"China's Strong Influence in Battery Supply Chain... Security vs Green Industry Conflict"

"US Views China's Supply Chain Dominance as a Threat"
Excluding China Difficult from Minerals to Processing and Component Production

As the world accelerates its transition to electric vehicles, China is exerting powerful influence over the battery supply chain, a core component of electric vehicles, raising concerns that national security policies and green industrial policies are clashing in countries like the United States.

On the 17th (local time), the British publication The Economist reported that the U.S. is struggling to speed up its goal of having more than half of the cars sold in the U.S. be electric by 2030 due to supply constraints and geopolitical headwinds. This is because China, which the Biden administration is trying to check, plays a major role in the battery industry.

[Image source=Reuters Yonhap News]

The Economist pointed out, "Even if production is overseas, Chinese companies dominate most of the supply chain," adding, "U.S. policymakers see this as a threat to the resilience of the U.S. supply chain."

To control the battery supply chain, securing the supply of minerals such as lithium and nickel, which are raw materials for batteries, is essential. According to the report, about half of lithium production last year came from Australia, 30% from Chile, and 15% from China. In the case of nickel, Indonesia held the largest share at 48%, followed by the Philippines at 10%, and Australia at about 5%. These minerals mainly come from Asia.

The U.S. has signed limited trade agreements with some countries excluding China to secure these minerals and provides subsidies through the Inflation Reduction Act (IRA) for building production facilities domestically. Additionally, to qualify for a $7,500 tax credit when selling electric vehicles in the U.S., the minerals must be sourced from the U.S. or countries that have free trade agreements with the U.S., excluding China.

However, The Economist's analysis suggests that it is not easy for U.S. policies to avoid China in the battery supply chain. Chinese companies are established throughout the battery production process, making it inevitable for the U.S. to go through them.

In particular, Chinese companies have a high market share in the battery raw material processing sector. China accounts for about 75% of nickel smelting and processing and nearly 70% of lithium processing. Even if processing occurs outside China, it is often related to Chinese companies, The Economist reported.

Considering this, U.S. automaker Ford decided in March to invest $4.5 billion in a nickel processing facility in Indonesia. This project involves PT Vale Indonesia, which owns a large nickel mine on Sulawesi Island, Indonesia, and China’s major smelting company Huayou Cobalt.

China's influence is also strong in the battery component manufacturing sector. About half of battery cell components are produced in China, and some components have a market share exceeding 70% in China.

The Economist emphasized, "The rest is concentrated in South Korean and Japanese companies, with some intermediate stages dominated by the three East Asian countries holding 92-100% market share," stressing that even if the U.S. secures minerals, it must collaborate with South Korea, Japan, and others to exclude China from the supply chain.

Moreover, with Chinese battery companies showing rapid growth, it is expected to become even more difficult for the U.S. to dominate the supply chain. According to energy market research firm SNE Research, from January to May this year, the top electric vehicle battery users were China’s CATL (86.2 GWh) and China’s BYD (38.1 GWh). CATL and BYD showed growth rates of 105% and 541%, respectively, in the global market excluding China during the same period, rapidly capturing the market.

This content was produced with the assistance of AI translation services.