Article by AI based on youtube video transcript: Why China is winning the EV war

Ford's Battery Plant and the US-China Trade War

In 2024, Ford Motors reduced production of their electric pickup truck, the F-150 Lightning, due to low sales partly attributed to its high price compared to the gas-powered version. This issue extends beyond Ford, as the average price of an electric vehicle in the US is around $55,000, making it inaccessible for many Americans. This is a significant problem as EV adoption is crucial for achieving climate goals.

Ford's plan to build a battery plant in either Virginia or Michigan, using technology from CATL, the world's largest battery maker based in China, faced political obstacles. Virginia's governor rejected the proposal due to CATL's links to the Chinese government. This situation highlights the broader trade war between the US and China, fueled by the rapid growth of China's EV market, which accounts for over half of global EV sales.

China's Rise in the EV Battery Market

China's dominance in the EV battery market is attributed to government support, control over the supply chain, and innovation. Around two decades ago, China, on its way to becoming the world's largest oil importer, saw the electrification of its car fleet as a path to energy independence and a solution to its air pollution problem. The Chinese government provided substantial support to companies involved in "new energy vehicles" through subsidies, cheap land leases, loans, research spending, and tax breaks.

Starting around 2009, local governments boosted the EV market by contracting Chinese companies to electrify their bus and taxi fleets. Consumer adoption was incentivized through subsidies, charging discounts, parking benefits, and preferential traffic policies. Furthermore, the government implemented stringent battery standards, pushing for better battery density to qualify for credits.

China's Control Over the EV Battery Supply Chain

China's control over the EV battery supply chain is another key factor in its dominance. Chinese companies strategically invested in mines globally that produce minerals essential for lithium-ion batteries, such as nickel, cobalt, manganese, graphite, and lithium. This ownership stake allows them to control the production and price of these crucial materials.

China's dominance extends beyond mining to refining, a polluting process that most developed countries avoid. Chinese companies refine the majority of these minerals, regardless of where they are mined. They also manufacture the four main components of EV batteries: the cathode, anode, electrolyte, and separator. This control is so extensive that even after the Biden administration implemented a rule requiring no more than half of battery components or minerals to be sourced from China to qualify for tax credits, only an estimated 20% of EV models met the criteria.

China's Battery Innovation and the Future of EVs

Leveraging its market dominance, Chinese companies have become leaders in battery innovation. In recent years, they have developed ways to reduce reliance on expensive battery minerals like nickel and cobalt through lithium iron phosphate (LFP) technology. CATL, for instance, announced an LFP battery capable of powering a car for 370 miles on a 10-minute charge. BYD, another Chinese company, has also developed its own LFP battery called the "blade battery," designed to maximize battery capacity within a limited space.

LFP batteries, primarily manufactured in China, are gaining popularity in the EV market. However, CATL is expanding its production capacity beyond China, with plants in Germany and plans for one in Hungary to cater to the European market. Ford's proposed battery plant in Michigan, if approved, will be the first LFP plant in the US.

The Dilemma Facing the US

The dominance of Chinese EV batteries presents a dilemma for the US. While there are concerns about potential unfair competition and human rights and environmental issues related to China's battery supply chain, the US currently relies heavily on Chinese technology for its EV transition. The US government is investing in its own battery industry, but it will take time to develop.

This situation forces the US to choose between its desire to distance itself from China and its urgent need to transition to electric vehicles to combat climate change. For now, Chinese EV batteries remain unavoidable, leaving the US to weigh its priorities.