Jorge Costa Oliveira
For 20 years, while Europe continued to push aside the issue of electric mobility and storage, China recognized the enormous potential of these strategic sectors to leverage a significant part of the future economy. Consequently, through clear public policies (including strong financial incentives), Chinese companies invested in all segments of the value chain.
Massive amounts were invested in R&D. Efforts were made to secure access to minerals such as lithium, nickel, cobalt, manganese, graphite, rare earth elements, copper, iron and aluminum.
Some companies (Tianqi, Ganfeng) specialized in the chemical processing (refinement) of these minerals into critical metals. Companies specialized in the manufacturing of electrodes (cathodes and anodes), electrolytes and other components of electric batteries received strong state support, producing these components in gigafactories.
The number of electric vehicle (EV) manufacturers in China multiplied, with over 500 EV brands in the country in 2021.
China’s progress in electric mobility has reached such a dimension that relevant foreign battery producers (LG Energy) and EV manufacturers (Tesla, BMW, Dacia, Smart, Mini) decided to establish production units there.
In recent years, Europe finally decided to invest in electric mobility and storage. To that end, it established a European strategy, set (unrealistic) deadlines for the end of combustion engine vehicle production, and created IPCEI and other support mechanisms for various aspects of electric mobility. Despite the sector’s relevance (7% of the European GDP), it will take until the end of this decade to have European EVs with batteries manufactured in Europe.
In the US, the most important part of the strategy—the financial and fiscal incentives outlined in the Inflation Reduction Act — was only defined in 2022. We will see if it remains in place if the new US president comes from sectors of the Republican Party that believe global warming and greenhouse gases are fantasies.
The European delay is leading to an increase in sales of Chinese EVs in Europe. According to a report by Allianz, by 2030, this should result in a 13% loss of the European market and a €7 billion decrease in net profits for European vehicle manufacturers. Meanwhile, China has become a net exporter of vehicles, and the trend clearly indicates an increase in surplus in this desirable sector.
The emerging EV industry and European gigafactories are dependent on the supply of electric batteries (for 5-10 years) and critical metals (in the long term, for at least 10-20 years) from Chinese companies — many of them state-owned. On the other hand, considering the progressive decoupling between the US and China and the low customs tariffs, Europe will certainly become the second-largest market for Chinese EVs, with analysts predicting a significant increase in their market share.
The European dependency on electric batteries and critical metals cannot be changed in the medium term. The European market is gradually becoming an important source of income for the top Chinese EV manufacturers (BYD, NIO, Li Auto, Xpeng, WM Motor). In this sector as well, the EU and China are condemned to engage in dialogue.
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