China domination on lithium carbonate supply chain and its effect on Indian EV space

Before understanding how China is going to affect the Indian EV Space, let's understand how china controls the global Lithium carbonate supply chain

China currently controls the world's manufacturing of new generation batteries, which are critical to the shift away from fossil fuels, after years of preparationElectric cars and most portable consumer devices, such as cell phones and laptops, require these new batteries

China is the world's largest user of lithium, accounting for 39% of worldwide consumption as early as 2019

China possesses the world's sixth-largest known lithium ore reserves

As of now what China is doing is importing the raw material and manufacture the cells and then exports the cells to the worldChina is not even touching its lithium reserves

According to data supplied by Benchmark Mineral Intelligence, a London-based lithium-ion battery market research firm, Chinese chemical companies produced 80% of the world's total output of advanced battery raw materials in 2019

China is home to 101 of the 136 lithium-ion battery factories planned through 2029China has complete control over the processing of nearly all key minerals, including rare earth, lithium, cobalt, and graphite

SNE Research, a market research firm based in South Korea, has named China's Contemporary Amperex Technology CoLtd(CATL) as the top producer of electric vehicle batteries for the past three years, with a market share of 279%Tesla's electric car batteries are made by CATL

Lithium Battery Supply Chain

China has prioritized capacity expansion at all stages of the battery supply chain
Aside from rare earth, the production of lithium-ion batteries is reliant on critical elements such as graphite, which is used in pencil tipsChina generated more than 60% of the world's graphite in 2019

Because it is widely utilized in electric vehicles, computers, and consumer electronics, cobalt has become one of the hottest commodities in the new energy revolutionHowever, unlike graphite, which China has considerable natural reserves, cobalt reserves in China account for just approximately 1% of global reservesMore than 60% of the world's cobalt is mined in the Democratic Republic of the Congo (DRC)

However, Beijing has complete control over the world's supply of this silvery-blue metal

China owns eight of the DRC's 14 largest cobalt mines, accounting for about half of the country's output
According to Benchmark Minerals, China's influence dominates cobalt processing, with Chinese enterprises dominating over 80% of the cobalt refining industry, where it is converted into commercial-grade cobalt metal and power

World Lithium Reserves

According to the 2020 USGS, China is one of the top five countries with the highest lithium resources, but it has been buying holdings in mining companies in Australia and South America, where the majority of the world's lithium deposits are found

Tianqi Lithium, a Chinese company, now owns 51 percent of the world's largest lithium reserve, the Greenbushes lithium mine in AustraliaIn 2018, the same business spent around $4 billion to become the second-biggest shareholder in Chile's largest lithium producer, Sociedad Qumica y Minera (SQM)

Ganfeng Lithium, another Chinese business, has signed a long-term arrangement to underwrite all lithium raw materials generated by Australia's Mount Marion mine, the world's second-largest high-grade lithium resource

So you can see, how China is controlling the global lithium supply chainNow let's move towards the Indian EV market and understand how it will be affected

Indian EV Sector dependency on China

Electric vehicles (EVs) are set to take center stage in the coming revolution of the automobile industry to a renewable alternative to fuel-dependent vehiclesThe Indian government has responded by investing heavily in Phase II of the FAME India (Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles in India) schemeIn a similar vein, the government's recent push for 30% EVs on the road by 2030 is perhaps one of the most ambitious energy transition projects ever attempted

The primary goal of this program is to reduce the number of fuel-powered Internal Combustion Engine (ICE) vehicles in cities and replace them with rechargeable EVsNITI Aayog predicts that Indian fuel imports, which account for 80% of the country's import bill, maybe considerably cut by 2030, saving up to USD 60 billionBecause of the large number of polluted cities throughout the world, the adoption of modern green technology and the use of efficient battery chemistries could not have come at a better moment

Although the national government and twelve state governments have already invested heavily in the electric vehicle transition, it is heavily reliant on forces beyond India's control

To catalyze this change, the Indian EV market is relying on both internal and external factorsInternal elements include phased planning, government assistance, stable funding, battery manufacturing, the creation of an innovative environment, and the establishment of local infrastructureThe geopolitical difficulties of resource acquisition, worldwide supply chains for technological skills, and the technology itself are the external elements that decide India's drive for "global leadership" While electric vehicles (EVs) are expected to reduce susceptibility to oil supply interruptions, a new trend of lithium-ion dependency is unavoidable

The Indian market is dominated by two-wheelers, as it is in China, and both EV policies see commercial and public transportation as the starting point for automotive electrificationBy deploying EVs for private as well as "last and first mile solutions," the introduction of EVs in the two-wheeler market has provided a durable backbone to the Sino car industryIndia's three-wheeler and two-wheeler segments have comparable plans

China is projected to play a significant role in India's attainment of the EV dream by catalyzing a widespread EV transition and generating demandIn fact, China is already a major player in the Indian battery manufacturing business
India imports lithium cells mostly from China, Taiwan, and Japan, with assembly (cell to pack) taking place in India

Due to increasing custom tax, currency depreciation, strong demand, and transportation costs, importing a complete LIB are more expensiveOver the course of a few years, imported batteries have been observed to have lower output, with considerable deterioration in battery capacity and longer charge hoursOne common fear is that India will become a dump for low-quality Chinese batteries

The advantages of indigenizing LIB production are twofold: it benefits both manufacturers and customersFirst, it will significantly cut the cost of owning an EV; it will also increase demand, ameliorate price shock, and therefore reduce consumer apprehension about EVsSecond, it will reduce reliance on other countries, lower the risk of poor batteries, increase value creation in the country, and foster technological skills

Supply Chain Gap

While the reasons for indigenizing LIB manufacturing are valid, Chinese businesses may still provide a variety of benefits to a new EV market like IndiaLithium, cobalt, nickel, manganese, and natural graphite are all important components of LIBsWhile the latter three battery elements are fairly common, the presence of lithium and cobalt raises serious concerns among worldwide and domestic EV makersHowever, the major problem is v

Domestic instability has resulted in a concentration of cobalt and lithium in the Democratic Republic of Congo and the South American Lithium TriangleFurthermore, China controls the enrichment and supply chain for these resourcesAs a result, the EV market is vulnerable to global concerns such as government policy, climate change, manufacturing decline, and socio-political upheaval, all of which exacerbate pricing uncertainty and volatility

Cobalt concentration in the DRC, for example, can produce supply interruptions and short-term supply shortfalls, as was the case in the 1970s when political upheaval in the country temporarily halted exportsCobalt trade is dominated by two countries: the Democratic Republic of Congo (DRC) and ChinaIn the years 2015 and 2016, China was the main producer and importer of cobalt (12 billion of 31 billion worldwide trade value)China was the largest cobalt consumer, accounting for 80% of the cobalt used in the rechargeable battery sector

Another key aspect of the Chinese EV ecosystem is that it has the potential to positively affect the Indian industry if the government can choose to adopt specific best practices, such as China's development of a sustainable battery value chainDespite China's current dominance of the LIB industry, Beijing has taken steps to address the concerns of unreliable lithium supply and environmental deterioration by enacting laws that make carmakers responsible for battery recyclingThis has given LIB producers a circular economic model in which the carbon impact can now be reduced after use

It's critical to improve relations with China's electric vehicle behemothsThe contest for automobile leadership will be won in the coming decades, but Indian policy must reflect the essential relaxation and promote the electric vehicle industry among commutersThe fate of Indian electric vehicles remains to be seen, but the Chinese electrification experience holds some promise