The focus of the world on climate change has renewed with the beginning of COP27 in Egypt. In the global hunt to decarbonize, Electric Vehicles play an essential role. The transition to EVs is extremely important in India due to the issue of air pollution as well although there is a risk for the EVs from China’s supply chain. The world should be warned after the recent sabre-rattling across the Taiwan Straits. The risk could be even greater given India’s tense relationship with China.
According to a report by International Energy Association, China is dominating the highly concentrated supply chain of EVs in every region. Key minerals required for batteries are the first stage of the supply chain. These minerals are namely, nickel, lithium, graphite, and cobalt. China produces 80% of the world’s graphite mining output. Two-thirds of the world’s cobalt supply is mined in the politically unstable Democratic Republic of the Congo, and Chinese corporations dominate mining there. Instead of being concentrated in China, lithium and nickel are concentrated elsewhere. Over 50% of the world’s lithium is mined in Australia, and 35% of the world’s nickel is mined in Indonesia.
India has been slow to acquire these important minerals from foreign mines.
As compared to oil and gas, the concentration is far greater overall. Processing the mineral/ore concentrate into metal is the second stage of the supply chain system, and China dominates across the globe. Across the globe, the processing of more than 60 percent of lithium, over 70 percent of cobalt, 40 percent of nickel, and 8- percent of graphite is done in China.
Then comes the cell components. Two-thirds of global anodes and three-fourths of cathodes are produced in China. South Korea and Japan are the only other producers. Next comes battery cells where China owns 70 percent of the share. Finally, of EV production across the globe, 50 percent is owned by China. Europe comes with 25 percent. With 10 percent production, the US becomes a small played of the EV supply chain. The country also owns the capacity of battery production at 7 percent. However, India does not feature as a player.
China is dominating the highly concentrated supply chain of EVs in every region.
China is now the country spending the most on the transition to a clean energy economy. Research claims that in 2021, China alone spent $266 billion of the $750 billion invested globally in climate-related projects (90 percent of which went to renewable energy and electric transportation). The United States came in second place with $114 billion. The US would be equal to the main European nations put together. India ranked seventh with $14 billion invested, which is not a bad position to hold. In contrast, over 95% of India’s spending is on renewable energy, compared to roughly 40% of Chinese and US spending on EVs. It’s interesting to note that in Europe, EVs account for about 75% to 80% of spending.
India cannot afford to depend on China or any other mentioned countries amid the good pace of its energy transition. A two-point strategy is needed by the country to make this happen, firstly taking it on the materials and minerals required. India has been slow to acquire these important minerals from foreign mines. Finding and acquiring foreign mines is the responsibility of KABIL, a recently established government partnership of three minerals and metals PSUs. The odds of success are slim due to the severe limitations that PSUs face, particularly when compared to their Chinese counterparts. An alternative strategy is to relax domestic exploration laws, compare them to international standards, and invite foreign companies to prospect and mine in India.
