Quand les réglementations façonnent l'avenir d'une industrie, le cas de la batterie haute tension

Publication Type:

Compte Rendu / Report

Authors:

Source:

Report of the Gerpisa monthly seminar, Number 276, CCFA (2023)

Notes:

Marc Alochet, Ecole Polytechnique

Full Text:

Will the battery industry change the automotive industry? Marc Alochet's presentation is based on the forthcoming issue of IJATM, the Gerpisa journal.

We need to understand the development of this industry from the point of view of CO2 emission regulations. There has been a significant increase in the production of electric vehicles (EVs). It wasn't the automotive industry that rushed into the production of EVs, nor were customers the ones pushing for the manufacture of EVs. It was regulations that forced this trajectory.

Today, China has absolute domination over all areas of the value chain. When China does not have the capacity at home, particularly in terms of raw materials, it is the leading importer. China dominates the market. Traditional carmakers have mastered ICE technology, but today they are dependent on China for everything to do with EVs, especially when it comes to supplying batteries.

By 2021, EV sales in China have surpassed half of global sales. How can this be explained? We need to look at regulations and financial support for electrification. China is acting on supply and demand, helping the market to take off and encouraging the purchase of new electric vehicles. In the USA, the Obama-era policy was somewhat proactive, but had little long-term effect. In the EU, investment is around half that in China.

What are these investments being used for in China? China is the world's largest market. The aim is to go from "big" to "strong", to become the world's leading player in the automotive industry. In China, the 1990s were the start of the Chinese automotive industry. From 2012, priority was given to battery-powered EVs. So, from the beginning, China has been interested in all stages of the life cycle and has introduced regulations covering the different stages.

This is "managed Darwinism": the aim is to select champions in the automotive industry in order to support the development of the market and the industry, first at national level and then at global level. Then there is a pragmatic adjustment of regulations to objectives. Finally, at a time when the market was struggling to take off, there was a "whatever it takes" type of investment.

In the USA, California plays a major role in the automotive industry, where regulations are very old and where 40% of vehicle sales take place. The political alternation between Democrats and Republicans has resulted in regulatory instability. The Biden administration has tried to take a proactive approach to regulation: IIJA (2021) and IRA (2022). Subsidies are available if production takes place in North America. And there is a desire to reduce dependence on rare materials (particularly nickel and cobalt).

In Europe, there is a lack of a coordinated and systemic approach to building a future for the industry. Fit for 55 was adopted in 2021, but all the regulations for setting up a value chain are arriving late. In a way, we're putting the cart before the horse. Public funding is inadequate, and the targets are fairly unambitious. This does not give us the means to break out of China's domination of the battery value chain. The EU refuses to engage in protectionism, while China and the USA are abusing it.

As far as battery manufacturing in Europe is concerned, the companies are mainly Korean, Indian, Chinese and European (44% of production capacity). What's more, there are a number of obstacles to the development of this industry. Most of the skills needed to produce batteries come from Asia, and are not available in Europe or the USA. Finally, the scrap rate is very high in the early stages of the battery industry, at around 10%.

Conclusions and outlook for the global battery industry :

1. Is there a risk of overcapacity in battery production in China? The risk of overcapacity is global, and it exists.

2. Chinese players will continue to dominate value chains. LG ES would be the only manufacturer capable of competing with CATL.

3. It is not known which battery technology will become dominant.

4. Sales by global manufacturers will fall in China.

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