Tesla’s Secret Weapon In The EV Revolution

The future of electric vehicles around the world depends on China. While Europe has long been at the forefront of the electric car industry, with Tesla leading the charge, almost all of those European EV companies have to go through China at some point in the production process, as Chinese industry has a veritable chokehold on one of the essential components of the standard electric car. 

As Oilprice reported back in 2018, “China Indirectly Controls EV Markets” through the nearly monopolized production of electric car batteries. “The European market should start contending with the likely outcome that European car production will soon be making a mass move to China,” Oilprice wrote two years ago. “This will have a major impact on the region that has long counted companies like Volkswagen, BMW, Mercedes-Benz and Renault among its economic strongholds.”

At the time, China produced a whopping two thirds of the global supply of lithium ion batteries, which are the most common kind of batteries used in a standard electric vehicle. “Furthermore, these highly valuable batteries make up a staggering 40 percent of the cars’ value. As it stands, Europe is far from being able to compete with China when it comes to the production of lithium ion batteries. In fact, currently the entire continent is estimated to hold just 1 percent of the market,” Oilprice went on to say. “Moving the production of electric cars to China is a no-brainer for European car companies.”

All this is to say that it should come as no surprise when reports this week said that in order for Elon Musk to make good on his promises to make electric vehicles more affordable and accessible to the mass market and the average consumer, China will have to be involved. Once again, the problem comes down to batteries. This time, however, the issue is not lithium, but cobalt. 

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According to Reuters, “EV manufacturers usually use nickel-cobalt-aluminum (NCA) or nickel-manganese-cobalt (NMC) batteries on passenger vehicles because of their higher energy density, which is critical in determining how far an EV can drive on single charge.” Cobalt, however, is one of the primary reasons that electric car batteries are so expensive, at 40 percent of the car’s value. 

Tesla already has moved much of their production to China, and it is at one of the company’s Chinese plants that their transition away from Cobalt is taking place. This week Reuters reported that “Tesla is in advanced stages of talks to use batteries from CATL that contain no cobalt – one of the most expensive metals in electric vehicle batteries – in cars made at its China plant.” Instead, the plant would adopt lithium iron phosphate (LFP) batteries which will be “cheaper than its existing batteries by a ‘double-digit percent.’”

Tesla hopes that doing so will help reverse the trend of slumping EV sales in China and abroad. As Norwegian news site CCN reports, “Elon Musk envisioned the Model 3 as a mass market car but it currently competes with luxury vehicles.” The article continues: “Even at the luxury car price, the Model 3 now outsells the more expensive Model S and the Model X by a wide margin, demonstrating the market’s hunger for more affordable EVs. Last year the Model 3 accounted for slightly over 80% of Tesla’s sales.”

The elimination of cobalt, however, is only one part of an industry-wide problem concerning rare earth minerals. Lithium could also be a problem for the EV sector going forward. “The Renewable Revolution Has A Lithium Problem,” Oilprice proclaimed a year ago. First of all, this is just another opportunity for China to dominate the market, as their incredibly resource-rich environment puts them in control of many rare earth minerals markets. “If all the conventionally-fueled cars in the world were replaced with electric cars overnight, the global supply of lithium would be completely depleted in just approximately fifty years,” Oilprice reported. “Yes, this is purely hypothetical; about three million electric cars are currently in use globally–just a drop in the automotive ocean. That being said, that number is projected to skyrocket over the next decade, reaching a global fleet of approximately 125 million by 2030.”

While this increasing transition to electric vehicles could spell trouble for lithium reserves in the future, it’s overall a promising development towards decarbonization on the eve of potentially catastrophic climate change. And it’s not bad news for Tesla either. 

By Haley Zaremba for Oilprice.com

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