China's Role in the EV Battery Supply Chain

China's Role in the EV Battery Supply Chain

China dominates every stage of the EV battery supply chain from mining the metals used to make them to producing the cells that store the power.china ev battery supply chain It has 70% of the world's capacity to produce cathodes (the part that receives electrons) and more than half of production of nickel, cobalt, manganese and lithium batteries. It also has nearly a quarter of all the electrolyte and separator output needed to make a complete EV pack. That gives it a massive advantage in costs, which can be as much as 30% lower than those in Europe and the US.

As a result, it has flooded global markets with electric vehicles with batteries that cost less than their Western counterparts.china ev battery supply chain And that has triggered concerns of unfair competition and even national security threats.

The US has proposed new rules to block cars from being sold if they contain Chinese-made EV batteries or other parts that might be tainted by the Chinese government.china ev battery supply chain That threatens the sales of more than a million electric vehicles, which would push up prices for consumers and stifle demand. But even if those rules are never adopted, China's dominance is expected to continue to grow as more nations adopt stricter air quality standards and invest in the battery technology needed to comply.

Amid this shift, the US and other countries are stepping up efforts to boost domestic production of key EV battery components, including cell and pack manufacturing. For example, the European Union has a goal of building enough capacity to meet one-third of the bloc's 2025 EV sales. That will require investment of as much as EUR20 billion by carmakers and battery makers, including major Chinese producers such as Contemporary Amperex Technology Co Ltd and BAYD Co.

While it will take time for such investments to pay off, some of them may help ease reliance on foreign suppliers. Major automakers like General Motors Corp are investing in Africa's battery producers to gain access to critical raw materials, while boosting the likelihood they qualify for a streamlined EV investment program called the iRep program. Other companies are making moves in South Korea to take advantage of the country's free-trade agreements with the US and boost their odds of obtaining lucrative IRA tax breaks.

Meanwhile, China continues to ramp up its own investment in European EV batteries as it tries to lock down market share abroad. For example, CATL is expanding its production at a plant in Germany and building another in Hungary. It's joined by other big Chinese battery producers such as SVolt Energy Technology Co and Stellantis NV.