Fight in China between the auto industry and Joe Biden
The automotive industry is struggling with the problems created by the reliance on battery materials. On the other hand, the world’s largest automakers are also experiencing bigger problems in the US due to the Joe Biden administration’s rivalry with China.
According to the Financial Times, the Cut Inflation Act, the most important climate law enacted in the Biden era, offers generous tax breaks for electric vehicles produced in North America. The new rules on the origin and components of batteries will come into force gradually from 2024.
THE LAW LEFT IT IN DIFFICULT
But under the law, vehicles must not have any battery components made or assembled by China, Russia, Iran and North Korea for companies to qualify for tax breaks of up to $7,500 starting in 2024. By 2025, companies will be required to batteries do not contain minerals mined, processed or recycled in these countries.
However, automakers are still heavily dependent on minerals processed in China. However, these manufacturers began to worry about deteriorating competitiveness and losing customers if they work with China.
Although automakers initially supported the new law, companies and trade groups began to push for relaxation of the rules regarding China. Some manufacturers argued that Chinese content should continue to be allowed.
THE INDUSTRY APPRECIATES
Ford, Stellantis and Volkswagen, the world’s largest car companies, have also asked regulators to allow Chinese origin. Although these companies demanded that a threshold be established for products originating in China, Volkswagen suggested that this threshold be 10 percent.
Ford has also raised concerns about the “foreign entity of interest” label. The company announced it will supply batteries for its Mustang Mach-E car and F-150 Lightning pickup truck from Chinese battery maker CATL next year. The two companies also signed a memorandum of understanding to improve relations.
THE CHINESE DOMINATE IN PRODUCTION
China has invested heavily in the extraction of critical minerals around the world over the past 10 years. According to the International Energy Agency (IEA), China controls the processing of 35 percent of the world’s nickel, half of the lithium, 60 percent of the cobalt and 90 percent of the rare earths. These products are the basic materials used in the construction of electric vehicles.
Furthermore, according to a recent IEA analysis, seven companies are responsible for more than half of the world’s cathode production. The Chinese are at the top of this list. It was also stated that the six largest producers of anodes are Chinese and these companies account for two thirds of the world’s production capacity.
Chad Bown, a senior fellow at the Peterson Institute for International Economics, said: “It’s very difficult to get China out of this supply chain. “To do that, you have to use policy tools that we never thought to use before,” he said.