Electric Vehicles: A “Charging” Geopolitical Power

Threats emerging from global carbon emissions and climate change have forced governments and consumers throughout the globe to look for alternate sustainable energy sources. This change is most evident when we see traditional automobile giants like Mercedes and Volkswagen push in R&D related to Electric Vehicles (EVs) and Plug-in Electric Vehicles (PEVs), many big tech companies like Tesla and BYD have emerged out of this change which now rules the consumer market when it comes to electric vehicles. This research article focuses on the emergence of EVs as a new form of geopolitical power which is being controlled by governments around the world, where every country aims to become carbon neutral in the future. The key questions I seek to answer in this article are: What makes EVs a geopolitical power? And what are its implications in the space of global trade, the global EV market, bilateral relations between countries and the politics of the US, EU and China? 

This article is divided into three sections. Section 1 defines the space and power in the field of EVs and rare earth metals. Section 2 explains the Global Value Chains (GVCs)  of EVs, and the dramatic rise of China as an EV manufacturer. Section 3 looks critically at the geopolitical repercussions of EVs, critical/rare earth mines and the race to become carbon neutral. 

1. Defining Space, Power and Significance of EVs 

Countries worldwide and super nation organisations like the United Nations and World Economic Forum have emphasised severe climate change and global warming as not only a reason but also an opportunity to look for better, renewable and less harmful fuel for our vehicles.  This implies that countries will be less dependent on rich “oil-producing nations” like that of Saudi Arabia, the US, UAE and others in the future.  The UK and EU have made it clear in their policies that the complete ban on Internal Combustion Engine (ICE) cars will be in effect from 2035. While this transition will take its time, it has become important for the world's major powers to be ready and well-equipped for this change. Major powers around the world are also in the race to become “carbon neutral”, and any country would like to be the first one to achieve this. This transition has led to the formation of a “gap” or a void as countries now need to depend on some “other” nations which are rich in minerals, research and technology when it comes to electric vehicles.

The major political powers leading this transition are China, Europe and the US in that order. “Electric car sales neared 14 million in 2023, 95% of which were in China, Europe and the United States”. The same nations also host the largest manufacturers of EVs like Tesla (the US), BYD & NIO (China) and Volkswagen (Germany) to name a few. The current sales of EVs are huge and unprecedented but it is very evident that we need more EV manufacturers and sooner so that people can transition as the current number of fossil fuel-run vehicles on the road is in billions.

But the space of EVs is not only limited to manufacturing cars as a whole, a lot of it also depends upon the minerals and technology needed to make the batteries and other components of these cars. EV batteries contain critical elements and metals such as Lithium, Cobalt and Nickel. Other elements such as Terbium, Neodymium and Dysprosium are important to make permanent magnets and other parts of the vehicles. These elements come from “rare earth metals”. Contrary to their name rare earth metals are found in large numbers across the globe but their ores are relatively less in number when compared to other metals like iron or copper. 

Till now we have established one space, the space of electric vehicles and one kind of power, the major political and economic powers like the US, EU and China. But here I would like to introduce one more space and that is the space of rare earth metals or rare earth mines which are spread across the world. The reason these mines should be considered to be a separate space is that they are sovereign state properties. These rare earth metals are not only required for making the parts of a vehicle but also for other important components like semiconductor chips and renewable energy sources like solar panels. Though separate, the space of EVs and critical/rare earth mines are highly dependent on each other. 

Countries like China and the US are in a strong position here as they are not only consuming more but also producing more because they have huge reserves of these minerals, but one also needs to pay attention to other countries which have substantial mines. Countries like Brazil, Vietnam, India and Greenland are taking strategic actions so that they can balance economic development and make their position stronger in the future.  

2. Global Value Chains (GVCs) of EV and China’s Rise

To decipher China’s rise we need to look at the major steps involved in EV manufacturing. We also need to look at the consumer side because EVs are still a new trend and the automobile companies and the government have to make them appealing so that more people adopt them. Generating a demand for EVs is necessary for it to sell. I would like to break down the major steps as (1) R&D of minerals (2) reliable value chains for mass production of cars and (3) Creating a market for these vehicles. 

1. China has the highest reserves of critical and rare earth metals (approx 40%) in the world. But rare earth metals like those mentioned above are not only consolidated in China alone. The reasons for China’s rise are behind its industrial policy. These policies involved a private-public partnership between the Chinese automobile companies, mining companies and the government that allowed them to invest in R&D of these minerals, their extraction and refinement. R&D centres and training institutes came into the picture as companies received substantial support from the government and tax exemptions during China’s Reform and Opening Era (1950s) to set up these centres.  China has also invested in acquiring a talent pool from around the world to help it retain its spot as the largest rare earth industry. This was done by investing in earth-related patents that attracted talent worldwide by allowing them to license their intellectual property. Concerning rare earth-related patents, China surpassed the US and Japan in 2008 and 2009, respectively. Due to a strong hold on patents and mineral refining industries, China was able to regulate the prices of rare earth metals in the global market. The prices were so low that companies which wanted to open new mining facilities would struggle to make profits and end in debt. Even if they were barely profitable they were acquired by Chinese conglomerates. 

(2) GVCs are like assembly lines for manufacturing products. “ A single finished product often results from manufacturing and assembly in multiple countries, with each step in the process adding value to the end product. How countries engage with GVCs determines how much they benefit from them”. These GVCs are at the core of China’s dramatic rise as an EV manufacturer. Patents related to Lithium-ion batteries and other components were shared with automobile makers in the early 2000s. China lacked the legacy of ICE vehicles and could never compete with Japanese, American and German automakers. “This pushed the Chinese government to break away from the established technology and invest in a completely new territory: cars powered entirely by batteries”. China also allowed foreign high-tech industries to access their rare metals if they shifted their production facilities to China. When compared to European counterparts and the US, China also has the upper hand because of its cheap labour force. Most of them work in factories with manufacturing facilities. These factors helped China increase its capacity to produce EVs year after year and other countries could not replicate the same. For example, the “West” (US and some European countries) has relied too much on Tesla, due to this the brand has been late on deliveries and has not been able to innovate with time when compared to Chinese brands which are offering more choices to customers.

Fig 1: projected production of EVs, country-wise (Statista).

(3) Making EVs appeal to new and old car owners has been a difficult task for governments around the world apart from a few exceptions like Norway. For the widespread adoption of electric vehicles automakers and policymakers (government) must create lucrative incentives like charging infrastructure, favourable policies and subsidies. One of the major causes for this is that EVs are expensive when compared with ICEs, they also depreciate faster. The Chinese government has come up with subsidies ranging from $10,000-$20,000 per vehicle depending upon the city and the type of vehicle sold. On the other hand, the US was one of the earliest countries to subsidise EVs but these subsidies with time paled in comparison with countries like Norway and China. Chinese policies favour only domestic companies and the companies which assemble vehicles in China. They are outspending on subsidies in comparison to the US. “A 2015 study estimated that subsidies for PEVs may need to be as large as $20,000 for an average American consumer to be equally likely to adopt a PEV over a conventional vehicle (all else being equal), whereas the same effect in China could be achieved with subsidies of $5,000 or less”. 

The above approaches make it evident as to why China has not only become the largest producer of EVs but it is also the biggest market for it. 

3 . Geopolitical Implications

Describing electric vehicles merely as commodities for the global market would be an oversimplification. EVs are a result of government policies, raw materials, pathbreaking technology, automobile manufacturers and consumer mindset. To cover most of the multidimensional implications of EVs and rare earths on geopolitics would be huge and out of the scope of this article rather it would be better if we look at a few major areas where it will affect the most (according to me). 

Critical geopolitics relies heavily on the relation between space and power. “It is concerned with questions of influence and power over space and territory. And it (geopolitics) is future-oriented”.

3.1 Resource competition and trade relations between countries

Continuing based on the defined spaces and powers in section 1 we realise that the the relation between the major powers (US, China) and the countries which are rich in critical and rare earth mines (Brazil, Greenland) is of strategic importance. There are tensions about who controls the space and how. If we consider critical/rare earth mines and host nations, all the powers (the US, EU and China) would like to control them by influencing them so that mineral-rich countries choose them in this revolution of EVs and carbon neutrality. The world is currently facing the risk of fragmentation known as “geo-economic fragmentation”, meaning countries are doing more trade of goods, services and investments with their geopolitical allies rather than economic allies. Several significant factors contributed to this fragmentation, including the 2008 Global Financial Crisis, Brexit, the trade tensions between the United States and China often referred to as the "US-China trade war," and Russia's incursion into Ukraine, which led to trade sanctions against Russia, China and other countries which are “geopolitically” close to them (Eg: Iran). Data from Global Trade Alert show that 2500 trade restrictions on goods, services and investments were being imposed by various countries as of December 2022. This has allowed neutral countries to evaluate their future based on which bloc of geo-economic fragment they join. Countries which do not have the infrastructure and technology to produce high-tech EVs took the action of nationalising their mines like in Serbia, South Africa and Greenland because they realised the potential of critical/rare earth minerals. In some cases, fragmentation has caused harm to the interests of the “West” and has allowed neutral nations to better their relations with Russia and China. For example, the Democratic Republic of Congo and Indonesia. “ In refusing to sell its raw nickel to the world, Indonesia has drawn more than $14 billion in investment, primarily from Chinese companies, into smelters that process it into products used to make stainless steel and E.V. batteries”. What is good about this relationship is that, here neutral countries have an upper hand which gives them the power to negotiate and benefit from trade deals. EVs will also have a ripple effect on oil-rich nations in the form of reducing trade, investments and job losses as new trade routes and deals are established. EV adoption can wipe out up to “$19 trillion from oil industry revenue by 2040” posing a major financial risk for the key players in this industry. 

3.2 Industrial policy and idealogy

The Chinese industrial policy and Western industrial policy (the US and EU) have capitalism in common, at least in some parts of China (Shanghai). But Chinese capitalism comes with a touch of Communist idealogy. In China, mining companies and automakers are either owned by the State or have massive financial backing from them. This allows them to acquire massive mines across countries like Indonesia and DRC. China’s six state-owned rare earth enterprises were merged to become one giant conglomerate, after the merger the conglomerate now owns almost 25% of global rare earth minerals. China uses this to control the supply and demand of rare earth metals and also regulates its prices. On the other hand, Western industrial policy is a flag bearer of “free-market capitalism”. Free market policies keep government involvement to a minimum and hence  American or European mining companies cannot keep up with the massive investments required to set up mining factories in mineral-rich nations. In 2019 President Trump came up with “changes in the Defence Production Act (DPA)” which freed up funding from the US Department of Defence (DOD) for increased domestic production, refinement and manufacturing of rare earth. But 2019 was already too late, these policies are still in their early stages and China has been doing this for almost two decades. The US and European governments need to prioritise subsidising EVs as much as possible to make them more affordable and so it becomes more lucrative for people to buy them. Along with this, it is also important to work on a vast charging network across the nation if it wants to beat China in EV sales.

3.3 Security implications 

The US and EU “are reliant” on China for rare earth metals and diversification of minerals is very difficult because of the reason mentioned in section 3.2. This reliance on China can have massive security implications as no country would like to rely on some other nation for supplies, especially the “superpower”. This problem could be handled diplomatically, but the relations between the two nations have deteriorated more after Russia’s war on Ukraine. For the US and EU to compete, along with mining they need to focus more on “intellectual property concerning future tech” which could help in other forms of renewable energy. “This approach would insulate the United States from vulnerabilities if China were to unexpectedly cut off rare earth exports in a future conflict. If China insulated its rare earth market internationally, prices would again rise and open new mines would be more viable without large government subsidies”. EVs are just a part of the ecosystem of renewable energy, as we also need to reduce our dependence on fuel used for electricity, aviation and heating our homes. Path-breaking innovation and leadership in these fields are of much importance as that of EVs. 

3.4 Psychological war and leadership

The adoption of EVs will impact heavily on carbon emissions and is one of the first important steps towards going “carbon neutral” and saving this planet. But I would also like to consider this race to be carbon neutral as a “psychological warfare”, like the “Space Race” during the Cold War (1947-1991). Why? Keep aside the international reputation boom and bragging rights. Countries which achieve this mammoth task will be stronger in future as they will not have to rely on alternate fossil energy. A cleaner and better environment will also help a nation keep its population healthy, attract a better workforce and improve economic activity as it can invest more in clean energy and sustainability and create jobs. 

3.5 Effects on human rights and the environment

Automakers and governments have realised the potential of technology and the role EVs and minerals will play in coming years when nations start banning ICE cars completely and hence they are important for the future. But we need to ask one critical question from a cosmopolitan view. Are we harming people and the environment by participating in this race to become carbon-neutral? 

Sadly yes. The trade-off to become carbon neutral comes with its costs. There are environmental trade-offs and serious implications for the livelihood of people. To begin with environmental trade-offs mining pollutes water and air, and CO2 emissions are higher for certain mines as they require more energy. “Water-intensive lithium mining in the Atacama desert in Chile, the world’s driest environment, has triggered a wave of legal battles over water rights pitching indigenous communities against multinational mining companies”.

The impact of mining is much more harmful to people than the environment. People suffer from mining pollution, and wastewater from mining factories is discharged into the water which makes it unfit for drinking. People working in the mining sector are often prone to fatalities because of the explosives used or instant land sides which occur in the mines. People working in the mining sector are subjected to dust which causes breathing problems like asthma, many workers inhale toxins and radioactive materials. “Heavy pollution from lead, zinc and copper mining has caused mental deficiencies in 40 per cent of children under 5 years in a Peruvian town”.  People who work in mines are exploited, not paid properly and in extreme cases, it forces children to work as well. 

The push to reach carbon neutrality is really important, but it comes with a price for people and nature. Unfortunately, most of this burden falls on underdeveloped and developing countries while the rest of the world reaps benefits. 

Conclusion 

The geopolitics of electric vehicles (EVs) unveils a complex interplay of power dynamics, resource competition, and strategic manoeuvring among nations. At its core, the race towards EV dominance represents a fundamental shift in global energy dynamics, driven by climate change and sustainable development. EVs constitute critical and rare minerals which are found across the globe, but China and the US have one of the highest reserves of it. These critical minerals, essential for EV battery production and other components, have become focal points of competition and strategic control. Nations with abundant reserves, such as China, have significant influence over global supply chains, posing challenges for other major players, the EU and the US. Geopolitical implications of EV adoption, range from resource competition to trade relations and security considerations. While the pursuit of carbon neutrality through the adoption of EVs holds a promise for combating climate change, it is also important to acknowledge and address the associated costs and challenges. From environmental trade-offs to socioeconomic impacts, the transition towards carbon neutrality necessitates an inclusive approach that prioritizes equity, sustainability, and global cooperation.

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