Electric cars, a fundamental challenge: not only economic but also geopolitical
The checkered flag has long been waved. But not all the contenders have noticed. Some went off immediately, others after a few seconds. Others are still completely at a standstill. At stake is the leadership on electric cars, one of the fundamental chapters for the future of global economic and technological competition. While the world is pushing for an acceleration on the energy transition that also passes through a progressive abandonment of combustion engines, there are those who risk being left behind and those who have been behind for some time.
Tesla produces more cars in China than in the US
There are still those who share the electric car with a purely American product, perhaps thinking of Tesla. But behind Elon Musk’s Californian company is Asian manufacturing, to be exact Chinese. Tesla has invested more and more in China, over time becoming one of the stars and stripes giants most welcome by the Asian giant. Today the company produces more machines in Shanghai than it produces in California. There is a very clear reason. China dominates the market for materials useful for the production of electric cars, at least in terms of minerals and raw materials used for the construction of the batteries needed to run electric cars.
China’s domination of batteries and cobalt
Companies are looking to secure a better position in the battery supply chain, from the extraction and processing of minerals. In reality, not only companies are doing this, but also governments, who consider the development of the sector to be fundamental. And, as in other sectors, Asia has the advantage. To be exact, China, which is now the world’s largest market for electric vehicles with total sales of 1.3 million vehicles last year, more than 40% of worldwide sales. Chinese battery manufacturer CATL controls around 30% of the world market for EV batteries. And specialized cobalt suppliers, Darton Commodities, estimate that Chinese refineries supplied 85% of the cobalt ready for batteries in 2020.
Cobalt is a fundamental material for the development of lithium batteries, which in turn are fundamental for the development of electric cars. Leadership in the electric car and self-driving car market simply means being a leader in the automotive sector of the future. Good. The Democratic Republic of the Congo has 54% of the global cobalt resources. And China has its doors wide open in that country. Just look at the data: in 2019 China imported 1.2 billion dollars. Behind it is India with 3.2 million. One can imagine the incredible lag of any other country, with 70% of the mineral resources of the Democratic Republic of the Congo operated by Chinese entities.
It also grows throughout Southeast Asia
As happened in other sectors, even in the electric car sector, the countries of Southeast Asia are reaping the benefits of some distorting effect of the trade war between the US and China. Several countries in the area are therefore aiming to become new hubs for the production of electric cars, especially Thailand. Meanwhile, China is fueling Asian countries’ ability to recycle batteries from retired electric vehicles (EVs). According to a report released by Fitch Solutions, the region has an annual capacity to process 43.5 gigawatt hours of depleted EV batteries based on existing and on-site facilities. This compared to 40.9 GWh in Europe and 26.3 GWh in the United States.
Elsewhere one certainly does not stand by and watch. By the end of the decade, The Guardian writes, the continent is expected to have 28 factories producing lithium-ion cells, with production capacity set to increase 1440% from 2020 levels, according to Darton Commodities. This growth is being driven by companies such as Britishvolt in Northumberland and Sweden’s Northvolt, as well as by the same Asian companies that are expanding production to Europe.
But there is another reason behind the Sino-Asian leadership. Especially in China, the absence of traditional autochthonous auto giants’ activity makes the industry’s resistance to abandoning combustion engine production and accelerating the transition to electric ones weaker or non-existent. This is not the case in the West, starting with Italy. In fact, these large companies underline the criticalities linked to the employment and economic effects of the possible acceleration of the transition. During the Reuters Next Conference, the CEO of Stellantis Carlos Tavares pointed out, for example, that there is a risk of burning 60,000 jobs in Italy and half a million in Europe between now and 2035 with a possible loss of over a third of jobs. I work in the components.
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