The global surge in electric vehicle (EV) sales has positioned China as a dominant force in the market, raising concerns among foreign automakers about potential market share losses. In 2023, China emerged as a key player in the production of iron-based power batteries, with two-thirds of the total output. This expertise in low-cost chemistry has enabled China to make significant strides in fast-charging technology and energy density improvements, putting foreign brands at risk.
Wood Mackenzie’s recent report, titled ‘Electric vehicle & battery supply chain: 5 things to look for in 2024,’ sheds light on critical aspects such as policies, EV sales, raw materials supply, and the role of foreign automakers. The report anticipates 2024 as a pivotal year for transport electrification, with a focus on the evolving landscape of the industry.
The upcoming 2024 United States election is poised to be a battleground for EV policies. Democratic candidates are expected to highlight job growth in the “battery belt” and the health benefits associated with reduced pollution deaths through increased EV adoption. In contrast, Republican candidates may argue against perceived limitations on individual purchasing freedom and suggest that the rise in EV purchases indirectly benefits Chinese entities. Notably, leading Republican candidates have expressed intentions to eliminate the $7,500 federal EV subsidy and impose an EV tax. Such policy changes could impact EV investments, legacy auto sector profitability, and the future prospects of global leaders like Tesla.
China’s proactive approach to EVs as part of its manufacturing strategy has seen local carmakers prioritize in-vehicle software, appealing to younger Chinese buyers. This shift not only jeopardizes existing profit streams for foreign brands but also poses a threat to their future growth potential in the world’s largest passenger car market. Any slowdown in China’s rapid EV market growth could lead to significant drops in margins for foreign brands, given the underutilization of existing internal combustion engine vehicle plants.
The European EV market faces a crucial moment as the European Commission concludes its anti-subsidy probe on China-origin EVs. Potential countervailing duties on Chinese imports pose a significant threat to European market leaders like Tesla, Dacia, and MG, which heavily rely on importing volume models from China. The outcome could impact the overall EV penetration rate in Europe, potentially reducing competition and allowing European automakers to ease their efforts, particularly considering the weakened Euro 7 vehicle emission norms.
Wood Mackenzie’s report highlights that cellmakers are set to expand their chemistry options. As the industry witnesses a surplus of lithium, cobalt, nickel, and graphite for several years, this provides relief to cell producers and mitigates concerns over rising materials costs. The decline in raw material costs presents an opportunity for Western automakers to consider more affordable cells from China, reducing overall EV costs. Non-Chinese Tier-1 cell manufacturers are expected to explore lithium iron phosphate (LFP) and lithium manganese iron phosphate (LMFP) cells to cater to both cost-effective and high-end EV models.
In conclusion, 2024 is projected to be a decisive year for low-cost batteries, with opportunities for the industry to transition from early adopters to the mass market. Foreign automakers face strategic decisions, and adapting to the unique demands of the Chinese consumer may prove pivotal in securing their position in this dynamic EV landscape, as noted by Wood Mackenzie.
