Tesla’s battery deals highlight Chinese dominance

Tesla has signed new contracts with two of its current Chinese battery materials suppliers, Bloomberg reported on Sunday, highlighting how U.S. electric vehicle makers depend on China for critical minerals and materials.

Zhejiang Huayou Cobalt Co. and CNGR Advanced Material Co. renewed their pricing agreements to provide Tesla with supplies of ternary precursors, chemical concoctions essential to lithium-ion batteries to store energy for electric cars, until the mid-20s. 2020s, according to Bloomberg. China dominates the global lithium-ion manufacturing market, producing around 79% of all lithium-ion batteries that entered the global market in 2021.

“If you want to build electric vehicles, you need access to the whole suite of specialty chemicals, and the vast majority of them are produced in China – the problem is not mining per se, but the refining in which China totally dominates the most relevant chemicals,” Mark Mills, a senior fellow at the Manhattan Institute, told the Daily Caller News Foundation. “Or we could wait five to 10 years – if you’re lucky – for non-Chinese refineries to be built.”

Huayou Cobalt will supply Tesla with processed cobalt for batteries from July 1, 2022 through the end of 2025, and CNGR will supply Tesla with cathode material precursors for lithium batteries from 2023 through 2025, according to Bloomberg.

China dominates the refining and mining of cobalt, a mineral essential for the production of electric vehicles, accounting for 50-70% of the world’s supply of lithium and cobalt, according to a report by the International Energy Agency of 2021.

“China is hoping to gobble up and keep a stranglehold on this infrastructure, so it’s concerning that the administration is pushing everyone to use electric vehicles,” Heritage Foundation researcher Dustin Carmack told the Daily Caller News Foundation.

Tesla’s annual production rate of around 2 million electric vehicles means the automaker’s demand for materials like ternary precursors is strong, and the deal with Chinese suppliers is needed to meet that goal. Tesla aims to grow at a rate of around 50% per year, which will also require a massive amount of battery material to sustain.

As President Joe Biden continues to pursue his ambitious climate agenda, the need for electric vehicles will only increase due to incentives and other programs. Ford also unveiled supply deals to ramp up electric vehicle production in July, striking a deal with China’s Contemporary Amperex Technology Co. to acquire much-needed batteries as the company aims to produce 600,000 electric vehicles by 2025.

“We need to ensure that we build safer, more secure, and non-beholden supply chains to a country that has multiple human rights abuses, predatory lending practices, and vast national security complications,” Carmack said.

Purchasing materials for electric vehicles also raises ethical concerns about mining rare earth minerals like cobalt. According to a 2016 Amnesty International report, Huayou Cobalt allegedly obtained its cobalt from mines in the Democratic Republic of Congo, where there are few worker protections and child labor has been employed.

“Many American companies have long turned a blind eye to these practices to take advantage of lower production costs,” Carmack said.

Tesla, Huayou Cobalt and CNGR Advanced Material did not immediately respond to the Daily Caller News Foundation’s request for comment.

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