Revolutionizing the EV Industry

The competition for battery metals has the potential to recreate one of the most devastating dynamics in global economic history. The rapid transition to electric vehicles (EVs) is impeded by an insatiable demand for resources from Africa and elsewhere, particularly minerals used in battery production. This insatiable demand for resources, fueled by dirty technologies, threatens to repeat the destructive dynamics of the past. For instance, the systematic extraction of raw commodities from the global south causes environmental degradation, human rights violations, and underdevelopment in developing countries. Since then, global EV sales have more than doubled from 2020 to 2021, marking a 108% increase. In 2022, the industry will hit the milestone of 10 million EVs sold.

Today, several countries are making efforts to enhance their portion of the wealth generated by the energy transition. For instance, Indonesia implemented a ban on exporting raw nickel ore in 2020, while Bolivia is seeking to increase the value of its lithium reserves. However, economists are skeptical about whether these initiatives effectively promote development, citing concerns about inadequate local expertise and logistical networks.

The EV industry and its dirty secret

Under the sleek exteriors of electric vehicles, there is a startling tale of child labor, extreme poverty, and blood batteries. Amnesty International warns that the lack of laws requiring producers to report on their supply chains increases the risk of child labor and abuses in electric vehicle batteries. The dirty secret of the green revolution is its insatiable hunger for resources from Africa and elsewhere that are produced using some of the world’s soiled technologies.

Congo is no ordinary African country. The Democratic Republic of the Congo, with its vast cobalt reserves, is a key player in the green transition, as its EV batteries offer longer driving distances. China’s commercial and political interests in resource-producing regions connected to the sea for export are replicating the colonial era’s resource extraction economy, putting nations like Congo at risk of perpetual underdevelopment.

Out of sight, out of mining: The Dawn of a New Era in Automotive Technology

The auto industry is about to make a huge technological leap that could change the way we think about the market for electronic vehicles. Sodium and lithium batteries are increasingly being integrated into the language of renewable-energy vehicles.

Hydrogen vs. Sodium and Lithium

Toyota, a global automaker and pioneer in automotive R&D, is dominating this emerging sector. Toyota predicts a 30% market share for battery cars in Japan, with hydrogen and internal combustion engines sharing the remaining share. Despite initial challenges, the Mirai from Toyota is among the few hydrogen-powered vehicles that are readily accessible, along with Hyundai’s Nexo SUV from South Korea.

Despite being the most abundant element in the universe, hydrogen is hard to get on Earth. A majority of pure hydrogen is created through carbon splitting from methane, which emits carbon dioxide. Electrolysis produces “green hydrogen” with zero emissions. Hydrogen provides faster refilling, larger payloads, and a longer range, making it perfect for organizations that require continuous operation without charging downtime.

Minor Caveats

Many energy specialists do not possess the same level of enthusiasm as the manufacturers of hydrogen cars. Hydrogen fuels deliver less energy to vehicles due to wasted heat, especially when burned directly or used in e-fuels to replace petrol or diesel in noisy, hot engines. Hence, hydrogen cars use more energy overall than battery cars. Jasper Jolly, a Guardian reporter, contends that hydrogen cannot replace automobile batteries due to safety concerns, flammability, and leakage. However, the hydrogen gas tanks used in these vehicles are equipped with ballistic protection due to the highly flammable nature of hydrogen. Carmakers should prioritize clean hydrogen for fuel cells, which necessitates additional tankers and on-site electrolyzers for efficient storage and delivery. Japan aims to introduce 0.5 million hydrogen fuel cell vehicles by 2025 and 10 million by 2030, despite challenges, with the potential to revolutionize human mobility and benefit the environment.

Enter sodium-ion batteries Sweden’s Northvolt, a leading innovator in research and development, has successfully created an energy storage system that does not rely on lithium, cobalt, graphite, or nickel. Sodium is cheaper and more abundant than lithium, making it less sensitive to resource availability difficulties and price volatility. This reduces China’s dependence throughout the green energy transition.

There are two significant distinctions between batteries and the aforementioned green technology sectors. The EU’s response to a trade investigation on China-made batteries could potentially cause short-term inflationary pressures on European industries. This is due to the limited and expensive alternative supply sources. Currently, China is responsible for around 50% of the worldwide manufacture of battery cells.

Chinese battery manufacturers have made substantial investments in Europe, which have contributed to the growth of the local economy and mitigated risks despite being owned by Chinese companies. It is improbable for the European Union to initiate measures against them in the near or intermediate future, especially by means of its newly established foreign subsidy instrument.

Europe’s efforts to establish a domestic battery industry may face a challenge from Chinese-owned megafactories located on the continent. If these factories engage in unsustainable price reductions, they could potentially threaten emerging European champions like Northvolt or Verkor.

EU law and Chinese retaliation: a potential trade war on the rise?

The European Commission has imposed higher duties on electric vehicle imports, potentially sparking a trade war amid political uncertainty in Europe. Beijing condemns the provisional duties imposed on Chinese EV-makers after an investigation into state aid and threatens retaliation against European farmers and plane makers.

An EU official has stated that Chinese electric vehicles receive subsidies throughout the entire production process, from lithium mining to shipping to Rotterdam or Hamburg. This is because of Beijing’s investment in various stages, including metal refining, steel production, battery and car manufacturing, and transportation.

The goal is not to block EVs from China completely. But rather, the EU aims to maintain a level playing field for Chinese electric vehicles, ensuring they adhere to globally agreed-upon WTO rules.

Simone Tagliapietra, an expert in economic policy at Bruegel, contends that the EU’s duty call does not deviate from the bloc’s established principles of economic efficiency, comparative advantage, and open trade. Instead, it seeks to ensure fair competition among all participants. Duties will become effective the day after the bloc officially issues the provisional duties on July 4.

What does this mean for SMEs?

Currently, the electric vehicle (EV) sector is dominated by automakers with the deep pockets necessary for vehicle design and manufacture, such as Toyota, BMW, and Mercedes. Small and medium-sized enterprises (SMEs) are spearheading the advancement of electric vehicle (EV) infrastructure, with a special focus on developing energy storage and recycling technologies.

Strategic positioning of European SMEs in the electric car technology value chain.

● SME engagement can spur economic development and innovation through EV business opportunities.

● Europe 2020, a 10-year EU strategy, aims for smart, sustainable, and inclusive growth.

● SMEs need to play a role in EV-based automotive value chain re-shaping in New Zealand.

● There’s a disconnect between SMEs’ potential to join the future EV supply chain based on technology and manufacturing capacity.

The transition from soft law to hard law on human rights due diligence is rapidly occurring, driven by consumer and shareholder demands for ethical and sustainable business practices. It is now time for the auto industry to undergo a significant technological advancement that could significantly alter our perception of the electric vehicle market.