2023-05-31 06:28:43
We explored the question with Yan Cimon, professor of strategy at the Faculty of Business Administration at Université Laval, and Michel Jébrak, professor emeritus at the Department of Earth and Atmospheric Sciences at UQAM.
China dominates the electric car market. In many ways, American and European manufacturers seem to be out of step. How far behind are they?
Michel Jebrak. The last Shanghai Motor Show in April made Western manufacturers aware of their technological backwardness in terms of batteries, but also of their ability to build cars at very low prices. The Chinese offer electric vehicles for around 10,000 US dollars, a far cry from what is done in the West.
Also, and unlike Westerners, they have massively adopted LFP (lithium-iron-phosphate) batteries. They therefore do not need, to make this component at the heart of the electric car, to rely on nickel and cobalt, metals that are more expensive, rarer, more polluting, and which cause ethical problems due to their mining conditions, particularly in the Democratic Republic of Congo.
In addition, Chinese mining companies have followed suit, which ensures them a supply of metals, particularly lithium.
People of Cimon. China controls more than 90% of the critical minerals available on the market, essential for the construction of batteries and electric vehicles. That said, this benefit is temporary. If large rich countries start mining rare earths and other critical minerals, it might decline rapidly.
And in terms of technology, North Americans still have an interesting advantage when you look at all the advances made, among other things, for vehicle automation, design, software or marketing.
An improvement is to be expected in the near future, because American manufacturers have very ambitious targets for the volume of construction of electric vehicles. There is reason to be optimistic, but the game is not won in advance.
The West wants its share of the market, but has no choice but to collaborate with China. What form will the upcoming competition take, given the diplomatic tensions?
M.J. It’s extraordinary to see that now, when an American car manufacturer wants to develop, it has to adopt Chinese technology licenses. This is the reverse of what happened 30 years ago.
Political tensions illustrate this shift in the market. But everyone has an interest in an open market. The Chinese have behaved extremely capitalistly for thirty years.
As Westerners have a technological delay of around three or four years, their only defense will be tariff barriers to limit the entry of Chinese products. Which is also a bit contradictory, because American companies are present in China where they have financed the development of electric vehicles through partnerships. Warren Buffett, for example, invested in BYD, Tesla’s big competitor.
Y.C. We must not be towed by China or other countries that might master certain critical minerals or technological elements at the same time. This would place us in a highly dependent situation, which is not desirable. We sometimes see how the geopolitical context can change rapidly.
It’s a matter of supply chain predictability. It is often better when the activity is carried out at home or with neighbors who are not used to using global supply chains as a bargaining tool.
Yan Cimon, professor of strategy at the Faculty of Business Administration at Laval University
Photo : Radio-Canada
Extraction and transformation of raw materials, manufacture of batteries, assembly of vehicles, there is a strong desire in Canada to develop a sector. What are the challenges?
Y.C. For Canada, the automotive sector is strategic. It contributes to maintaining a large number of jobs with high added value, jobs that generally come with good working conditions and good salaries.
Canada also has a very attractive skilled labor pool. You have research centers that are both world leaders in their fields, including artificial intelligence, automotive electronics, assembly lines, etc.
Canada must give itself the means to compete with world leaders, except that the favorable moment risks disappearing if we do not nourish the ecosystem. For example, tax incentives are often much less generous than in the United States.
M.J. There is currently a race for grants. Moreover, everyone subsidizes their factories very generously, whether they are the Chinese, the Europeans or the Americans.
We see it with the attitude of Stellantis. The multinational asked for more money from the Canadian government to pursue its electric vehicle battery factory project in Ontario, following realizing that it might not compete in the short term with the Chinese market and that it would a new strategy should be developed.
Many manufacturers face the same challenge. But all are trying to move forward.
If we take stock of the large traditional companies, Ford has launched its production of electric vehicles in the Chicago area, General Motors has four plants under construction, Chrysler – which is now in Stellantis – also has several projects in Europe.
Otherwise, we have made good progress in the extraction of lithium, an essential element for batteries. North American lithium has started producing in Quebec and exploration has yielded interesting results with the recent discovery of world-class deposits in James Bay. We might be able to produce a lot of lithium within 10 years, but we will have to invest.
Y.C. In Canada and in Western countries, there is also the question of the social acceptability of electric vehicle supply chains. However, if the final product, the electric vehicle, has a very strong acceptability, this is not the case at the other end of the spectrum for the extraction of critical minerals.
So, when looking at environmental impacts, there is still skepticism or uncertainty. There might be opposition, even though these are activities that are strategically essential for Canada.
Some see the electric car market as a symbol of shifting global power. Do you share this analysis?
M.J. Absolutely. The last great geopolitical shift was the handover between England and the United States, when we went from a predominance of coal to that of oil. We have the impression of seeing the same process at work.
XI Jinping once said that rare earths will be China’s oil. The Chinese had the idea, as early as the 1980s, of moving towards the transformation of energy. They understood that critical metals were going to play an essential role and, from the beginning, they manipulated prices, especially lithium.
Y.C. Not necessarily. The power lies in high value-added activities and Canada might consolidate its advantages.
In the 20th century, Canada skilfully positioned itself in the chains of the traditional automobile and we were able to benefit from this for decades.
For electric automobiles, however, the window of opportunity is fading. It is therefore necessary to act very quickly and decisively to be able to seize this rent.
For clarity, we’ve edited our experts’ questions and answers.
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