In late 2021, parties to the UN Framework Convention on Climate Change adopted the Glasgow Climate Pact, agreeing to phase out inefficient fossil fuel subsidies and phase down unabated coal power. As one of the world’s biggest carbon emitters, China has taken the lead in transitioning away from fossil fuels with energy revolution—putting technologically advanced EVs on the road.
It is not news that China delivers on its blueprints for national ambitions. For decades, China had been playing catch-up in building cars powered by the internal combustion engines. Things began to change in 2015 when China decided to overtake the world pacesetters in the automobile industry by incorporating “making low-carbon, electrified, and smart vehicles” into Made in China 2025, an initiative that aims to upgrade China’s manufacturing industry.
As 2025 is drawing near, China not only sees fast growing sales of EVs but also dominates the EV supply chain. According to CAAM, China sold over 3.5 million new energy vehicles in 2021, hitting a hard-fought record considering the whole industry was troubled by chip and battery shortages. This achievement defies all odds and is made possible by China’s resilient EV supply chain.
“Even the cleverest housewife cannot cook a meal without rice,” this Chinese proverb reaffirms the importance of mature EV supply chains for production. There are 7 major segments of an EV supply chain: mining for raw materials (LIT), manufacturing battery cells, assembling battery packs, EV integrating and manufacturing, EV sales, EV recharging and services, and recycling EV components, especially the batteries. Among them, mining for raw materials and manufacturing battery cells need more brains and brawn than the rest.
According to data released from Benchmark Mineral Intelligence, a London-based research firm for the lithium-ion battery industry, in 2019, Chinese chemical companies accounted for 80% of the world’s total output of raw materials for advanced batteries. Chinese firms do not shy away from traveling half the globe to secure the materials. For example, Cobalt, sometimes called the “blood diamond” of batteries, is an essential input for the production of high-energy density, low-weight lithium-ion batteries. As China’s cobalt reserves make up only about 1% of the global total, about 90% of cobalt used in China today must be imported. Such a high rate of import dependence has driven Chinese firms to secure overseas cobalt resources.
In 2016, China Molybdenum poured $2.65 billion into buying a 56% equity stake in Tenke Fungurume Mining (TFM), one of the Democratic Republic of the Congo’s (DRC) largest mines. This deal would give China access to about 16% of global cobalt reserves. Through these efforts, Chinese companies produce about 77% of refined cobalt, a key ingredient in the first step of the lithium-ion battery production process.
On top of rare earths, the manufacturing of lithium-ion batteries depends on some key materials like graphite. In 2019, China produced more than 60% of the world’s graphite, according to U.S. government research.
Battery technology is another crucial part in the EV supply chain as EVs are also called “batteries on wheels”. CATL has emerged as the world’s biggest maker of electric car batteries after only ten years of development. Though it specializes in manufacturing lithium-ion batteries, it continues to make breakthroughs in batteries of other materials, such as the newly unveiled sodium-ion battery, to stay on top. Its domestic competitor BYD has created the “Blade Battery” to address battery safety issues while redefining safety standards for the entire industry. To some extent, BYD’s skyrocketing car sales and market value in 2021 were powered by the secure batteries.
As the pandemic rages on, the growth of EVs in China seems relentless. The combination of China’s guiding strategy in developing EVs, a group of Tesla-like EV innovators such as Nio, Xpeng, and BYD, and home-grown and world-leading battery suppliers has helped forge a solid EV supply chain with which China takes its EV manufacturing in its own hands.
