Chrysler-parent Stellantis, the maker of Jeeps, plans to reduce shipments of gasoline-powered cars to states that have adopted California’s emissions rules, despite the rule not taking full affect until 2035. The company warned auto dealers that “we may be compelled to allocate fewer conventional gasoline engine vehicles to California states,” including New York, Massachusetts, Vermont, Maine, Pennsylvania, Connecticut, Rhode Island, Washington, Oregon, New Jersey, Maryland, Colorado, Minnesota, Nevada, Virginia and New Mexico, in order to allocate more electrified powertrain vehicles to comply with the more stringent standards being enforced in the California States. In Delaware, a dealer will not receive regular shipments of popular Jeep gasoline-powered models because the state adopted California’s emissions standards. Rather, electric SUV models that are $20,000 more expensive will be available.
California EV Bill
California requires that electric vehicles make up 35 percent of auto-maker sales in 2026, 68 percent in 2030 and 100 percent by 2035. Last year, EVs made up 19 percent of California sales with two-thirds or so of those sales being Teslas. Automakers that do not meet California’s targets must buy regulatory credits from Tesla and other EV manufacturers that over shoot those targets. Recently, California officially asked the Biden Administration’s permission to impose its EV mandate.
Because federal and state subsidies totaling up to $15,000 have not persuaded enough consumers to buy electric vehicles, Stellantis plans to reduce its gasoline-powered options in order to meet California’s standards. As other auto manufacturers follow in those footsteps, the result will be shortages of gasoline-powered cars and higher prices in California and other states electing into California EV rules. While Americans could buy gasoline-powered cars in other states, those sales will be temporary due to EPA’s de facto EV mandate despite its denial that the EPA vehicle efficiency rule does just that. The rubber is beginning to hit the road from the Biden Administration’s frenzied push to show progress on its climate goals.
U.S. Dependency on China Will Grow
China dominates the market for EV batteries and will do so for the foreseeable future as it is ahead of other countries’ supply chains and manufacturing capability by decades and lengthening that lead. Despite billions in Western investment, China is so far ahead — mining rare minerals, training engineers and building huge factories — that it will take decades for the rest of the world to catch up. According to estimates from Benchmark Minerals, even by 2030, China will make more than twice as many batteries as every other country combined. China controls every step of lithium-ion battery production, from getting the raw materials out of the ground to making electric cars.
Electric vehicles use about six times more rare minerals than conventional vehicles because of the battery, and China decides on the price and the availability of those minerals. Although China has few underground deposits of the essential ingredients, it has pursued a long-term strategy to buy its way into a cheap and steady supply elsewhere. Chinese companies, relying on state assistance, acquired stakes in mining companies on five continents. China owns half of the large cobalt mines in the Democratic Republic of the Congo, which has the majority of the world’s supply of cobalt needed for the most common type of battery. American companies that owned mines in the Congo–companies where President Biden’s son Hunter had an interest–sold those mines to their Chinese counterparts. As a result, China controls 41 percent of the world’s cobalt mining, and it controls 28 percent of lithium mining.
Global supplies of nickel, manganese and graphite are much larger but batteries use only a fraction of them. Nevertheless, China’s steady supply of these minerals gives it an advantage. According to forecasts by CRU Group, China’s investments in Indonesia will help it become the largest controller of nickel by 2027, despite its current 6 percent share. Graphite is mostly mined in China with a 78 percent share.
While Western countries own mines abroad, they are more reluctant to put money into countries with unstable governments or poor labor practices. A new mine can take more than 20 years to reach full production due to developing the area, obtaining permits, and fighting activists in court. Although the Biden administration claims it wants the United States to develop its own critical mineral mines, its actions show the opposite due to its revoking leases, delaying permits and helping environmental activists by listing plants as endangered.
Regardless of who mines the minerals, nearly everything is refined into battery-grade materials in China due to its cheap coal power and lack of stringent environmental rules. Battery minerals require three to four times as much energy to make as steel or copper. Supported by the government with cheap land and coal-fired electricity, Chinese companies have been able to refine minerals at larger volume and lower cost than anyone else, causing its competition to close.
With less stringent environmental regulations, Chinese mineral refineries keep costs low despite air pollution from grinding graphite, and toxic waste from processing nickel, which must be disposed of in special structures in the ocean or underground. The refining process, which pulverizes the ore and treats it with heat and chemicals to isolate the mineral compounds, creates mounds of waste. Cobalt, for example, generates about 860 pounds of waste rock for each pound of refined cobalt powder. Using more sustainable methods to process battery minerals and adhering to regulations of Western countries would drive up costs.
The United States has little capability for refining minerals. A refinery typically takes two to five years to build and additional time to train workers. Australia’s first lithium refinery that has some Chinese ownership, for example, was approved in 2016 but did not produce battery-grade lithium until last year.
By making battery components efficiently and at lower cost, China was able to become the largest battery producer, making 66 percent of the world’s battery cells. The most important battery component is the cathode, which is the battery’s positive terminal. Of all battery materials, cathodes are the most difficult and energy intensive to make. China produces 73 percent of the most common cathode that uses a combination of nickel, cobalt and manganese, called NMC cathodes. Cathodes allow a battery to store electricity in a small space, China recently invested in a cheaper cathode known as LFP, for lithium iron phosphate, that uses iron and phosphate instead of nickel, manganese and cobalt. China produces almost all the world’s LFP (99 percent). Today the United States makes only about 1 percent of the world’s cathodes, all of which are NMC.
Chinese companies also make most of the battery’s other components. They dominate the production of anodes, the negative end of a battery, and sell the most separators, a layer that goes between the cathode and anode to prevent short-circuiting, producing 74 percent of the world’s supply. Electrolytes, made of mostly lithium salts and solvent, are needed for conductivity, and the top four electrolyte producers in the world are Chinese. The country produces 82 percent of the world’s supply of electrolytes.
Battery assembly is complex and technical. To make a battery, cathode and anode materials are attached to thin metal sheets each about one-fifth the thickness of a human hair. These are then stacked with separators, moistened with electrolytes, and rolled up. The process needs to take place in rooms that minimize air particles and moisture. China can build battery factories at nearly half the cost of countries in North America or Europe, because labor costs are lower, and there are more equipment manufacturers in China. To top it all off, China has inexpensive energy to fuel the process.
China has the most electric cars on the road and nearly all of them use Chinese-made batteries. In 2015, China enacted policies to block foreign rivals and raise consumer demand. Chinese battery manufacturers (e.g. CATL and BYD) became the largest in the world, growing at the expense of their Japanese and South Korean competitors. According to the Center for Strategic and International Studies, China has spent more than $130 billion on research incentives, government contracts and consumer subsidies. Electric car buyers in China get tax rebates, cheaper vehicle registration, preferential parking and access to an extensive charging network. China’s investments have allowed the country to lead the world in production, equipment and product design, manufacturing 54 percent of the world’s electric vehicles.
Several states are following California’s lead in mandating EV sales, which is making car manufacturers produce less gasoline-powered vehicles and push more electric vehicles on dealers. As a result, Americans will see shortages of gasoline-powered cars and higher vehicle prices, particularly in states electing into California EV rules. But, other states will have to follow suit if EPA’s vehicle efficiency rule goes into effect, which is a de facto EV mandate.
These rules will increase U.S. dependence on China as it dominates the EV battery market. Due to the country’s lack of environmental standards and cheap coal-powered electricity, China is way ahead of other nations in processing and manufacturing EV batteries. It would take several decades to catch up, which is unlikely given the current rate of investment in Western countries and the negative actions of the Biden administration. Americans can expect the United States to become 4 times as dependent on China for EV batteries and their components than it ever was on the Middle East for oil, as China dominates about 80 percent of mineral processing and is heavily invested in other components of the supply chain. Despite all these factors, the Biden Administration is hurtling full speed toward this future for Americans.