Welcome to the Hyperdrive daily briefing, decoding the revolution reshaping the auto world, from EVs to self-driving cars and beyond.
- Ford closes at almost five-year high on $30 billion EV plan.
- Waymo’s former CFO joins electric-truck maker Rivian.
- Bill headed to Senate floor includes up to $12,500 EV credits.
Nation Against Nation
The auto industry has been the backbone of Western economies for decades, providing millions of well-paid manufacturing jobs. Now that the combustion-engine era is fading, governments that have long had symbiotic relationships with the sector are jostling for position.
The long-time auto heavyweights — the U.S., Germany and Japan — are under pressure to defend their standing in a sector that’s rapidly electrifying. At the same time, countries that have done little or no carmaking are seeing an opening, and a chance to boost local industries by making electric vehicles.
Saudi Arabia, whose crude has fueled the auto industry, has hired advisers to explore establishing its own domestic EV maker, my colleagues Christoph Rauwald and William Wilkes reported last month. Abu Dhabi and Qatar, which also derive significant wealth from oil and gas, have invested in EV-related companies to diversify their income.
While this may not be Game of Thrones-like material, the geopolitical competition to dominate the electric car is nevertheless heating up. Joe Biden didn’t just publicly test drive Ford’s new electric pickup truck (free marketing!) last week; he also touted his $174 billion plan to make America’s auto industry fit for the future. His climate adviser told Bloomberg Television’s Emily Chang that the president is concerned that China is “far ahead” of the U.S. when it comes to EVs.
China has been famously hands-on with building up its domestic auto industry for decades, and has committed several-hundred billion yuan to supporting the EV shift by an industry replete with state-owned manufacturers.
So, how to win this race? Much like oil was the lifeblood of the 20th-century economy, the key resource of the EV age is the battery — and all the stuff used to make them.
The International Energy Agency made a fascinating recommendation earlier this month to Western governments, advising them to consider stockpiling critical battery metals such as cobalt and lithium. Unlike oil, a relatively ubiquitous commodity, production and processing of minerals such as lithium, cobalt and some rare-earth elements is highly concentrated, with the top three producers accounting for more than 75% of global supply.
In Europe, prospective battery manufacturers are popping up in the Nordics, Germany, France, the U.K. and Poland in a transcontinental competition to chip away at the dominance of China’s CATL and South Korea’s LG Energy Solution.
Earlier this year, the EU paved the way for dozens of companies including BMW and Swedish startup Northvolt to get about 2.9 billion euros ($3.6 billion) in state aid for battery projects. The EU expects the support to trigger more than three times as much private investment.
The region has significant skin in the game. Carmakers including Volkswagen, Renault and Fiat owner Stellantis, together with the hundreds of companies that supply them, provide direct and indirect jobs to 13.8 million Europeans — about 6% of total EU employment.
The industry’s transformation is putting at least some of those jobs at risk (think of the people building gearboxes and fuel injectors, for example). Europe’s battery push is meant to create 3 to 4 million new jobs by 2025 as others are lost. By that same year, the EU expects to become the world’s second-largest battery cell producer behind China.
Germany looks poised to elbow its way to the front of the pack. VW made a massive bid for the pole position by unleashing an estimated $18 billion plan for six battery factories in Europe, and it’s also the biggest shareholder of QuantumScape, which is developing a battery technology that could extend range and speed up charging time.
“Batteries account for the largest component by value in an EV, and are crucial to performance and cost,” said James Frith, an analyst at BloombergNEF. “Countries are fighting to attract manufacturers of this crucial technology to ensure that their auto industries stay relevant in an EV world, and that existing jobs in the automotive supply chain don’t disappear.”
Before You Go
Tesla may take unusual steps to secure supply of chips, including advance payment, the Financial Times reported, citing people at semiconductor industry suppliers, chipmakers and consultancies. The carmaker is also looking into an outright purchase of a plant, though those considerations are at a much more preliminary stage, the newspaper said.