China dominates the electric car battery industry, Why?

With increasing environmental awareness and pressure to reduce greenhouse gas emissions, electric vehicles are emerging as a sustainable alternative to gas-powered cars.

Electric car batteries play a pivotal role in this transformation, as they are the basic element that provides these vehicles with the energy needed to operate them.

These batteries have many advantages, such as reducing harmful emissions, enhancing sustainability, improving energy efficiency, reducing noise, and developing technology.

Electric vehicle batteries

If we want to define a battery in a simplified way, it is a rechargeable energy storage device designed specifically to power electric cars. The battery is the primary source of energy that drives the car by providing electricity to the electric motor.

These batteries play a pivotal role in the transition to sustainable transportation, as they enable vehicles to operate without relying on traditional internal combustion engines.

Electric car batteries usually consist of lithium-ion cells due to their high energy density, efficiency, and relatively light weight. These cells store electrical energy through a chemical reaction between the cathode, anode, and electrolyte inside the battery.

When the vehicle is in use, the stored energy is converted into electricity, which in turn powers the electric motor, resulting in smooth, emissions-free acceleration.

Global leadership

Asia's largest economy dominates battery production, making global automakers dependent on Chinese partners. Battery manufacturers in China supply about 80% of the cells worldwide, supported by the mining and processing chain.

At the beginning of 2023, the German car manufacturer Volkswagen sent nearly 300 employees to the Chinese battery manufacturer Gution to learn about battery manufacturing, starting from the basics of the chemical composition of the battery, to assembling the battery pack.

Volkswagen employees have been conducting such educational trips since 2021, when the German company began investing in Gution and later became its largest investor.

The fact that Volkswagen, a car manufacturer with a century of experience, needs to learn from the Chinese battery maker; China is at the forefront of the new energy sector around the world.

Chinese hegemony

There is no doubt that China is making great strides in the field of electric car batteries, as the country dominates the rapidly growing sector driven by countries' shift towards electric cars.

The battery is the most expensive part of the electric car, and it is a part that China dominates globally. The battery is also the beating heart of the electric vehicle supply chain, which includes the entire process, from raw material production to battery manufacturing and recycling.

The cost of the battery in China is $127 per kilowatt-hour on a volume-weighted average basis, according to Bloomberg data. This means that using Chinese-made batteries can significantly reduce the overall cost of a new energy vehicle.

Statistics from market research company Jato Dynamics showed that the average cost of an electric car in China is about 32 thousand euros, compared to an average of 56 thousand euros in Europe.

According to data from market research company Counterpoint, as of the third quarter of 2023, China has become the largest market for electric cars in the world with a share of 58%, followed by the United States and Germany.

Chinese companies provide cheap and advanced batteries, and own a large part of the global supply chain for electric car batteries, from rare earth extraction and refining to cell production.

According to a report issued by the International Energy Agency in July 2022, China dominates the electric vehicle battery supply chain after mining. It also controls the processing stage of basic materials, such as graphite, lithium, nickel and cobalt.

The country has spent years building its expertise, with China processing more than half of the world's lithium, two-thirds of its cobalt, more than 70% of its graphite, and about a third of its nickel. China is demonstrating its strength in cell components, which are the four main parts that are necessary for the battery to function, as it possesses about 70% of the global production capacity of the cathode, more than 80% of the anode, and more than half of the production of electrolytes.

The cathode is the most important element, which is the positive terminal of the battery. Of all battery materials, it is considered the most difficult and energy-intensive. Chinese companies make most of the other components of the battery, and they also dominate the production of the anode, which is the negative terminal of the battery. China also sells most separators, which is the layer that passes between the cathode and anode to prevent a short circuit.

Electrolytes, consisting mostly of lithium salts and solvents, are also needed for conduction, and the Chinese are the four largest producers of electrolytes in the world.

These parts come together to form the lithium-ion battery, and China alone manufactures 80% of the global production of electric car batteries, most of which is by only two companies, Catel and BYD, and the two companies together accounted for about 53% of the use of electric car batteries in the world. For the first 10 months of 2023, according to data from market research firm SNA Research.

This extensive manufacturing infrastructure, coupled with subsidies and other forms of government support; By making China home to the largest electric car market on Earth.

Rare earth metals

Rare earth elements - a group of 17 elements - are crucial to electric car engines, and electric cars use six times more rare earth metals than conventional cars because of the battery.

China is far ahead of the rest of the world in extracting these rare earth minerals, and the country controls every step of the production of lithium-ion batteries, from extracting raw materials from the ground to manufacturing cars.

Although China has few underground stockpiles of essential components, it has pursued a long-term strategy to secure cheap and steady supplies. Chinese companies have acquired stakes in mining companies on five continents, and China owns most of the cobalt mines in Congo, which owns the majority of the world's supplies of this rare material needed to manufacture the most common type of batteries.

As a result, China controls 41% of the world's cobalt mining, and the bulk of the lithium mining that carries the electrical charge for the battery.

Although global supplies of nickel, manganese and graphite are much larger and only a small portion are used in batteries, China's steady supply of these minerals still gives it an advantage.

China's investments in Indonesia help it become the largest controller of nickel by 2027. China also extracts a large portion of graphite, along with rare earth metals, cobalt and lithium, which are important raw materials for electric car batteries.

Factors that contributed to Chinese dominance

Government investment: The Chinese government has invested heavily in the electric car battery industry. This investment has helped develop new technologies and improve the infrastructure for the battery industry. The Chinese government has provided financial incentives to companies that manufacture or use electric car batteries.

Supply chain control: China controls many of the basic raw materials for the electric car battery industry, and this control has helped reduce production costs and increase its ability to compete.

The presence of a strong manufacturing base: China has a strong manufacturing base that enables it to produce electric car batteries in large quantities, and this manufacturing base has helped China meet the growing demand for electric car batteries.

Research and Development: China places great emphasis on research and development in the field of electric vehicle batteries, and this focus has helped develop new technologies and improve the performance of electric vehicle batteries.

Lack of competition: There are not many companies competing with China in the manufacture of electric car batteries, and the lack of competition has helped China capture a large share of the market.

Long-term strategy: China plans to become a global leader in the electric vehicle industry, and this long-term strategy has helped focus on research and development and investment in infrastructure.

Taking advantage of technology: China has taken advantage of modern technology to improve production efficiency and reduce costs, and this has helped China become more competitive in the global market.

Fears of Chinese hegemony

Many countries depend on China to manufacture electric vehicle batteries, raising concerns among China's adversaries that this control could be used for political or economic purposes, and threatening to disrupt the global supply chain.

There are not many companies competing with China in the manufacture of electric car batteries, which may hinder innovation and lead to higher prices, and the lack of competition leads to the marginalization of emerging companies developing new technologies.

China controls many of the basic raw materials for the manufacture of electric car batteries, such as lithium and cobalt, and this control may lead to a monopoly of these minerals and raise their prices, which affects the cost of producing electric car batteries.

The process of extracting some of the raw materials used in the manufacture of electric car batteries causes environmental pollution, and China’s dominance over these materials may contribute to exacerbating this problem, threatening the possibility of achieving sustainability goals.

There are fears of exploitation of workers in mines to extract raw materials used in the manufacture of electric car batteries, and China’s control over these materials may exacerbate this problem, threatening human rights violations.

To face these challenges, the electric car battery supply chain must be diversified by investing in extracting raw materials in other countries and developing new technologies that do not depend on raw materials controlled by China. Competition must also be supported by providing incentives to emerging companies that develop new technologies for electric car batteries and developing laws that enhance competition in the market.

Establishing global standards for electric car batteries helps reduce these concerns, in addition to exchanging expertise and technology between countries.

Investment in new technologies plays an important role in reducing Chinese dominance, as new technologies for electric car batteries that are more efficient and less expensive should be developed, in addition to investing in electric car battery recycling technologies.

Available opportunities

Countries can diversify the electric vehicle battery supply chain by investing in extracting raw materials in other countries, as well as developing new technologies that do not rely on raw materials controlled by China. There is also an opportunity to invest in new technologies for electric car batteries by developing new, more efficient and less expensive technologies, in addition to investing in electric car battery recycling technologies.

The current situation provides new job opportunities in the field of manufacturing electric car batteries, as countries can invest in manufacturing electric car batteries away from China, in addition to creating new job opportunities in the field of research, development, manufacturing, and marketing.

Establishing global standards for electric car batteries helps provide an opportunity for international cooperation in this field, as global standards can be set for electric car batteries to ensure their quality and safety, in addition to the possibility of exchanging expertise and technology between countries.

Countries can support emerging companies that develop new technologies for electric car batteries through incentives, rewards and exemptions, in addition to setting laws that enhance competition in the market.

In conclusion, electric car batteries are an essential element in the future automobile industry, and Chinese dominance over this element represents a complex phenomenon that has positive and negative effects on the global automobile industry.

As reliance on electric cars increases, the demand for their batteries increases, which poses a major challenge to the automobile industry, as these batteries contribute to reducing harmful emissions, enhancing sustainability, developing technology, and diversifying uses.

The electric vehicle industry requires international cooperation to ensure a sustainable future by investing in new technologies and diversifying the electric vehicle battery supply chain.