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How China dominates the electric vehicle supply chain

AYESHA RASCOE, HOST:

The entire auto industry is making a massive pivot.

(SOUNDBITE OF GM SUPER BOWL COMMERCIAL)

MIKE MYERS: (As Dr. Evil) OK, let's go. We're going all electric.

MINDY STERLING: (As Frau Farbissina) Everybody in.

RASCOE: That means they'll need more batteries. And as NPR's Camila Domonoske reports, the supply chain for those batteries is dominated by China.

CAMILA DOMONOSKE, BYLINE: There's a lot of enthusiasm around the auto industry's big switch toward electric vehicles.

(SOUNDBITE OF ARCHIVED RECORDING)

PRESIDENT JOE BIDEN: God, it's good to be back in Detroit.

(APPLAUSE)

DOMONOSKE: But when President Biden visited a GM plant this past fall, there was also a strong whiff of regret.

(SOUNDBITE OF ARCHIVED RECORDING)

BIDEN: Something went wrong along the way. We stopped. We risk losing our edge as a nation. And China and the rest of the world are catching up.

DOMONOSKE: In fact, when it comes to the massive batteries that are essential to electric vehicles, China is way ahead. It controls something like three-quarters of the market for the raw materials that go into these batteries, like lithium, cobalt and nickel. So automakers rely on China for these minerals. And as companies go electric, they'll need a lot more.

KWASI AMPOFO: You're looking at a scenario where demand is going to jump about eight times what it is.

DOMONOSKE: Kwasi Ampofo is the head of metals and mining at BloombergNEF.

Now, it's not like China won the geological lottery and just happens to have a bunch of rich deposits. These particular minerals are in places like the Democratic Republic of the Congo, South America and Australia. Instead of getting lucky, China got busy.

AMPOFO: The other way of bringing metals onshore into your country is to build the refineries that are needed to actually refine these metals. And that is where the China story started 10 years ago.

DOMONOSKE: Beijing decided it wanted to dominate the electric vehicle market down to the minerals. China has an authoritarian government that often intervenes in the economy. When it makes a decision like this, it acts on it.

MARY LOVELY: If you're a large country, if you're willing to put a lot of money into it - boom. Guess what? You've got it.

DOMONOSKE: That's Mary Lovely, a senior fellow at the Peterson Institute.

So today, most of the world's electric vehicle batteries are made out of stuff that has to pass through China. Some crisis could hamper China's ability to process these minerals. Or the U.S. and China might, say, slap tariffs on each other, driving car prices up. Or China might actually block minerals from reaching plants in the U.S. or Europe.

Vivas Kumar is the CEO of Mitra Chem, a battery component startup. Part of his sales pitch is reminding people that China has used supply chains as economic weapons before.

VIVAS KUMAR: There's growing alarm that that may happen again if the geopolitical tensions between the Chinese Communist Party and our nation's government continue.

DOMONOSKE: Companies like Mitra Chem are trying to build a new supply chain in the U.S. to reduce this risk. But China has the advantage of scale, cheap labor and a lot of expertise, and it has historically been willing to take a lax approach to environmental standards. So one question is, how much are companies - or the U.S. government - willing to pay to reduce their reliance on China? Maybe China wouldn't disrupt supplies. It, too, would suffer from a collapse in these supply chains. But it's a risk.

KUMAR: It is a conversation that is happening at every single boardroom.

DOMONOSKE: That conversation is happening on Capitol Hill, too. The bipartisan infrastructure law dedicates billions of dollars to build up a domestic supply chain for batteries. But even an all-out effort would take time. Here's Ampofo, the metals expert.

AMPOFO: China saw the vision 10 years ago. And then it took a while. It took almost a decade for the fruits to start bearing and to - yeah, there's no short-term fix here.

DOMONOSKE: For now, the supply chains for these in-demand batteries are firmly anchored in China.

Camila Domonoske, NPR News.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.

Camila Flamiano Domonoske covers cars, energy and the future of mobility for NPR's Business Desk.