G7 viewpoint: EV push faces upstream challenges
A US administration focused on climate change and a British host eager to plug its green credentials will lead to a sharp focus on vehicle electrification at this year's G7 summit, but big promises will require significant upstream investment in metals supply chains if they are to take root and extend beyond headlines.
Discussions in Cornwall this weekend are expected to centre around restricting internal combustion engine (ICE) vehicle sales, with Germany and the UK having already committed to banning new sales by 2030. Japan is currently targeting 2035, while France, Canada and the US plan to ban sales by 2040. Italy is the only member of the G7 that has yet to make a commitment on this front. The UK is expected to push for a multilateral agreement for 2030, ahead of its chairmanship of the COP 26 later this year.
Individual members also have been ramping up their electric vehicle (EV) commitments ahead of the G7, with US and European administrations outlining plans that extend beyond just banning ICE vehicles.
The New Atlantic Charter, released yesterday by the US and UK, affirmed both countries' commitment to climate goals, saying they will "prioritise" climate in "all of our international actions".
In May, US president Joe Biden announced a $174bn EV plan as part of a wider infrastructure package. He emphasised the building of a new EV industry in the US rather than exporting manufacturing abroad.
"We need automakers and other companies to keep investing here in America and not take the benefits of our public investments and expand electric vehicles and battery manufacturing abroad," Biden said at automaker Ford's plant in Michigan. The centrepiece of the plan is $100bn in consumer rebates for buyers of EVs and $15bn for a network of charging infrastructure — crucial for the US, where drivers often travel longer and further than their European counterparts.
US facing up to supply chain risks
The EV ambitions of the US administration are not in doubt, but what is less obvious is where the batteries and raw materials will come from. It is a problem common to all the G7 nations, but Europeans lately have invested heavily in regional battery technologies and raw materials supply, helping the continent catch up with China in terms of cell manufacturing.
Projects such as Northvolt — partially owned by Germany's VW group — Britishvolt and lithium mining firms such as UK-based Cornish Lithium and Cinovec in the Czech Republic will go some way towards helping Europe build its own battery supply chain.
The US administration is waking up to the fact that the US is exposed to several potential risks, prompting Biden to order a review into supply chains for new technology that wrapped up this week. The resulting report underscores the challenges faced by the US in building its EV sector. "Currently, the US has limited raw material production capacity and virtually no processing capacity […] This current approach to the US supply chain exposes the downstream value chain to additional supply chain risk from the reliance on foreign inputs from the upstream value chain, especially the lack of domestic processing," it says.
The report also highlights the geopolitical risks of not building an independent battery supply chain, warning of the danger of relying on potential political adversaries for industrial materials.
"There are several geopolitical disruptions that could interrupt the high-capacity battery supply chain. The first is the possibility of China restricting exports of cobalt, nickel, lithium, graphite or finished anode or cathode materials, for each of which China has dominant processing capacity […] It is reasonable to expect that China could restrict exports of any or all of the battery supply chain materials it produces, due to trade tensions with the US or a simple prioritisation of domestic customers for its battery materials […] The US must secure a reliable supply base through both targeted international investments and a strong domestic supply base," it says.
The report also warns that China could just as easily dump battery materials into the global market to reduce international competition because of its current advantages. It makes clear that Biden has a responsibility to act to prevent rivals, mainly China, from controlling a vital part of the future transport network, but recommendations in a report are easy to make, more difficult to deliver.
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