In the past, the U.S. relied upon foreign oil to power a substantial portion of its energy needs. In the future, the country may develop a similar dependence, relying on a global rival to provide key materials needed for electric vehicles.
The shift toward electrification has left the U.S. auto industry in a vulnerable competitive state amid heightened economic and security tensions between China and the U.S., according to a report issued Thursday, Sept. 24, by a Washington, D.C., think tank.
China has consolidated control of key supply chains needed to produce EVs at global scale, according to the report from Securing America’s Future Energy, a nonpartisan group of military and business leaders that examines the convergence of energy policy and the transportation industry.
The U.S., on the other hand, remains dependent on imports for key minerals and materials needed to produce batteries, an imbalance that “should be deeply concerning” to policymakers and auto industry executives, says Robbie Diamond, CEO of the group.
“The 21st century will be defined by the relationship between the United States and China, and the strategic and economic promises of transportation technologies … are already at its center,” he said. “To truly compete against China’s ownership of these critical supply chains and new technology, we need to rehabilitate and transform our entire industrial ecosystem.”
From mineral extraction to battery supply to EV manufacturing, China has established itself as the preeminent hub for EV-related business, the group says. By last May, 107 of the 142 lithium ion battery megafactories that exist or are under construction were located in China, according to the report, titled “The Commanding Heights of Global Transportation.”
Further, the Chinese have focused on securing supplies of key materials used to produce battery cells, such as cobalt, lithium, nickel and graphite. China has 73 percent of the global share of production of lithium ion battery cells, per the report. The U.S., by comparison, controls 10 percent.
This isn’t the first time alarm bells have been raised about the competitiveness of the U.S. industry. In February 2019, Benchmark Mineral Intelligence Managing Director Simon Moores testified before a U.S. Senate subcommittee, saying, “We are in the midst of a global battery arms race, in which so far the U.S. is a bystander.”
By contrast, China, eager to ease its dependence on foreign oil, made electrification a foundational tenet in a 10-year strategic plan the country embarked on in 2015 called Made in China 2025. Deploying a national, top-down strategy, China now sits in a prime position to build and supply what Bloomberg New Energy Finance projects will be a global stock of 500 million EVs by 2040.
The Securing America’s Future Energy report warns policymakers that U.S. companies are fighting an asymmetric competition, in which American companies are competing against the whole Chinese state rather than distinct Chinese companies.
Further, it skewers China’s economic conduct, saying the country deliberately circumvented World Trade Organization rules.
“It flouts global trade rules, undermines the market-based system by granting state subsidies to companies, denies foreign companies fair access to its markets while coercing technology transfer, steals intellectual property and fails to uphold the rule of law,” the report says.
In the transportation realm, those tensions are not strictly contained to EVs. They extend to efforts to develop self-driving vehicles and 5G technology.
Concerns stretch beyond economic competitiveness and may be a matter of national security at a time when China and the U.S. jockey for global power.
“We must assess the clear security concerns inherent in Chinese ownership of our transportation future,” said Gen. James Conway, co-chair of the Energy Security Leadership Council, a project of the group. “We have a brief window to mobilize our considerable resources to build a robust transportation sector free from Chinese control. If we miss that window, we risk jeopardizing our auto and truck industry and the 10 million U.S. jobs the auto industry supports.”