China has made little secret of its intention to capture the electric vehicle (EV) supply chain. Viewing the domination of the EV industry from minerals to markets as a strategic priority, per its Made in China 2025 report, Beijing has wasted little time in ramping up its EV ambitions.
Even at this early stage in the industry’s development, the scale of China’s domination of the entire EV supply chain is astonishing. Total U.S. EV sales finally crossed the 1 million mark in November last year. In 2018 alone, Chinese consumers bought 1.2 million EVs. In addition, two out of the top five EV brands are Chinese, with Nissan, BMW and Tesla making up the rest. Of the 70 lithium ion battery megafactories being planned worldwide, 46 are due to be built in China. Just five are planned for the United States.
As battery costs fall, government finance programs defraying upfront purchase costs in tandem with stricter emissions goals mean electric buses are most likely to be the beach head for wider EV deployment.
China has worked hard to corner this market too: There are already 421,000 electric buses in China, compared to just 300 in the United States as of May 2019. Moreover, Chinese companies benefit from significant state funding, with approximately $60 billion given to the country’s EV manufacturers between 2009 and 2017. This support allows Chinese companies to submit bids for U.S. transit agency contracts that undercut their North American counterparts by millions of dollars.
Beijing has a clear strategy to cement its position as the dominant player in the EV market by subsidizing its companies worldwide to crush local competition at this nascent stage of the EV market’s development. Not only does this harm our domestic industry, but it also creates larger problems for U.S. national security: If China captures the EV market, the United States shall be swapping its current reliance on a volatile global oil market to fuel our transportation system for a dependence on an emerging great-power rival for our EVs, batteries, and the minerals required to build and power these vehicles.
In testimony to the Senate in February, Simon Moores, the CEO of rare earths consultancy Benchmark Minerals Intelligence, told the U.S. Senate Committee on Energy and Natural Resources that the United States is a “bystander” in a global race for EV supply chain dominance. However, the National Defense Authorization Act (NDAA) provides the United States with an opportunity to counter Beijing’s strategic ambitions.
The Senate version of the NDAA contains provisions to prevent federal funding from being used by U.S. transit agencies to purchase Chinese rail cars and buses. However, the House version limits its restriction solely to rail rolling stock. If the House recedes to the Senate version, then the United States will have taken an early step toward countering Chinese electric bus ambitions in the lucrative—and strategically important—American market.
On its own, passing an NDAA which precludes the use of federal funds to buy Chinese buses is unlikely in a vacuum to derail Beijing’s attempts to secure the global EV supply chain. It is, however, a signal that the United States is alive to the economic and national security threat Chinese EV dominance would have on the country.