China is electrifying the world
By Peter Lisbygd
IT SHOULD NO LONGER BE A SURPRISE THAT OUR GLOBAL ENERGY MIX IS RAPIDLY CHANGING FROM BLACK TO GREEN. THIS IS A NEEDED TRANSITION TO SAVE THE PLANET AND TO SECURE SAFE ENERGY SUPPLY AND STABLE PRICES IN THE FUTURE.
while THE WESTERN WORLD HAS BEEN UNDERINVESTING IN THE SUPPLY CHAIN OF THE RAW MATERIAL NEEDED TO TAKE ON THE GREEN TRANSITION, CHINA HAS TAKEN ALMOST FULL CONTROL OF SUPPLYING THE LONG-KNOWN MATERIALS FOR THE WORLD TO ELECTRIFY AND GO GREEN.
New Energy Vehicles at the core of development
When we look at the supply chain of electrifying our energy sources, the car industry is a great example because we can all relate to it. Western automakers built their fortunes on the combustion engine technology buy China now has the ambitions to define the electric vehicle age.
This development has already been in full swing for almost decade, based on the industry masterplan, Made in China 2025, that was launched back in 2015 by Premier Li Keqiang. Today Chinese companies have the leading technologies, shaping a booming NEV sector.
Another piece of the puzzle is the continuous investments in creating the most modern production base and the foundation of having the largest home market in the world.
If we look at the bigger picture, 53% of all new energy vehicle sold in the world in 2021 were sold in China, and roughly 80% of the cars were Chinese brands. Recently released numbers from the China Passenger Car Association (CPCA) show a continuous increase is sales volumes of impressive 96% in 2022, while Europe and EU are growing at a much lower pace.
The Chinese numbers are quite remarkable, taken the difficult circumstances in China into consideration. The development is driven by a clear strategic focus, investments, innovation, carbon credits and not least favorable subsidies, nudging Chinese consumers to choose green alternatives. The current subsidiary to boost consumption of new energy vehicles will last until the end of 2023.
While the car industry is a good example of a sector where Chinese companies will play a dominant role in the future, we see the same trend in solar, wind, hydro, PtX, and power storage. All the new clean technologies have one this in common - they need new energy material to transport and store the electricity and this is where Chinese companies, at this moment, have the upper hand.
That are the facts?
Chinese companies are not directly controlling the mining of the raw lithium that is the dominant source in most batteries today. But they have bought into mining companies in Australia and South America over the past decade and they are rapidly scaling up their own mining capabilities in China to be more self-supplying soon.
When we look at the processing capability of the new energy metals and rare earth materials China has a dominant control. Chinese companies have strategically positioned themselves being at large self-supplying and at the same time dominating the global supply chain of the materials the world needs to electrify. This industry is highly energy consuming and damaging for the local environment, if not handled well.
As you can see on the illustration from New York Times, the bottom line is that China is controlling the refining and processing of the material that we are basing our green transition on.
To put this into context of the latest US policies to ramp up production of Lithium for their own home-grown car industry, the US is home to only one active lithium mine in the state of Nevada, manufacturing just 1% of global lithium production. It will take years if not decades before the US have built their own Lithium industry.
Why it matters?
While the two largest economies in the world, US and China is pulling strings on tech and trade we can all end up losing as deglobalization will only slow down the green transition and make is much more expensive.
We already see the impact. According to Nikkei Asia solar panel installations in the U.S. have slumped by an estimated 23% in 2022, as trade restrictions with China limit access to key low-cost parts and materials.
Politician in the West have realized much too late what kind of innovation and investment drive China possesses. A much firmer approach to competition and innovation is needed for the EU, US, and other nations to up the game.
When countries in the EU have finally received the last drop of Russian gas, a battle of access to new energy material might start.