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Opinion: To overtake China in the EV market, the US needs to step hard on the accelerator

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A report from the non-profit Carnegie Endowment for International Peace in May concluded that: “Excluding China from supplying critical minerals is simply not possible in the short term.”

China’s large influence is largely due to its substantial investments in mining operations worldwide and strategic position in the supply chain. This leverage ensures that, even if certain minerals are not mined in China, it still maintains considerable control over their availability and pricing. This presents a significant challenge for the US’ attempt to diversify its supply chain.
A container of lithium carbonate is seen in a shipping warehouse at Albemarle Corp’s Silver Peak lithium facility, on October 6, 2022, in Nevada. At least US$2.8 billion in grants have been awarded to build and expand US manufacturing of EV batteries in 12 states, benefiting 20 companies, including Albemarle Corp. Photo: AP
For example, China owns most of the cobalt mines in the Democratic Republic of the Congo, and while it is the third-largest global producer of lithium, trailing Chile and Australia, it also has substantial investments in lithium facilities elsewhere.
So far, the US has made just one critical minerals trade deal, with Japan earlier this year, allowing Japanese companies to leverage US tax incentives as they supply EV battery materials. The US is also in talks with the European Union, Britain and nickel-rich Indonesia, but uncertainties surrounding these potential agreements may make companies reluctant to join, leaving the US in a quandary.

Trade deals with Washington would allow foreign organisations to benefit from US tax breaks, but these deals are neither set in stone nor fully backed by US law, which means they could be altered or undone.

This gives rise to fears that a future US president with different ideas could change these agreements, or similarly, that members of Congress could push for different policies, challenge the rules or even introduce new laws that undo President Joe Biden’s plans.

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Currently, at least nine US states are pivoting towards EVs and planning to ban the sale of new combustion engine cars after 2035, with several other states also considering joining them. Thus, there is heightened pressure to source enough materials for “Made in America” EV batteries to meet increasing consumer demand.

The US is poised to become the fastest growing EV market worldwide. In the first half of this year, it accounted for 13 per cent of global EV sales, or 815,000 units, a staggering growth of 97 per cent year on year, Canalys figures show. Although, to put that in context, China accounted for 55 per cent of global EV sales in the first half, or 3.4 million units.

To address the challenge of domesticating its supply chain, the US is implementing a strategy that it hopes will completely remove reliance on Chinese resources by 2029, but concerns are rising about how realistic this is.

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To qualify for the full clean vehicle credit of US$7,500, within four years, 80 per cent of the value of critical minerals – such as cobalt, lithium or nickel – used in EV batteries, must be mined, processed or recycled within North America or in countries that have a free-trade agreement with the US.

By 2029, all the components of an EV battery must be either manufactured or assembled in North America to qualify. On top of this, from next year, any EV that contains battery components or minerals from China or other designated “foreign entities of concern” will not qualify for the credit.

The US has to perform a critical balancing act to quickly and affordably increase EVs on its roads while nurturing a home-grown supply chain. To stand a realistic chance of countering China’s strong position in the EV market, Washington needs to double down on combining policy support, financial incentives and advances in technology, to reduce its reliance on imported materials.

China’s lead over the US in EV markets is huge, but not insurmountable

The blueprint for accelerating the US EV industry is multifaceted – it involves not only extending tax credits but also installing a robust charging infrastructure across the nation and ensuring EVs are more competitively priced.

The US stands at a strategic juncture and investing in Canada’s abundant critical minerals supply could be a game-changer. As the world’s fifth-largest producer of graphite and nickel, Canada is not only a neighbour but also a natural ally with the potential to be a powerhouse in lithium, magnesium and rare earth elements – all vital in EV machinery. Strengthening this partnership could fortify North American supply chains and reduce reliance on China.

Sonja Cheung is editorial director at the Asia Business Council

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