During 2018/19 OEMs powerhouses of the automotive industry revealed their cycle plans and strategies for 2020 onwards. The main areas of investment in the near term was primarily electro-mobility. Electrification is seen as one of the key “focus items” in their agendas, as they seek to decrease costs of a KW/hour to a break through $100 KW/h to achieve mass market scale and move towards a robust ROI.
The largest amount of investment has come from the heart of the automotive sector, right here in EU, and specifically Germany. In the latter 2 years, the German Automakers and Government have been co-developing a plan to position Germany and the EU as one of the leading players in automotive industry. They aim is to demonstrate their ability to support the increase of electric vehicles production whilst at the same time reducing the BOM cost, especially of the batteries.
Although this announcement has been providing a positive reaction in the market and the supply chain of electric vehicles, it also prompts some questions regarding the feasibility of the scale that they OEMS want to achieve in the short term. The main 2 challenges if a massive increase electric vehicle production is made would be cost and battery development. To be more specific the main challenge would indeed be the cost and following that, the availability of the raw materials required for the batteries. There have been a lot of conversations on this topic during the past two weeks and we would recommend you to read Roger Atkins’ posts on Vehicle Electrification and watch his highly interesting video on Batteries.
Adding to this EU, Japan and USA have identified issues in the resource sovereignty of the battery raw material. A recent report from the EU shows that Europe’s latest assessment calculated its dependency at 62% on China for 27 critical raw materials. In the newest assessment, due in Spring 2020, it is unlikely the dependence will have improved, making it much more likely that the EU’s list of critical raw materials will have grown even longer. The situation has now become so critical that this week, delegates from USA, Japan, Korea and Australia are meeting in Europe to discuss the geopolitical challenges, more trade agreements and a pro-investment agreement to balance the playing field.
To summarise, in order to deploy electric cars, it is paramount to have access to the raw materials required for battery development. In a transition from fossil fuels to electric, the governments, companies or powerhouse with the most access to these raw materials will have an advantage when it comes to controlling the global economy as the mobility transformation approaches in the very near future. Currently China, has the majority of these necessary raw material to support this transformation, however they do not have a big retail market share in automotive worldwide. The Germans, the Japanese and the Americans however do.
So recent investment announcement in electric vehicles from the German automakers could be part of the strategy to shift the supply chain in the automotive industry and gain more ownership of the raw material so EU and USA could be part of the control of the growth, and the future of the mobility economy.
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