Why China is winning the EV war

Summary

Ford Motors faced challenges in selling their electric F-150 Lightning due to high costs, reflecting a broader issue with the affordability of EVs in the US. Chinese company CATL's battery technology, integral to EV affordability, became entangled in US-China trade tensions. China's dominance in the EV battery market stems from substantial government support and control over the supply chain, leading to innovations like the LFP battery. As the US seeks to bolster its own battery industry, it grapples with the dilemma of balancing competition with China and the urgent need for affordable, widespread EV adoption.

Takeaways

• 🚚 Ford Motors reduced production of their electric F-150 Lightning due to lower sales, partly because it's more expensive than the gas-powered version.
• 💰 The high average price of new EVs in the US, around $55,000, makes them less accessible to many consumers, hindering the adoption of EVs which is crucial for climate goals.
• 🔋 Batteries account for approximately 40% of the production cost of an electric vehicle, highlighting the significance of battery cost in the overall price of EVs.
• 🏭 Ford considered building a new battery plant in Virginia or Michigan to reduce costs, but faced political resistance due to the technology's origin from CATL, a Chinese company.
• 🌏 The US-China trade war has affected the EV industry, as China dominates the global EV market, making up over half of all EV sales worldwide.
• 🇨🇳 Chinese companies lead in EV battery production due to substantial government support aimed at energy independence and reducing air pollution.
• 💼 The Chinese government provided $29 billion in subsidies, research funding, and tax breaks to the EV industry from 2009 to 2022 to foster growth.
• 🚌 Local governments in China created an instant market for EVs by contracting companies to electrify public transport like buses and taxis.
• 🛑 The Chinese government set strict battery standards, requiring high energy density to qualify for subsidies, which spurred technological advancements.
• ⛏ Chinese companies control significant portions of the global supply of battery minerals by acquiring stakes in mines and dominating the refining process.
• 🔬 Chinese battery companies are at the forefront of innovation, developing technologies like lithium iron phosphate (LFP) batteries, which avoid expensive minerals and offer fast charging capabilities.
• 🌐 Despite concerns about unfair competition and environmental impacts, the global EV transition is heavily reliant on Chinese battery technology, with no immediate viable alternatives.

Q & A

Why did Ford Motors reduce the production of their F-150 Lightning in 2024?

Ford Motors reduced the production of the F-150 Lightning in 2024 because sales had tanked, partly due to its higher cost compared to its gas-powered counterpart.

What is the average price of a new electric vehicle (EV) in the US, and why is this a challenge for EV adoption?

The average price of a new EV in the US is about $55,000, making them hard to sell for most US consumers, especially during a time when widespread EV adoption is critical for climate goals.

What percentage of the cost to produce an electric vehicle is attributed to the battery, and why is this significant?

Roughly 40% of the cost to produce an electric vehicle is in the battery. This is significant because it highlights the need for cost reduction in this component to make EVs more affordable.

Why was Ford considering a new battery plant in Virginia or Michigan in 2023?

Ford was considering a new battery plant in Virginia or Michigan in 2023 to help lower its costs, which would make electric vehicles more affordable and competitive in the market.

What is the connection between the battery technology Ford was considering and the company CATL?

The battery technology Ford was considering was from CATL, a company based in Fujian Province, China, which is the largest battery maker in the world.

Why did Virginia's governor reject the battery plant proposal?

Virginia's governor rejected the battery plant proposal due to its links to China and concerns that the company is influenced, if not controlled, by the Chinese Communist Party.

How has China's dominance in the electric vehicle market impacted the global EV industry?

China's dominance in the electric vehicle market has led to the rise of affordable and high-quality EVs globally. China accounts for over half of all EV sales worldwide and has significantly influenced the development and supply of EV batteries.

What role did the Chinese government play in the development of the EV battery industry?

The Chinese government provided substantial support to the EV industry, including subsidies, cheap land leases, loans, and tax breaks, which helped Chinese companies develop leading EV battery technology.

How did China's early adoption of stricter battery standards affect the EV industry?

By introducing stricter standards for battery density, the Chinese government encouraged the development of higher-quality batteries, which in turn fueled the growth and innovation within the EV industry.

What is the significance of the lithium-ion battery and its components in the EV industry?

The lithium-ion battery is the most common type used in electric vehicles, with the cathode, anode, electrolyte, and separator being its main components. Control over these components and their supply chain is crucial for the production and innovation of EV batteries.

How has China's control over the battery supply chain influenced the global market?

China's control over the battery supply chain, from mining to manufacturing, has allowed it to dominate the market and lead in battery innovation, making it difficult for other countries to compete without relying on Chinese technology and resources.

What is the significance of CATL's LFP battery technology and its impact on the EV market?

CATL's LFP battery technology allows for longer driving ranges with faster charging times, which is a significant advancement in EV battery capabilities. This has made LFP batteries a growing share of the EV market, with nearly all of them manufactured in China.

What challenges does the US face in developing its own battery industry to support its EV goals?

The US faces significant investment challenges, estimated at $82 billion by Bloomberg, to build up its battery industry to meet domestic demand by 2030. Additionally, there are concerns about unfair competition, human rights, and environmental issues associated with China's battery supply chain.

How did Ford eventually resolve the issue of finding a site for its CATL battery plant?

Ford resolved the issue by finding a site for its CATL battery plant in Marshall, Michigan. This decision has triggered a US House investigation but represents a step towards establishing the first LFP plant in the US.

Outlines

00:00

🚗 Ford's Electric Vehicle Challenge and China's Battery Dominance

Ford Motors faced a decline in sales for their electric F-150 Lightning due to its higher cost compared to the gas-powered version. The high average price of new EVs in the US, around $55,000, hinders broader adoption crucial for climate goals. Ford considered a new battery plant in Virginia or Michigan to reduce costs, partnering with CATL, the world's largest battery maker based in China. However, political concerns over Chinese influence led Virginia's governor to reject the proposal, prompting Ford's CEO to emphasize the plant's independence. This situation reflects the broader trade tensions between the US and China, especially considering China's significant role in the global EV market, accounting for over half of all EV sales. The script delves into how Chinese companies became leaders in EV battery production, largely due to substantial government support aimed at energy independence and reducing air pollution. The Chinese government's policies provided subsidies, cheap land leases, and favorable loans, fostering a conducive environment for EV growth. The city of Shenzhen exemplified this with its complete electrification of the bus fleet through BYD, now the world's largest EV company.

05:01

🔋 China's Control Over the EV Battery Supply Chain and Innovation

China's dominance in the EV battery market is attributed to its control over the supply chain, from mining to refining and manufacturing of battery components. Despite environmental concerns, China refines the majority of raw materials and produces most of the components for lithium-ion batteries. Chinese companies like BYD, which initially made batteries for electronics, have leveraged their manufacturing expertise to become major players in the EV battery industry. The US, historically not a player in lithium-ion battery manufacturing, now faces challenges due to China's extensive control over the supply chain. Even after the Biden administration's rule to limit Chinese sourcing for tax credits, only 20% of EV models qualified, highlighting the difficulty in avoiding reliance on Chinese components. Chinese companies have also led in battery innovation, developing lithium iron phosphate (LFP) batteries that avoid expensive nickel and cobalt. CATL's LFP battery promises a 370-mile range with a ten-minute charge, while BYD's blade battery increases energy density through its unique shape. As Chinese companies expand with plants in Germany and Hungary, and Ford establishes a CATL battery plant in Michigan, the US faces a dilemma between distancing from China and the urgent need for affordable electric vehicles. The US government is investing in building its battery industry, but the immediate challenge remains to offer consumers affordable EV options amidst environmental and geopolitical considerations.

Keywords

💡F-150 Lightning

The F-150 Lightning is Ford's electric version of their popular F-150 pickup truck. It is significant in the video as an example of the challenges faced by electric vehicles (EVs) in the market due to higher costs compared to their gasoline-powered counterparts. The script mentions that Ford had to cut back production on the F-150 Lightning due to lagging sales.

💡Electric Vehicle (EV)

An electric vehicle, or EV, is a vehicle that is powered by an electric motor instead of an internal combustion engine. The video discusses the high average price of new EVs in the US, which is a barrier to widespread adoption and a critical issue for meeting climate goals. The term is central to the theme of the video, which revolves around the challenges and strategies in the EV market.

💡Battery Production

Battery production is the manufacturing process of creating batteries, a crucial component of electric vehicles. The script highlights that Ford was considering establishing a new battery plant to lower costs, indicating the importance of battery production in making EVs more affordable.

💡CATL

CATL, or Contemporary Amperex Technology Co. Limited, is identified in the script as the world's largest battery maker, based in China's Fujian Province. The company is central to the narrative as its battery technology was considered by Ford for a new plant, but faced political complications due to US-China relations.

💡Trade War

A trade war refers to a situation where countries impose tariffs or trade barriers against each other, often escalating in a cycle of retaliation. The video script mentions the broader trade war between the US and China as a context for the challenges faced by Ford's battery plant proposal, illustrating the impact of geopolitical tensions on business decisions.

💡Government Support

Government support refers to the assistance provided by the state to certain industries or sectors, often to promote growth or achieve strategic goals. The script explains how Chinese government support was instrumental in the development of China's EV battery industry, providing subsidies, cheap loans, and other incentives to companies.

💡New Energy Vehicles

New energy vehicles is a term used in the script to describe vehicles that are not powered by traditional fossil fuels, with a focus on electric vehicles. The Chinese government's policies defined these vehicles and provided substantial support to promote their adoption and manufacture in China.

💡Lithium-ion Battery

A lithium-ion battery is a type of rechargeable battery that is commonly used in electric vehicles due to its high energy density and longevity. The script discusses the components of this battery and China's dominance in the supply chain for these components, which is central to the video's exploration of the EV market.

💡Supply Chain Control

Supply chain control refers to the influence or management of the various stages involved in the production and distribution of goods. The video emphasizes China's control over the supply chain for EV batteries, from mining the minerals to manufacturing the battery components, which contributes to their competitive advantage.

💡Lithium Iron Phosphate (LFP)

Lithium iron phosphate, or LFP, is a type of battery technology that the script identifies as an innovation by Chinese companies to avoid using expensive minerals like nickel and cobalt. LFP batteries are highlighted as a growing share of the EV battery market, with Chinese companies leading in this technology.

💡Blade Battery

The blade battery is a specific type of LFP battery developed by BYD, characterized by its thin, long shape that allows for more batteries to be packed into the same space. The script uses this as an example of Chinese innovation in battery technology, contributing to the efficiency and range of EVs.

💡Global Transition to Electric Vehicles

The global transition to electric vehicles refers to the shift from traditional gasoline-powered vehicles to those powered by electricity. The script discusses the challenges and complexities of this transition, particularly the reliance on Chinese EV batteries and the geopolitical considerations involved.

Highlights

In 2024, Ford Motors reduced production of the F-150 Lightning due to lower sales, partly attributed to its higher cost compared to the gas-powered version.

The average price of a new electric vehicle (EV) in the US is about $55,000, making them less accessible for many consumers, despite the urgency of EV adoption for climate goals.

Approximately 40% of the production cost of an EV is attributed to the battery, indicating the significance of battery costs in the overall price of EVs.

Ford considered a new battery plant in Virginia or Michigan in 2023 to reduce costs, with technology from CATL, the world's largest battery maker based in China.

Virginia's governor rejected the battery plant proposal due to national security concerns related to CATL's Chinese affiliations.

China dominates the global EV market, making up over half of all EV sales, and has introduced affordable electric cars in a few years.

The Chinese government's substantial support, including subsidies, cheap loans, and tax breaks, has been pivotal in developing the EV industry in China.

China's early adoption of stricter battery standards spurred innovation and quality improvements in domestic battery technology.

The Chinese government required foreign EVs to use Chinese-made batteries to qualify for consumer subsidies, protecting and promoting the domestic battery industry.

Chinese companies control significant portions of the global supply of minerals needed for batteries by acquiring stakes in mines worldwide.

China refines the majority of raw materials for EV batteries and manufactures the majority of the battery components, solidifying its dominance in the supply chain.

US government rules limiting the use of Chinese-sourced materials in batteries have resulted in only an estimated 20% of EV models qualifying for tax credits.

Chinese companies have led the world in battery innovation, developing technologies that avoid expensive minerals like nickel and cobalt.

CATL's LFP battery technology allows for a 370-mile range with just a ten-minute charge, showcasing significant advancements in battery capabilities.

BYD's blade battery innovation increases energy density, allowing cars of the same size to travel farther on a single charge.

LFP batteries, predominantly manufactured in China, are gaining market share, but CATL is expanding with plants in Germany and plans for Hungary.

Ford's decision to locate its CATL battery plant in Michigan has raised concerns, leading to a US House investigation.

The US is investing in its battery industry, with estimates suggesting it would cost $82 billion to meet domestic demand by 2030.

Current reliance on Chinese EV batteries is high, with no immediate viable alternatives, posing a dilemma between geopolitical concerns and the need for affordable EVs.

Transcripts

In 2024, Ford Motors cut back production

on their F-150 Lightning, the electric version

of their popular pickup truck.

Sales on the Lightning had tanked, in part

because it costs more than its gas powered counterpart.

This isn't just a problem for Ford.

The average price of a new EV in the US

is about $55,000,

making electric cars a hard sell for most US consumers

at a time when EV adoption is critical for our climate goals.

Roughly 40% of the cost to produce

an electric vehicle is in the battery.

So in 2023, it was reported

that Ford was looking at sites

in Virginia or Michigan for a new battery plant

that could help lower its costs.

But there's a catch.

The battery technology it would use is from a company

based here, in Fujian Province, China.

That company is CATL,

the largest battery maker in the world.

Virginia's governor

decided to kill the battery plant proposal in his state

because of its links to China —

They are influenced,

if not controlled, by the Chinese Communist Party.

— putting Ford’s CEO on the defense —

Look, this plant is a wholly owned subsidiary of Ford.

— and leaving them to look elsewhere for a site.

This battery plant got caught up in a broader trade war

between the US and China,

in reaction to the extraordinary rise of China's electric vehicle market.

They make up over half of all EV sales globally,

and in just a few short years, have brought slick

and affordable electric cars to the market.

Key to this rise is the electric vehicle battery.

This part of the EV

is where China has really come to dominate the global market.

So how did Chinese companies create the world's

leading EV battery?

And can US automakers make an affordable electric car without it?

The first major reason for

why China's companies were able to develop their EV battery

is due to a huge amount of government support.

Roughly 20 years ago, China was on track

to become the world's largest importer of oil,

so electrifying its car fleet would help

it become more energy independent.

Not to mention a growing air pollution problem

in China's cities, in part due to car emissions.

What the EVs had going for them

was that the head of the Ministry of Science and Technology

was a big believer in this.

And his sense was that Chinese companies were just

never going to be able to compete on internal combustion

engine technology.

That’s how you get this package of policies that really supported

what the Chinese government defined as “new energy vehicles.”

Companies making the cars can get a subsidy

whenever they sell a car.

We're also talking about,

they're getting cheap land leases from the government.

They're getting cheap loans from the state-owned banks.

According to one estimate, from 2009 to 2022,

the Chinese government gave out $29 billion

in the form of subsidies, research spending,

and tax breaks, to the EV industry.

And starting around 2009,

local governments also gave

Chinese companies an instant market by contracting them

to electrify their bus and taxi fleets.

The city of Shenzhen's fleet of 16,000 buses was electrified by BYD

before it became the world's largest EV company.

To get consumers on board, governments offered them generous subsidies too,

along with other benefits.

Like discounts on charging, favorable parking,

traffic congestion-related policies that EVs get a break on.

EVs actually have a different colored license plate, even,

so it's very visible.

And so people see, oh, that's an EV.

They get all the special treatment.

But the battery wasn't very good in the early days.

And so the Chinese government goes in and starts introducing

stricter standards of batteries,

saying, well, you'll only qualify for this credit

if your battery density reaches this level.

Consumer EV sales in China exploded,

and when it did, the government

did something important to protect their own battery industry.

When foreign car companies like GM

and Tesla wanted to sell their EVs in China,

the government made a rule that their cars must use

Chinese-made batteries to qualify for consumer subsidies.

China’s central government

phased out consumer subsidies in 2022,

but the demand had been created.

In 2024, over half of new car sales in China were electric.

This is a milestone, because half is a big thing.

It means that the majority of the people

are actually preferring EVs over gas cars now.

The second way Chinese battery companies became

so dominant is through the supply chain

for the battery components.

The type of battery that typically goes into

electric vehicles is called a lithium-ion battery.

The four main components of the battery cell

are the cathode, the anode,

the electrolyte solution, and a separator.

The cathode is usually packed with

nickel, cobalt, and manganese.

The anode uses graphite,

and the electrolyte is made up of mostly lithium salts.

Over the past several years,

Chinese companies started acquiring ownership stakes

in mines around the world where these minerals exist.

So they're sure that, if we control the production, then we control the price.

The effect is that Chinese companies control significant percentages

of the world's supply of the minerals needed for batteries.

But where China really controls

the supply chain are the steps after mining.

No matter who mines the minerals,

China refines a vast majority of them.

This is the step where factories grind down raw mined

materials and extract the desired mineral from it.

It's pretty polluting.

That's why you don't see that much refining

happening in developed countries.

Chinese plants then also manufactured the vast

majority of the four components

of the EV batteries: the cathode, the anode,

the electrolyte and the separator, and put them together

to make the battery cell.

Because you already had pretty developed manufacturing

for batteries aimed at electronics.

So BYD is actually one of those examples,

they started by producing batteries

for electronics in the 90s. And then it got into producing EVs.

The US was never a battery manufacturing player,

historically speaking, in lithium ion.

It was previously Japan and Korea.

China has has now superseded both.

China’s control of the battery supply chain is so encompassing

that after the Biden administration passed a rule

saying no more than half of the batteries’ components or minerals

could be Chinese-sourced

to qualify for tax credits, only an estimated

20% of EV models qualified.

With their market dominance, Chinese companies have been able

to lead the world in battery innovation. In the past two years,

Chinese companies figured out how to avoid

using the two most expensive

battery minerals, nickel and cobalt.

They did this by innovating on battery technology

called lithium iron phosphate, or LFP.

In 2023, CATL announced an LFP battery

that could power a car for 370 miles on

just a ten-minute charge,

and BYD has developed their own version of an LFP battery, too.

It's called blade battery.

It’s like a very thin, very long blade.

But basically they’re saying that by using that shape,

it can cram more batteries into the same space.

So in that way, like,

the same size of a car can travel farther.

Today, LFP batteries are a growing share of all EV batteries,

and nearly all of them are manufactured in China.

But not for long.

CATL has built battery plants in Germany,

and has plans to build one in Hungary for the European auto market.

And Ford ended up finding a home for its CATL

battery plant in the town of Marshall, Michigan.

The project has triggered a US House investigation.

But if it goes through, it'll be the first LFP

plant in the US.

All of these factors have

made Chinese EV batteries virtually impossible

to avoid in the global transition to electric vehicles.

Was there not a viable alternative?

No there wasn't.

LFP technology is is very well developed.

The battery business is a global business.

And, this was,

there were no alternatives.

There are some concerns about whether China's government support of the EV industry

amounts to unfair global competition,

as well as human rights and environmental concerns

associated with China's battery supply chain.

The US is investing their own government support

to build up its battery industry.

Bloomberg estimated it would cost $82 billion for the US

to meet their own domestic demand by 2030.

So it might be possible in the future,

but that's no help right now,

when we desperately need to transition to electric vehicles

to wean ourselves from fossil fuels, and US

automakers are struggling

to give consumers affordable options.

So for now, we'll have to decide

whether our desire to keep our distance from China

outweighs our goals of going electric.