The advent of COVID-19 and the logistical problems it created, along with the looming threat of a military conflict over Taiwan, are encouraging many big Western firms to diversify their manufacturing operations away from China. Volkswagen and other automakers are looking to build a supply chain for electric vehicles outside of China. The Wall Street Journal’s William Boston reports:
BERLIN—Volkswagen VOW -0.33%decrease; red down pointing triangle is searching the world, from Canada to Indonesia, for supplies to make the batteries in electric vehicles it sells in the U.S. and Europe less dependent on Chinese components, a senior VW executive said.
PowerCo, a subsidiary VW created last year, is leading the company’s search for natural resources and other critical battery ingredients. Ultimately, VW wants to secure its own supplies for battery plants outside China and not have to rely on Chinese suppliers for battery materials, most of whom are in China, VW board member and technology chief Thomas Schmall told The Wall Street Journal.
“Today we are 100% dependent on China,” Schmall said, adding that VW’s goal was to reduce the share of Chinese components in the batteries it makes to 50% globally on average—meaning even less or no reliance on Chinese supplies for battery plants in Europe and North America.
Other western automakers also are trying to build batteries independent of China. The efforts underline how multinational companies are adapting as the West strives to reduce its dependence on China, both as a market and as a supplier of critical components.
For carmakers, the need to rely less on China is particularly pressing because the battery accounts for a large portion of the value of an EV. By making their own batteries with components they source themselves, European and U.S. carmakers can capture a bigger share of the profits for every EV they sell.
Over the past decade, China has secured key sources of lithium, cobalt and nickel and built a homegrown industry for processing and refining the materials. Although the country possesses a fraction of the world’s supply of lithium, China dominates global production of refined battery materials used in EV batteries, according to industry estimates.
That strategy ultimately gave Chinese battery manufacturers control over more than half of the global market for EV batteries, according to analyst estimates.
“They control all of the raw materials from the mines through to refining,” said Ian Robertson, a former BMW board member. “If they want to stranglehold the rest of the world they can do it.”
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