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The EV battery wars are just getting started


The article discusses the recent increase in U.S. tariffs on Chinese electric vehicles (EVs) and their batteries. It highlights the complexities and potential ramifications. While tariffs on an EV  battery are rising from 7.5% to 25%, those on EVs themselves are jumping from 25% to a staggering 100%. This discrepancy appears illogical considering China’s significant cost advantage in producing EV batteries. This makes Chinese EVs far cheaper than North American ones. However, the decision is influenced by North American automakers’ heavy reliance on Chinese battery components.

China’s dominance in battery production is substantial, controlling a vast majority of the global market. This includes 91% of anode production, 78% of cathode production, and significant shares in lithium, nickel sulfate, cobalt, and graphite processing. Such dominance is attributed to China’s advanced technology, streamlined bureaucratic processes, and substantial government subsidies. This has led to six of the world’s ten largest EV battery producers being Chinese, with companies like CATL leading the charge.

China’s strategy includes overcapacity, preparing for a massive surge in supply even as global EV demand softens. This overproduction, supported by domestic subsidies, aims to flood the market and outcompete international manufacturers, a tactic previously seen in industries like steel and solar panels.

The U.S. and Europe are responding differently to China’s EV market influence. Protectionism and political volatility mark U.S. policies , complicating long-term planning for automakers. The Inflation Reduction Act, aimed at boosting domestic EV production, clashes with high interest rates. Those are intended to curb inflation, leading to predicted EV price increases. In contrast, European automakers, heavily dependent on Chinese markets, are more cautious about tariffs. Stellantis, for instance, is partnering with Chinese EV maker Leapmotor. This reflects a strategy to integrate into the Chinese market rather than confront it.

In summary, the interplay of tariffs, market dominance, and international strategies reveals a complex landscape where protectionist policies and market overcapacity are shaping the future of the global EV industry.
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