrough2050intheAPSscenario,risingfrom~$150Bannuallytodayto~$1.4Tin2050.Thebroaderrangeforthisprojectionis~$14TintheSTEPSscenario,and~$44TintheNZE.Unlikemanyothertechnologiesdiscussedinthisreport,thestrongexistingmomentumintheprivatesectorbehindthetransitiontoelectricvehiclesisexpectedtopushthelikelymarketscenarioclosertotheNZE,correspondingtoa$4.3Tmarketacrossmodeledsegmentsin2050.

Alargeportionofthisvaluewillflowupstreamtocriticalsuppliers,with~$2Tand$8Texpectedinthebatteryandpowertrainmanufacturingandrawmaterialssegments,respectively,intheNZEthrough2050.Softwaredevelopmentandafter-salesservices,largelydominatedbysubsegmentsthatcenteraroundautonomousdriving(includingride-hailingservices),total$4-6T(APS)and$9-15T(NZE)cumulativelythrough2050.Chinaisalsoprojectedtobeamajornear-termexportopportunity,butgrowthin2028andbeyondisexpectedtoplateauasmarketshareislargelycapturedbydomesticChineseplayers.ImportantforeigncountriesandregionsbrokenoutinthisanalysisaredetailedinTable1,below.

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Figure4.2-CumulativeDeploymentPotentialbyPriorityMarket

TheU.S.ServiceableObtainableMarket(SOM),whichreflectstheportionoftheglobalmarketwhichU.S.-basedcompaniescouldrealisticallycapture,isestimatedtobe10–55%oftheglobalmarketbasedonprecedentssetbytheEV,legacypassengervehicle,andSaaSindustries.ThelowerboundoftherangeisbasedonthecurrentestimatedU.S.shareofglobalEVproductionwhiletheupperboundisbasedonthegloballeaderinpassengervehicleproduction(China)forrawmaterials,batteryandpowertrainmanufacturing,OEM.Theupperboundforremainingsegments(software,aftersalesservices)isbasedonthegloballeaderinSaaSmarkets,whichistheU.S.ThisrangereflectsthespreadofmarketsharewhichtheU.S.couldpotentiallycapture,withthelowerbound(~10%)reflectingbusinessasusualwithoutstrategicsupportwhiletheupperbound(~55%)reflectswhatamarketleadercouldcapture.U.S.-basedplayers,particularlyintheOEMandbatteryandpowertrainmanufacturingsegments,canachievemarketshareclosertotheupperboundbybuildingacompetitivemoatthroughearlyleadershipininnovativetechnologies,bycapturingeconomiesofscaleinmanufacturing,anddevelopingexpertiseandIPinrelevantadvancedmanufacturingprocesses.

Priority

MarketsSegmentsincludedinSAMRelevantDriversforMarketDeepDive

European

Union

?

?

?

?

Rawmaterials

Batteryandpowertrainmanufacturing

OEM

Softwareandafter-salesservices

?

?

?

TheEUisseeingincreasedEVinvestmentandhasstrongregionalautomakerswithplanstogrowlocalbatterymanufacturingCollectively,theEUisthesecond-largestimporterofU.S.-madevehicles

Localautomakersarealsol