Whether the average electric vehicle owner knows it, the world is in the midst of a veritable arms race over the global control of mineral resources. This time, rather than racing to tap into deep-buried oil deposits, nations are scrambling to invest in mines containing the rare earth metals that compose rechargeable electric vehicle batteries.
- China is the world leader in producing Lithium batteries and the supply of minerals to make them
- The USA controls 13% of lithium battery production, China controls roughly 66% and growing
- China and The European Union continue to invest in battery production while the US lags
- US manufacturers are in real danger of placing themselves at the mercy of foreign producers
Well, at least China is. The U.S. is conspicuously behind China in the procurement of minerals that go into the production of EVs and smartphones like lithium, graphite, manganese, nickel, and cobalt — of which the U.S. currently imports half its supplies. For perspective, China produces just shy of eight times as much lithium as the U.S.
Worse yet, according to a new Bloomberg report, the U.S. shows no signs of growing its lithium battery cell production in the coming years, of which it controls around 13% of global production. China, however, already commands two thirds of the world’s lithium battery cell production. And that percentage is expected to grow to 73% by 2021.
“You can’t build half a million electric vehicle battery packs without a secure supply of several critical raw materials,” Chris Berry, a battery-metals analyst at House Mountain Partners, told Bloomberg. “If the U.S. lags in the build out of lithium or cathode capacity, its supply chain dynamism and competitiveness around the new energy theme is put at risk.”
Essentially, the U.S. is sitting on its hands while other competitive economies like China and The European Union invest heavily in EV battery production. In fact, the European Union, led by Germany have begun subsidizing the production of lithium-ion battery cells in order to offset Asia’s growth and dominance in the sector.
Europe rightly fears its carmakers could become beholden to Asian battery suppliers, if the region doesn’t step up. What’s more, if Asian brands are given sweetheart battery deals, that price advantage could slowly destroy the profits and long term viability of both American and European automakers.
Don’t believe me? We’re already seeing the effects of such an imbalance. Due to the increased costs of its battery packs, which it sources from LG, Audi can’t afford to build as many e-tron quattro pure-electric SUVs as it had hoped. Accordingly, it has been forced to slash production by 18%. This sort of thing could happen to any automaker — not just Audi.
It gets worse from here, I’m afraid. Due to the glut of new plug-in electrified vehicles due to hit the global market in the next six years (an estimated 207 new models), and the relative small market for the cars, automakers’ profits could suffer hugely. With increasing environmental regulations, however, brands will be forced to sell EVs — no matter whether they’re losing their shirt in selling them or not.
Take the already astronomic loss EVs already pose for automakers and add the growing battery-essential mineral imbalance and we have a recipe that could spell the quick demise of many European and American auto brands in the coming decades. That’s because, if we think carmakers are going to face big losses on selling EVs in the current marketplace, just wait until their bottom lines are further slashed by increased battery costs.