Why Does China Dominate the World Electric Car Market?

China will most likely control the world's electric vehicle civilization.

KOMPAS/ALBERTUS KRISNA

Several fully electric-powered cars under the brand name ARCFOX were displayed at the BAIC Headquarters in Shunyi District, Beijing, China on Monday (20/5/2024).

By the end of 2023, around 40 million units of electric cars will be on the roads globally. Most of the electric vehicle production is concentrated in three main regions, namely China, Europe and the United States. These three regions account for around 95 percent of electric car registrations internationally. China is the largest contributor to date.

Based on the Global EV Outlook 2024 from the International Energy Agency (IEA), it is stated that around 14 million new electric vehicles will be added worldwide in 2023. This increase is about six times higher than the situation in 2018, indicating that the electric car market is strengthening and being accepted by consumers.

In 2023, the world's largest registration of electric vehicles will be concentrated in China, accounting for around 60 percent of global proportion. This will be followed by Europe at around 25 percent, the United States at around 10 percent, and the rest from other regions.

This phenomenon will of course influence the trend of electric cars that will hit the streets in various parts of the world. Electric vehicles from China, Europe and the US will dominate the trends or models developing internationally. It is very likely that Chinese electric cars will become the model that will dominate in many countries due to the massive production of electric cars from this bamboo curtain country.

There are a number of factors that encourage China to have the potential to become the largest and strongest electric car producer in the world now and in the future. One of them is ownership of critical mineral natural resources (critical minerals) and also the processing industry that supports the development of electric vehicle battery production. China has abundant lithium and graphite resources domestically and carries out large-scale nickel and cobalt refining in a number of countries.

Currently, China is ranked second in the world in producing lithium with a production contribution of around 23 percent. It is true that domestic lithium production is ranked second, but in terms of lithium refining, China is estimated to be in first place by 2030 with a refining share of up to 57 percent. This makes China dominate the world lithium market so it is relatively easy to control the lithium commodity which is very necessary in the production of electric batteries.

In addition to lithium, another highly abundant commodity in China is graphite. This mineral mining material functions as a battery anode that plays a crucial role in the electric charging process for batteries. By 2030, China's graphite commodity production will dominate about 82 percent of the world's supply, with 93 percent of China's supply being used for battery production purposes.

Also read: Lithium battery that can be charged in minutes is developed

KOMPAS/RADITYA HELABUMI

HPAL Smelters.

The commodities for the next battery components that are also dominated by China are nickel and cobalt. Although these two mining minerals are not originally from the country, China is trying to mine and refine them by collaborating with several producing countries. For example, with Indonesia, China is collaborating to refine the nickel that is Indonesia's mainstay on the global stage.

With Indonesia's nickel mining production dominating approximately 62 percent globally, China has sought to collaborate in refining it. Some of it is utilized for producing iron, steel, and aluminum, but there are also those that are used for producing materials for nickel-based electric vehicle batteries.

Even though it does not have natural resources, it is estimated that by 2030 China will be able to refine nickel to control around 21 percent of the global market. Indonesia, which is very abundant in this commodity, is only able to refining around 44 percent.

Likewise with cobalt, China is able to collaborate with a number of the world's main producing countries. For example, Congo controls 66 percent of world cobalt production, Indonesia controls 10 percent of the global share, and Russia accounts for around 3 percent of international production. With this business relationship, China will emerge as the largest producer of cobalt refining products globally in 2030, controlling around 74 percent.

Vehicle battery

With that raw material supply, China has an advantage in producing electric vehicles. In terms of electricity supply, China has a big opportunity to develop electric vehicles with various types of batteries.

In general, lithium ion batteries are divided into several types, including NCA, NMC, and LFP. NCA is an abbreviation for lithium nickel cobalt aluminum oxide. This type has a greater voltage capacity compared to NMC (lithium nickel manganese cobalt oxide) and LFP (lithium iron phosphate).

The difference in voltage capacity is caused by different battery material compositions. NCA has a dominant nickel material compared to other elements, while NMC has a nearly equal composition of nickel and other elements, and LFP does not use nickel.

According to research by the National Research and Innovation Agency (BRIN), the difference between the three types of batteries lies in the voltage capacity they produce. The electric voltage of NCA batteries is around 3.7 volts per cell, while LFP is around 3.2 volts per cell. NMC batteries are within the range of NCA and LFP. This causes NCA batteries to have high specifications and are more compact in size.

It can be described that if an NCA battery only requires 100 battery cells, an LFP battery requires up to 200 battery cells. Thus, the dimensions of the LFP battery type will be larger than the NCA type.

Also read: Electric Vehicle Batteries Targeted to Be in Production in 2024

Until now, the majority of NCA and NMC electric vehicle batteries are used by manufacturers from the United States, Europe, and South Korea, while LFP types are widely used by manufacturers from China.

According to the powork lithium compound page, NCA and NMC batteries are mostly applied in cars that consume less power and support speed and long distances. Theoretically, a car using an NCA lithium battery can travel further than a car using the same number of LFP battery cells.

NCA and NMC battery types are benefited by high energy density of each battery cell compared to LFP type. Therefore, NCA and NMC types can save space or battery dimensions compared to LFP type.

This specification makes NCA and NMC batteries more appropriate for relatively small types of vehicles because they are efficient in size and power output. On the other hand, the LFP type is more likely to be used for large volume vehicles, such as electric buses or heavy lift electric vehicles.

However, with the increasingly advanced technology, some electric vehicle manufacturers from China are able to develop LFP batteries for small vehicles, such as cars, motorcycles, and also electric bikes.

The progress made by China is worthy of appreciation as it is able to compete with the world's reliable electric car producers, such as Tesla and Hyundai. In fact, some time ago, Tesla was reported to have produced Tesla model Y using LFP type batteries supplied from China.

The high penetration of China's electric vehicles market with LFP batteries has led to an increasing proportion of the LFP battery market share. According to IEA, by 2023, it is projected to dominate the global market, accounting for about 50 percent. This is more than the high-nickel NCA or NMC battery types.

Around 70 percent of electric vehicle manufacturers in China use LFP-type batteries, around 25 percent use high-nickel batteries, and the rest use low-nickel batteries.

Electric vehicle producers that use high-nickel battery are concentrated in the US and Europe. The production of LFP batteries in both regions is relatively low, each less than 10 percent.

By having all the supporting material for battery production, China has the opportunity to "control" the prices of battery commodities. This is indicated by the trend in the price of LFP batteries, which have a linear effect on the prices of NCA and NMC batteries. The decrease in the price of LFP batteries in 2023 is also followed by a decrease in the price of NCA and NMC batteries.

Therefore, it is not impossible for the world's electric vehicle civilization to be indirectly controlled by China. This country is capable of developing LFP, NCA, and NMC battery technology together without difficulty in the supply of raw materials.

Collaborating with China could be a stepping stone for a country to build technology transfer related to the development of electric vehicles and their battery technology. Indonesia, as one of the relatively large nickel and cobalt producing countries in the world, can take advantage of this in the interests of national independence. (R&D COMPAS)