The rise of electric vehicles (EVs) has created a demand for lithium-ion batteries never before seen. However, the supply chain for these batteries is not without obstacles, especially considering China’s market dominance. This article examines the complexities of the battery supply chain as well as the geopolitical ramifications of China’s control over it.
The dominance of China in the battery supply chain
For the resilience of supply chains in other nations, including the United States, China’s control over the battery supply chain is a significant concern. To satisfy the estimated global demand, the production of lithium-ion battery-required minerals must increase by a third annually during this decade. This implies that tens of millions of batteries will be required in the United States alone in order to meet its goal of achieving 50 percent EV sales by 2030.
Ensuring a steady supply of battery components
The majority of battery supply chains are headquartered in Asia, where the initial production and processing constraints occur. Lithium and nickel, two essential battery components, are especially vital to secure a steady supply of. Australia produced nearly half of the world’s lithium in 2022, followed by Chile (30%) and China (15%). Indonesia produced 48 percent of the world’s nickel, followed by the Philippines (10 percent) and Australia (5 percent).
The American Response to Supply Shortages
In order to alleviate these supply constraints, the United States is pursuing narrow trade agreements with countries such as Australia and Chile in order to obtain access to minerals and production capacity. Through the Inflation Reduction Act, the government is also providing significant subsidies to producers. To qualify for the $7,500 credits for new EVs, producers must meet certain requirements regarding mineral processing and battery production location, with an emphasis on avoiding Chinese involvement.
The Challenge of Creating a Supply Chain Without China
Meanwhile, China is constructing its own parallel battery supply chain. Indonesia’s dominance in nickel production could impede the production of electric vehicle batteries. By 2035, it is anticipated that 2,7 million tonnes of nickel will be required annually for electric vehicles. However, Indonesia presently only produces 1,6 million tonnes, the vast majority of which is used to produce stainless steel. Efforts are being made to increase nickel mining and processing capacity, but China’s established expertise makes it difficult to establish a supply chain that is independent of China.
Developing a reliable battery supply chain outside of China is a challenging and uncertain undertaking. However, the increasing global demand for electric vehicles and the pressing need to reduce greenhouse gas emissions make it imperative for nations to aspire for a robust and diverse battery supply chain.
What are your perspectives on China’s role in the global supply chain for batteries? How can nations diversify their supply chains to diminish their reliance on China? How should the United States ensure a consistent supply of battery materials? Share your insights and comments in the section below.
