Akhil Ramesh

Opinion | China’s lead over the US in EV markets is huge, but not insurmountable

China is not only the world’s largest electric vehicle market, but controls much of the supply of critical minerals needed for EV battery manufacturing

Nevertheless, by engaging its automotive sector, plugging loopholes in legislation and working with its allies, the US might still have a shot at coming out on top

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A GAC Aion Hyper SSR electric sports car on display at the Shanghai Auto Show on April 24. China is the world’s largest market for electric vehicles. Photographer: Bloomberg

Akhil Ramesh

Published: 4:30pm, 11 May 2023Updated: 9:20am, 12 May 2023

In his address at the Brookings Institution, US National Security Adviser Jake Sullivan basically sounded the death knell for neoliberalism in Washington. In the process of articulating the vision, justification and rationale for US economic policies, he laid the foundation for what has been called a “new Washington consensus”.

The Biden administration is pursuing industrial policies that involve reshoring and “friend-shoring” supply chains, redrawing the global trade architecture. However, the success or failure of the United States in diversifying electric vehicle (EV) supply chains will be the true litmus test of this new consensus.

In particular, three recent developments across three continents illustrate the challenges involved in redrawing the global architecture through decoupling measures such as friend-shoring and reshoring.

First, EV models took centre stage again as carmakers from around the world showcased their latest models at the Shanghai Auto Show. Second, the US Treasury Department provided much-anticipated clarity on tax credits and benefits for EV purchases.

Third, the Chilean government announced it would nationalise its lithium industry, essentially requiring private companies to transfer ownership to a state-owned enterprise in due course. All three events are connected and affect one another.

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China’s largest shipment of electric vehicles sets sail from Shanghai port

Why are automobile supply chains so important to the new Washington consensus? In the Biden administration’s supply chain review, four sectors featured prominently – pharmaceuticals and active pharmaceutical ingredients, batteries, semiconductors and critical minerals. Access and control of the supply chains of the latter three sectors will determine the course of an economy’s success in the fourth industrial revolution and in achieving its climate change goals.