The emerging battery industry: implications for the international division of labor and geopolitics of the automotive industry

Abstract:

In 2021, about 6.5 million EVs were sold worldwide, mostly in Mainland China and Europe (85%), accounting for 8.3% of global sales of cars (passenger and light commercial vehicles). Within 10 years, this market grew substantially from 125,000 vehicles and a 0.2% market share in 2012. In 2009, following the Global Financial Crisis, both European countries and U.S. pumped large amount of money into the car industry, with the condition for car makers to develop EVs. As first-runners, the Nissan-Renault Alliance, Mitsubishi Motors and GM could not achieve to develop a full lineup of EVs and in turn make profit out of their investments. The Japanese and Korean car makers pursued their bid into hybrid and plug-in hybrids, while German premium car makers saw the early opportunity to bring into the market expensive EVs. Tesla struggled to turn its EV strategy into a profitable business, especially between 2016 and 2019, facing the common barrier shared by newcomers of reaching mass production of its Model 3. In the 2010’s, the Chinese central and regional governments launched ambitious industrial policies to force consumers to buy EVs, at the expense of hybrid cars. These policies were translated into incentives such as purchase subsidies of EVs, and several policies to strengthen the competitiveness of local car and battery makers. Within 10 years, the Chinese battery industry grew as the leading one, and China acquired a strong position from upstream to downstream sectors of the battery industry. BYD is a key specialized EV car maker that also developed its battery manufacturing, CATL, established in 2011, is the current leading LIB maker, Ganfeng Lithium and Tianqi Lithium are core miners that also grew downstream the value chain. However, these firms are not State-owned enterprises or firms that benefited from the JV policies launched in the early 1990s, rather they are private companies with somewhat distinct mode of capital accumulation and innovative capabilities. The question of whether they transform the “Chinese capitalism” is a key issue to understand the new geopolitics of the automotive industry. The mass production of EVs also entails the sourcing of “new” raw materials (rare earth, lithium, cobalt, nickel, manganese) that are mostly found in South America’s Lithium Triangle (Argentina, Bolivia, Chile), Central Africa and especially the Republic Democracy of Congo, and Australia. While the 20th Century saw the economic growth of some oil producing countries, there is a current power imbalance between mining firms and some battery makers on the one hand, and the above-mentioned countries on the other. Finally, since at least 2018, both governments and car makers in some traditional core automotive countries (mainly U.S. and EU) substantially implemented energy policies and EVs development strategies to invest this infant industry. With both stricter emissions rules to deal with, and large financial, marketing, research and manufacturing assets, the role of traditional core car makers (Toyota, VW Group, GM, Ford, Stellantis, Hyundai Group, Honda, Renault-Nissan-Mitsubishi Alliance) cannot be eluded.
This presentation aims at mapping out the current state of this emerging segment within the automotive industry, with the aim to analyze the competitive patterns, the industrial organizations, and the financial strategies that shape this segment. The international division of labor’s approach will allow us first to point the major countries and makers involved in the establishment of this industry, their roles, and their positions at the global scene, and second to describe the competitive and exchange rules that govern this infant industry. One issue that addresses this presentation as an underlying discussion is whether this new segment, i.e. the battery industry, reshapes the traditional Fordist/neo-Fordist model of mass production, regime of accumulation, and vertical integration that has been governing the automotive industry since the 1920’s, and if so, what are the forces of changes that destabilize this order.