China's Dominance in the Battery Supply Chain

China's Dominance in the Battery Supply Chain

China’s dominance in the battery supply chain is a growing concern for global policymakers.china ev battery supply chain It controls nearly 80% of the world’s capacity to produce battery cells, backed by companies that control mining and processing for critical raw materials. The dominance of a few countries in the value chain has the potential to stifle growth in clean mobility and create hiccups in the transition away from fossil fuels. To counteract this, some automakers are experimenting with new technologies that could decrease their reliance on these expensive raw materials. Others, like Ford and Tesla, are investing in refining facilities to reduce their dependence on Chinese suppliers.

The EV revolution has brought with it immense demand for lithium, nickel, cobalt, graphite, and other materials used to make cathode material in EV batteries.china ev battery supply chain These materials are mined, refined, and integrated into the final product in complex processes that require a lot of energy. As a result, a disruption in any one of these steps will have a dramatic impact on the whole value chain.

To illustrate this, the authors of the article constructed a Sankey diagram (shown below), which is a flow chart that shows the relative share of each country in different parts of the value chain.china ev battery supply chain The colored areas represent countries and their share of production or trade flows in each step of the process. The thickness of the line represents the share of end-use demand for the commodity in question. The color of the box represents whether the commodity is sourced from domestic or foreign sources.

The results from the Sankey analysis showed that China dominates at all stages of production for EV cathode materials, with about 70 percent of the manufacturing capacity in both the anode and cathode sectors. It also holds a significant share of production capacity for the intermediates that go into EV batteries, such as cell components and electrolyte and separator. The authors of the article noted that these figures have sparked concerns from the international community about a lack of competition in EV battery technology and the dominance of China’s battery producers.

But even though downstream actors can’t directly influence the upstream mining of minerals that go into EV batteries, they can exert some leverage on the issue by demanding that their suppliers use responsible practices. This is already beginning to happen, as pressure from consumers and carmakers has led to corporate commitments to improve supply chain transparency and social responsibility in the same way that coffee shops have influenced responsible coffee farming. Combined with robust regulations and policies governing the entire supply chain, these efforts could mitigate negative impacts in the long run.