Currently, concerns within the industry regarding the development of the new energy vehicle industry, besides the challenges of promoting and applying fuel cell vehicle technology and the contradictions in market-oriented mass production due to huge initial costs, mainly focus on the relatively mature and commercially mass-produced lithium battery-powered electric vehicle sector. What exactly is hindering the development of the new energy vehicle industry? I believe the answer can be summarized in three aspects: technology, resources, and policy.
The key to the technological bottleneck lies in the battery.
Both in China and globally, the manufacturing of vehicle shells and the assembly of complete vehicles have very mature technological support and manufacturing systems, so there is no need to worry too much. For new energy vehicles, although it is relatively easy to cultivate consumer habits, if the problems of long charging times and short driving range cannot be solved, then compared with the fast refueling and dense network of refueling stations for traditional fuel vehicles, new energy vehicles may lose their status as the market's new favorite.
From a marketing perspective, "battery swapping stations" can effectively alleviate concerns about battery life and charging time, and also provide professional battery maintenance. However, three major problems remain:
First, the construction cost of the site itself is enormous, and the batteries require professional maintenance. What kind of capital partner can a battery manufacturer collaborate with to achieve this?
Secondly, when consumers purchase a car, they are essentially paying a deposit to lease the battery module. This investment may take 3 to 10 years to recoup. What kind of company can bear such a risk?
Third, there is currently no unified battery standard. Just like the earliest mobile phones, there is no standardized module or unified interface. What kind of company has the foresight and R&D capabilities to formulate and lead the standard setting?
Therefore, the most realistic solution at present is still to focus on fast charging and increasing battery life.
In the electric vehicle manufacturing chain, the "three-electric system" (battery, motor, and electronic control) is crucial, with the battery being the fundamental and decisive element. For lithium-ion batteries, currently the most commercially mass-produced, achieving fast charging requires significant technological improvements to existing materials, especially cathode materials, such as high-nickel batteries; while a substantial increase in driving range necessitates improved energy density. It's worth noting that lithium nickel manganese cobalt oxide has gradually become mainstream in the past two years, while lithium iron phosphate has also seen breakthroughs in energy density. These advancements are laying the foundation for the development of high-capacity, long-range battery technologies.
At the same time, the negative impact on safety performance cannot be underestimated. For example, after the Samsung phone explosions, major airports adopted stricter regulations regarding the carrying and use of lithium-ion batteries. The core issue is that it is difficult to achieve the most effective combination of battery capacity density and safety performance, and there seems to be no fundamental breakthrough yet. Even graphene, which was once a hot topic, is unlikely to achieve large-scale commercial production within three to five years.
The core of the resource dilemma lies in lithium and cobalt.
In the past three years, the price of basic lithium salts has risen dramatically. From the end of 2014 to 2017, it climbed from less than 40,000 yuan/ton to 180,000 yuan/ton, before falling back to around 150,000 yuan/ton by the end of the year. The price of battery-grade lithium carbonate increased by about four to five times.
Meanwhile, the situation for cobalt also appears somewhat volatile. Data shows that cobalt prices surged by 400% between 2006 and 2008, and by nearly 50% during the quantitative easing period from 2009 to the first half of 2010. Driven by strong demand for ternary lithium-ion batteries for new energy vehicles, the cobalt price published by the UK's *Metal Bulletin* (MB) reached $29 per pound at the end of August 2017, but still more than 65% below its historical high. Since cobalt ore generally occurs as a byproduct of copper-cobalt or nickel-cobalt production, the price relationship between cobalt and nickel/copper cannot be ignored.
Is the price surge caused by resource scarcity? The answer is no.
From a lithium resource perspective, the world's proven lithium reserves are currently 14 million tons (MT), while the current annual demand is 32.5 kilotons (kt). Globally, lithium resources are mainly distributed between 30-40 degrees north latitude and 20-30 degrees south latitude, such as the Andes Mountains in South America, the western United States, and the Qinghai-Tibet Plateau in China. Australia and Chile together control 75% of the world's lithium resources.
In my country, 90% of lithium resources are distributed in the west. Currently, mining mainly involves ore lithium (spodumene and lepidolite), and the average grade is relatively low (0.8%-1.4%, lower than the 1.465%-3.55% abroad). The brine contains high levels of magnesium (Mg/Li ratio is generally greater than 40, while Chile's Atacama Salt Flat is only 6.47), making industrial-scale utilization difficult.
From the perspective of cobalt resource analysis, the world has abundant cobalt resources, which are concentrated in certain areas. According to the 2016 Mineral Commodity Summaries of the U.S. Geological Survey (USGS), the world's proven cobalt reserves in 2015 were 7.1 million tons, mainly concentrated in the Democratic Republic of Congo, Australia, Cuba, New Caledonia, Zambia, and Russia, accounting for about 80% of the world's total cobalt reserves.
In terms of production capacity, the Democratic Republic of Congo (DRC) has 10 cobalt mines in operation, but five of them are controlled by Glencore of Switzerland, accounting for approximately 67% of the DRC's cobalt resources. Freeport-McMoRan (USA), Eurasian Natural Resources (Kazakhstan), Shalina Resources (UAE), China Minmetals Corporation, and Jinchuan Group each control one mine. Global cobalt production capacity is insufficient to challenge the DRC's dominant position.
With the improvement of industrial-scale utilization and breakthroughs in extraction technology, the lithium battery recycling industry has quietly emerged based on the principle that metal elements such as lithium and cobalt do not disappear. Recycling has become a reality, and the demand for natural resources will decrease accordingly. The short-term surge in prices, like the iron ore market, is more a result of international capital control and speculation and cannot fully reflect the true situation of industrial development.
Policy concerns mainly lie in subsidies
It's crucial to clarify a fundamental understanding: the essence of government subsidies for new energy vehicles is to support an industry, create a first-mover advantage, and rapidly expand the market, rather than providing subsidies similar to those in traditional agriculture. The goal is to maintain market stability. Therefore, this subsidy policy will inevitably be abolished in the near future.
Current policy subsidies are generally geared towards two aspects: first, at the technological level, encouraging technological innovation, aligning with international standards, and heavily rewarding industry leaders; second, at the market level, breaking through environmental bottlenecks, advocating green travel, leveraging large and medium-sized cities, highlighting China's responsibility as a major power, relying on the "Belt and Road" initiative, and seizing overseas markets.
Specifically, in terms of enterprise production, operation, and product sales, the current seemingly slow growth or even decline in pure electric vehicle sales is largely related to the extended delivery period, now exceeding six months. This reflects the fact that the actual production capacity of power batteries is currently very limited. While related companies have invested in battery plants and basic lithium salt (mainly lithium carbonate and lithium hydroxide) projects using existing technologies, the planning, feasibility studies, design, approval, construction, and production ramp-up cycle for industrial projects, especially those in the chemical industry where basic lithium salts are produced, is generally 1-2 years. Large-scale capacity release is expected before 2020.
The related end-user demand for automobiles has not eased at all, as evidenced by the long waiting lists for new energy vehicle license plates in cities like Beijing, Shanghai, Guangzhou, and Shenzhen (for example, in Beijing, the waiting list extends back to 2021). Some foreign media believe that without battery production capacity constraints, pure electric vehicle sales could easily surpass plug-in hybrid vehicle sales. The Chinese government's strong support for the development of new energy vehicles in recent years has achieved its goal. Currently, the key constraint on the development of new energy vehicles is not government subsidies or market demand, but rather the production capacity generated by technological breakthroughs. Public data shows that in November 2017, Volkswagen announced an investment of over 10 billion euros (US$11.8 billion) to develop 40 new energy vehicle models with local Chinese partners. The company hopes to produce 1.5 million new cars in China by 2025, most of which will be electric vehicles. Toyota also stated that it would produce electric vehicles in China by 2020. BMW has moved its battery R&D and production center from Munich to Shenyang, and has also chosen CATL (Contemporary Amperex Technology Co., Limited) as a partner.
This is arguably the best of times for new energy vehicles. New players are emerging rapidly, with substantial capital flowing into every stage of the industry, from mining and basic lithium salts to electrode materials, battery production, and vehicle manufacturing, all vying for a competitive edge. Established giants have also been jolted awake, ramping up their efforts to solidify their positions and expand into new areas. In short, what this industry lacks most isn't money, but rather mature, marketable technologies and commercially viable operational teams.
