The Electric: Pushback to China's EV Juggernaut
China dominates the electric vehicle, battery and critical metals industries.
In recent weeks, though, policymakers in other countries have begun to push back: In Australia, regulators blocked Chinese investment in a lithium mine; in India, officials rejected a factory proposed by the largest Chinese EV maker; and in the U.S. Congress, Republicans challenged a partnership between Ford and China’s largest battery company.
The resistance to China is not everywhere—Brazil, Thailand and Indonesia are among countries enthusiastically welcoming Chinese EV investment. But there is deep suspicion of Chinese EV companies in places including France, which is pushing the EU to investigate claims that China’s government is unfairly subsidizing EV makers. That could lead to new tariffs on Chinese EV imports to the EU, Politico reported.
“China is discovering that the path to the top is lonely,” said Ilaria Mazzocco, an analyst on China at the Center for Strategic and International Studies. “Once you become a dominant force and create a monopoly and are not shy about leveraging that economic power, countries become a lot less willing to become dependent on you.” Illaria noted China’s threat earlier this month to curb exports of germanium and gallium, important for making semiconductors, and an earlier ban on imports of coal from Australia, since lifted.
Last week, we reported that India had rejected a proposal by China’s Byd to build EV and battery plants worth $1 billion in the country, part of what Byd said was an effort to capture 40% of India’s EV market by 2030.
The decision was just the latest example of defiance to China’s EV industry around the globe.
Becoming China EV Inc.
The pushback has not been a heavy blow to China: If you want to make EV batteries, you still probably have to work with a Chinese company at some step along the supply chain. China began to subsidize EV and battery companies in 2009, giving it a decade’s head start on the rest of the world, which, apart from Tesla, did not get serious about EVs until around 2020.
Today, if you buy an EV, Chinese companies very likely produced the battery’s main components.
China imports most of its critical minerals, but Chinese companies refine about three-quarters of the cobalt used in batteries, virtually all the graphite, half the lithium and two-thirds of the nickel, according to Benchmark Mineral Intelligence, a battery data firm.
Chinese companies produce about 78% of the cathodes for EV batteries, 91% of the anodes and more than two-thirds of the final batteries.
The U.S., Europe and South Korea are racing to build their own cathode and metals processing factories, but China is expanding faster: As we have reported, Chinese companies are projected to account for 87% of the world’s cathode production in 2030, up 9 percentage points from today, according to Benchmark.
In the latest display of Chinese influence, Volkswagen, which has struggled to sell cars in China, last week said it would pay $700 million for 5% of Chinese EV maker Xpeng, with which it will design and manufacture two EV models starting in 2026; that came after VW’s Audi unit said it would jointly develop EVs with Chinese auto manufacturer SAIC.
Analysts said the two deals mark a turning point: In the last few decades,Western automakers showed Chinese companies how to make cars; now the Western companies are striking deals to learn from the Chinese ones.
When Chinese companies are challenged, they often don’t react well. After India’s powerful finance and external affairs ministries opposed Byd’s proposed factories on national security grounds, the company said it no longer wanted to pursue the deal, according to Reuters. If Byd hoped the move salvaged its image, it didn’t. Rather, it looked like a case of “You can’t fire me—I quit.” If the opposition holds, the loss of the Indian market—potentially one of the world’s largest for small electric passenger cars and two-wheelers—will be a blow to Byd, which has ambitions of becoming the world’s largest EV company.
In Australia, the world’s biggest producer of lithium and one of the largest nickel producers, authorities this month blocked Nevada-based Austroid, whose principal director, Mike Que, is the son of Chinese businessman Que Wenbin, from buying 90% of lithium miner Alita Resources, Reuters reported. Austroid already owns 10% of Alita. It was the second time this year that Australian authorities had blocked a Chinese minerals deal: In February, authorities stopped China’s Yuxiao Fund, owned by mining magnate Wu Tao, from doubling its share of rare earths miner Northern Minerals to 20%. “Sending a message about Chinese ownership of critical mineral operations is certainly an important message being broadcast here,” said Cameron Perks, an Australia-based analyst with Benchmark Mineral.
Losing the U.S.
Next to China, the U.S. is the world’s most important auto market.
U.S.-Chinese tensions have thwarted Chinese EV and battery companies from setting up U.S. factories as they have done in Europe, but Ford in February announced a workaround: It would build the first commercial-scale U.S. factory making cheap lithium-iron-phosphate cathodes, used widely in Chinese EVs and by Tesla.
China’s Contemporary Amperex Technology Ltd., the world’s largest battery maker, would provide the technology to make the batteries.
Ford’s announcement was unusual in that it confronted reality head-on: China makes virtually all the commercially available LFP on the planet, and CATL manufactures most of the LFP batteries.
Ford rivals including Stellantis, Volkswagen and Mercedes speak of using LFP, but only Ford has publicly made it plain that a Chinese company will provide its entire supply.
In its February announcement, Ford said that starting in 2026, the Marshall, Mich., plant will produce enough batteries to equip 400,000 EVs per year.
Until then, Ford will import finished CATL LFP battery packs for the Mustang Mach-E SUV and the F-150 Lightning pickup from CATL; the vast majority of CATL’s batteries come from China.
From there, though, Ford has been cagey: It said the Michigan plant will make battery cells, but not whether it will produce its own LFP cathodes or whether it’s required to buy finished cathodes from CATL—important questions for congressional critics of the deal, whose main concern is that the U.S. create its own large LFP industry.
Ford declined to comment when I asked about the cathodes. But the deal has run into political hot water: Reps. Jason Smith (R-Mo.) and Mike Gallagher (R-Wisc.) on July 20 wrote a letter to Ford. Among other things, they alleged that Ford had plans to use CATL personnel in the factory through 2038—12 years after it opens. The committee expressed concern that the deal would lead to CATL “collecting tax credits and flowing funds back to CATL through the licensing agreement.”
As evidence of the supposed plans, a footnote cited “documents” a House committee had obtained. Spokespeople for Smith, Gallagher and the House Select Committee on the Chinese Communist Party did not respond to emails. But if true, the staffing arrangement would be surprising, because the people I spoke with at the time of the deal said the CATL workers would staff the plant for only a relatively short time—until Ford workers get the hang of the equipment. Ford’s executive chair, William Clay Ford Jr., told The New York Times that CATL would “help us get up to speed so we can build the batteries ourselves.” A Ford spokesperson disputed the committee’s claim: The company hasn’t decided how long CATL workers will staff the plant, the person said. “CATL technical experts [will be] on site to help, as examples, [to] install equipment and get the plant up and sustained. [There will be] more earlier, and significantly fewer over time,” the spokesperson said in an email.
It seems unlikely that political leaders will seek to pressure Ford to upend a deal involving 2,500 jobs ahead of the 2024 national election. But there’s enough anti-Chinese sentiment in the U.S. to make it possible. For China, we’re seeing “a little bit of the chickens coming home to roost,” said Tu Le, a global auto analyst.
Until now, China wanted access to Western technology for its companies’ use, and it strong-armed Western companies in exchange for access to its market.
Now China wants access for its companies to Western markets.
For the West, “it’s ‘OK, you played hardball the last 35 years with my companies. Let’s push back now that we finally have a little leverage,” said Le.
