Asia is setting the pace of geopolitics for the next few decades. If in the chip industry it is the Asian technological elite and the Western powers that monopolize the most advanced technology, the electric car market remains under the domination of China, including the design and manufacture of electric batteries. The change in the geopolitical cycle is taking shape and the evolution of electric cars will impact the four main global production poles, China, Asia, Europe and the United States.
Does actually Electric batteries will make a difference
And it is that we are at the gates of a paradigm shift, in which competitive advantages are no longer the exclusive preserve of the great powers. The end of business as usual is anticipated, as China fosters a new competitive environment, leading the technology of electric batteries, while generating new competitive advantages that transcend the field of industry to dominate the geopolitics of technology.
China’s dominance of two-thirds of the world’s production of electric batteries leaves little room for competition, South Korea barely accounts for a seventh of the market. In addition, the Chinese companies CATL and BYD lead the battery technology, and the latter is also the Chinese automotive startup that rivals Tesla in the manufacture of electric cars. The novelty is not that this new generation of global champions internationalize in Southeast Asia and Europe, but that they bring with them the expansion of Chinese standards in sustainable mobility, generating a new competitive advantage, Designed in China.
The dominance of the batteries is hardly a part of the geopolitical tableau. China also leads the production of rare earths, a differential competitive advantage, and any fluctuations in the prices of these strategic elements, such as the supply of batteries, could destabilize the market, severely impacting the supply of electronic devices and stressing supply chains. global. In fact, strategic minerals and rare earths have become a geopolitical risk factor that will have a greater impact on the supply chain than the reorganization of the model itself, precisely because of China’s dominance of these elements. And this applies to both the electric car sector and the semiconductor industry.
On the Asian side, South Korea and Japan are an essential part of technological value chains as generators of advanced technology in electric cars, as well as a source of digital talent. Hence, the United States has defined its strategy to counter the rise of China by expanding its association with its Asian partners, which already includes chip manufacturing and defense and security, among others, to electric car technology to attract new talent. cutting-edge technology and capabilities.
However, the new scenario posed by the United States is generating an added disruption to the challenge of competing with Chinese automotive startups. The promotion of greater local production that penalizes manufacturers that do not produce and source from North America poses a situation of great impact for the interests of South Korea and Japan, the main partners of the United States in the construction of new plants on land US. Until the plants are operational in a couple of years, these measures by the Biden Administration could reduce their sales and, therefore, their share of the global electric car market, just at its moment of greatest expansion.
However, in this geopolitics in transition, which has the challenge of accommodating the rise of China in multiple scenarios, it will be the environment of sustainable mobility where the rise of the Asian giant has a significant impact on European interests. While Europe negotiates with the United States to apply the same consideration as Mexico and Canada as partners, and thus avoid reaching a trade war, the expansion of the Chinese automotive global champions may be the biggest challenge to the competitive advantages they have positioning European brands in the elite of the automotive industry.
In this change of cycle, Chinese startups have selected Europe as the main strategic objective in their international expansion, investing in European soil while competing with the big names in the industry in their own market. For their part, European brands continue to prioritize the production of electric cars in China, while in Europe they maintain the cost of combustion cars until 2035.
It is, therefore, different strategic visions that will transform the reorganization of supply chains in the coming years and on which Europe will achieve the long-awaited self-sufficiency depends. Meanwhile, the announcement by TSMC, the Taiwanese chip giant, to build a factory on European soil lays the groundwork for encouraging technological self-sufficiency. The next step will be to strengthen the automotive competitive advantage by incorporating
Agueda Parra Perez is an analyst of China’s geopolitical and technological environment. She is the founder and editor of #ChinaGeoTech, author of ‘China, the routes of power’ and collaborator of Agenda Pública
