Strategic Battery Autarky: Reducing Foreign Dependence in the Electric Vehicle Supply Chain

Abstract

Over the past decade, China has emerged as a prominent player in worldwide electric vehicle battery supply chains by means of assertive financial commitments, astute acquisition of strategic mineral resources, manufacturing facilities, and technological expertise. Presently, China possesses more than fifty percent of the world's capacity to manufacture battery cells and high-nickel cathodes, which are indispensable for long-range electric vehicle batteries. Its market share for critical battery raw materials, such as lithium, cobalt, and graphite, is even more substantial, owing to its ownership of state-owned enterprises and acquisitions overseas. This degree of authority over numerous critical supply chain components grants Chinese battery behemoths such as CATL and BYD considerable sway over the pricing and availability of critical battery components. The reliance of nations on a solitary country for a critical emergent technology presents potential threats to the energy security and national security of countries aiming to convert their vehicle fleets to electric propulsion. On the contrary, countries that establish themselves as leaders in sophisticated battery technologies will gain significant economic benefits as the worldwide adoption of electric vehicles quickens. Therefore, reducing reliance on batteries manufactured in China becomes a critical strategic objective. Conversely, China's current preeminence has been methodically established throughout the previous decade, leaving limited alternatives in the immediate future. In all likelihood, the successful reconstruction of domestic battery supply chains by other nations will require five to ten years to complete. Enhanced subsidies or tax exemptions in conjunction with increased investments in domestic battery raw material refining or advanced cell/cathode manufacturing facilities are policy alternatives that can be utilized to reduce reliance on imports. Governments have the ability to ensure alternative foreign sources of critical inputs such as lithium or cobalt by establishing trade and investment partnerships with nations abundant in resources. Additionally, nations should make full use of trade remedies permitted by WTO regulations in order to combat unfair competition posed by Chinese firms that receive substantial state subsidies. In contrast, the abolition of dependence must be done so without inciting an unwarranted surge in economic nationalism. Extremely stringent regulations pertaining to battery components and materials run the risk of drastically impeding global decarbonization efforts. Over the course of the next decade, competition between China and other major economies to control the battery supply chains that are essential for the widespread adoption of electric vehicles is likely to intensify. Countries must implement policies that are proactive and consistent in order to mitigate their susceptibility to potential disruptions in supplies or fluctuations in prices. Inaction could result in China gaining permanent control over this vital emerging sector, which would have severe geopolitical and economic ramifications. Alternative options are limited, necessitating an immediate strategic effort to reestablish domestic or amicable foreign battery supply capacity.