Tesla signed new contracts with two of its current Chinese battery material suppliers, Bloomberg reported on Sunday, highlighting the extent to which American electric vehicle manufacturers rely on China for critical minerals and materials.
Zhejiang Huayou Cobalt Co. and CNGR Advanced Material Co. renewed pricing agreements to provide Tesla with supplies of ternary precursors, chemical concoctions essential for lithium-ion batteries to store energy for electric cars, up until the mid-2020s, according to Bloomberg. China dominates the world’s lithium-ion manufacturing market, producing about 79% of all lithium-ion batteries that entered the global market in 2021.
“If you want to build EVs, one needs access to the entire suite of specialty chemicals, and the vast majority of those are produced in China—the issue is not the mining per se, but the refining wherein China utterly dominates most relevant chemicals,” Mark Mills, a senior fellow at the Manhattan Institute, told The Daily Caller News Foundation. “Or else one 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, to the end of 2025, and CNGR will supply Tesla with lithium battery cathode material precursors from 2023 to 2025, according to Bloomberg.
China dominates the refinement and mining of cobalt, a mineral essential for the production of EVs, accounting for 50%-70% of the global supply of lithium and cobalt, according to a 2021 International Energy Agency report.
“China is hoping to gobble up and keep a stranglehold on this infrastructure so it is concerning that the administration is driving everyone to use electric vehicles,” Dustin Carmack, a research fellow at The Heritage Foundation, told The Daily Caller News Foundation.
Tesla’s annual production rate of roughly 2 million electric vehicles means that the manufacturer’s demand for materials like ternary precursors is heavy, and the agreement with Chinese suppliers is necessary to achieve this goal. Tesla aims to grow at a rate of about 50% per year, which also will require a massive amount of battery materials to sustain.
As President Joe Biden continues to pursue his ambitious climate agenda, the need for EVs will only increase due to incentives and other programs. Ford also unveiled supply agreements to ramp up EV production in July, striking a deal with the China-based Contemporary Amperex Technology Co. to acquire much-needed battery packs as the company aims to produce 600,000 EVs by 2025.
“We must make sure that we build supply chains that are safer, more secure, and not beholden to a country that has multiple human rights violations, predatory lending practices, and vast national security complications,” Carmack stated.
The procurement of EV materials also raises ethical concerns pertaining to the mining of rare earth minerals like cobalt. Huayou Cobalt allegedly sourced its cobalt from mines in the Democratic Republic of the Congo, where there are few worker protections and child labor has been employed, according to a 2016 Amnesty International report.
“A lot of companies in America have turned a blind eye to these practices for a long time to take advantage of the cheaper production costs,” said Carmack.
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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