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Electric vehicle manufacturing in China drives metal demand – FreightWaves

As the world’s largest country by population and second-largest economy, China is embarking on a dedicated effort to become a leader in the emerging electric vehicle market. Hundreds of manufacturing firms in China seek to take advantage of the vast national investment directed at renewable energy and battery storage technology. This also motivates China to capitalize on metal resources necessary for launching the electric vehicle industry.

In 2015 Chinese President Xi Jinping announced the “Made in China 2025” initiative, a ten year state-led policy to prepare China’s manufacturing base to be strongly competitive in the future global economy. Sponsoring companies that are making electric vehicles is a component of this plan. The Wall Street Journal recorded that there were 487 electric car manufacturers in China in 2018.

“This (large number of firms) is inevitable, because whenever there is an emerging technology or emerging industry, there must be a hundred schools of thought and a hundred flowers blooming,” explained Zhou Xuan, general manager of Automagic; a Hangzhou based electric vehicle designer.

One of these startups, Singulato, attracted foreign interest earlier this year when Itochu Corp (ITOCY: NASDAQ), a Japanese trading house, invested $9 million into the company. The deal is expected to open the door for Singulato to cooperate with Japanese automakers as they work to keep up with production quotas for electric cars in China. The world’s second-largest semiconductor manufacturer, Intel, also owns a small stake in Singulato.

Another company, Nio (NIO: NYSE), has the ambition of becoming an international competitor to Tesla (TSLA: NASDAQ) with a focus on sports utility vehicles. In September the startup filed a $1.8 billion initial public offering on the New York Stock Exchange. Like Tesla, Nio is working to incorporate autonomous driving systems into their electric car models.

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In 2017, 2.1% of new vehicles sold in China were electric plug-in vehicles, 96% of which were produced domestically. The Wall Street Journal reported that 777,000 electric vehicles were sold in China in 2017, up from 8,159 in 2011. CNBC reported in 2018 that one quarter of the Chinese car market is expected to be composed of electric vehicles by 2030 while Europe, the next largest electric vehicle market, will see electric vehicles make up 23% of new vehicles sold. The growth of the electric car market in China is possible through extensive tax credits and subsidization while Europe is using high fuel taxes and emission standards to discourage consumers from buying conventional fuel cars.

Chinese vehicle battery companies are also present in the United States. A123 Systems, an energy storage system startup was founded in 2001 with operations in Michigan, Massachusetts, Germany, and Hangzhou, China. The company focused on technology developed by MIT and received loans from the Department of Energy to manufacture batteries in the U.S in 2010. In 2012, after undergoing bankruptcy filings, A123 Systems became a subsidiary of the Wanxiang America Corporation, a subsidiary of the Hangzhou based Wanxiang Group. Wanxiang is one of the largest auto parts manufacturers in China with a record of acquiring distressed companies like A123 to establish a $4 billion subsidiary focused on the U.S. auto-parts marketplace.

With the rise of the electric vehicle industry (among other technology related sectors), China seeks to capitalize on raw materials for battery manufacturing. Lithium and cobalt are two important metal resources for developing batteries. Lithium is extracted from a brine found below salt-flats while cobalt is extracted from copper and nickel deposits.

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South America’s “lithium triangle” is estimated to hold 54% of the world’s lithium carbonate reserves. In 2016, Chile was the world’s largest exporter of lithium at 62% of global exports, amounting to $494 million worth of total exports. Japan, South Korea, and China were the three largest importers of Lithium at 22%, 18% and 18% of global imports respectively. South Korea, China, and Japan were also Chile’s largest buyers of lithium.


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