Hybrid crazy China: Supply and demand manipulation?
First currency manipulation, now plug-in supply manipulation?
Can China control the US market for battery-powered vehicles?
A few days ago, China announced that it might spend up to billion on new energy vehicles over the next 10 years. While the plan offers limited details, within 3 years China hopes to have 500,000 alternative vehicles on the road, and up to 5 percent alternative energy vehicle penetration within the next few years. By 2020, China hopes to have produced 5 million new energy vehicles.
But what does this really mean?
What are ‘new energy vehicles’? Just EVs? Hybrids and EVs? Something else?
If just EVs, isn’t China’s overwhelming reliance upon antiquated coal technologies going to become a major CO2 problem?
Regardless, that’s not the most interesting part of this story.
Resource supply management
Several years ago Ford claimed many more hybrid cars could have been sold, if not for Toyota’s stranglehold on NiMH battery supplies.
Because Toyota had planned years ahead – far ahead of Ford – and procured contracts for every important commodity needed for NiMH hybrid vehicles, cost-effective supplies were hard to acquire, and few battery makers were willing to invest much into such supplies. Thus Toyota helped develop their own supply chains over the course of many years.
Even today, while many ridicule Toyota for not developing plug-in vehicles fast enough, apparently because of the success of the Prius, I’d still bet that Toyota has already contracted far more lithium supplies than any Big 3 automaker. That might not be as relevant as with NiMH batteries, but it could still be an important key to early success.
However, unlike either Japanese or American automakers, China also has nice supplies of lithium and refined rare metals – state owned – for their government owned auto industry. Eventually, China might also need to import lithium, but for now China has a distinct advantage compared to both Japan and the US.
Even better, with a significant state-funded increase in demand for their precious state-owned rare earths, China can assure the highest prices for these important commodities, helping to offset the costs of this hybrid effort (besides interest from US treasuries will also help).
Ultimately, for as much as a decade or more, America simply cannot excel at the development of plug-in vehicles, or even hybrids, without critical resources from China, and the quicker China ramps up Chinese production of hybrids and plug-ins, the more expensive they can make non-Chinese hybrids and plug-ins through the supply and demand of critical resources.
If you’re China, why not ramp up battery-powered vehicles as quickly as possible when you can force the world’s established automakers to help cover the costs?
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