Forget the Oil Wars. We’re Now in an EV and Battery War.
By: Steve Levine
Tags: Battery, Tesla, Electric Vehicles, Future, China

Forget the Oil Wars. We’re Now in an EV and Battery War.

Photo: Zhang Peng/LightRocket/Getty Images

For almost a century, oil has been the vortex of geopolitical tension and war — it’s largely why Japan attacked Pearl Harbor, Saddam Hussain invaded Kuwait, and China militarized the South China Sea. That oil has led to such pushiness isn’t surprising: It is both the core building block of the human-made world surrounding us and a primary source of personal and national power and wealth. Vladimir Putin’s power flows from Russia’s oil. A century and a half after John D. Rockefeller built the world’s first oil fortune, his descendants continue to live off the proceeds. Oil’s rule as the inextricable glue of human civilization is the primary reason it has been so hard for the world to take the necessary steps to undo the great harm to the climate.

Against that backdrop, it’s difficult to imagine any single substance replacing the commanding stature that oil has held, both good and bad. But looming large among the resources and technologies vying for such a place is the advanced battery and the electrified economy it will create. Gigantic new fortunes will be earned over the coming years and decades in the businesses of manufacturing superbatteries, creating electric vehicles, and mining the metals and minerals that go into them.

There is likely to be stolen plans, inventions, and star employees, and more serious tactics for access to cobalt and nickel.

Yet, in the personal, commercial, and national rivalries to dominate this new era, are we watching the unfolding of a new kind of war — a commercial war between the U.S., Germany, China, and possibly others?

Gene Munster, managing partner at Loup Ventures, a Minneapolis-based venture capital firm that invests mostly in frontier technologies, tells me the answer is yes. “This isn’t only about wanting leadership or bragging rights,” Munster says. “There are economies at stake here.”

Dan Ives, managing director of equity research and tech analyst at Wedbush Securities, tells me much the same. “It’s an arms race in the EV market for battery technology,” he said.

The EV and battery war will likely not resemble the commercial battles of the 16th through the 19th centuries, with their battleships and armies landing hither and yon. But there is very likely to be tension-filled cyber conflict — with stolen plans, inventions, and star employees — and more serious tactics for access to metals like cobalt and nickel.

As of now, China is in the lead of what Ives calls “a golden age for EV vehicles.” Globally, EVs currently account for about 3% of all new vehicles, and Ives forecasts that will surge to 5% next year and 10% by 2025. Incentivized by state subsidies, China’s motorists are buying about half of all new EVs, and the country’s industrialists have built the world’s largest battery-making infrastructure. The leading battery chemistries — known by the acronyms as NMC and LFP — were invented in the U.S., but China has eclipsed the U.S. and everyone else in commercially deploying these advances in EVs.

Tesla, the world’s top EV company, is anchoring itself in China. Its Gigafactory 3, where it assembles EVs and battery packs, is located in Shanghai. Tesla’s Model 3 sedan is China’s bestselling EV, and yesterday Beijing decided to make buyers of the Tesla Model Y crossover SUV eligible for state subsidies. Tesla may end up selling 40% of its new vehicles in China, analysts say.

“Tesla is ultimately training people who in a few years will go on and compete with Tesla.”

Tesla’s success, however, may end up as much a Chinese as an American triumph in the EV and battery war. Munster said that the creators of the next generation of Chinese EVs and batteries are currently working at Gigafactory 3, or will be soon. After a few years, they will move on to new ventures in the industry. “Tesla is ultimately training people who in a few years will go on and compete with Tesla,” Munster says. “A casual read of it is that Tesla is walking into getting ripped off. But that’s not how I see it. Tesla is confident in their competitive position. And that’s basically Silicon Valley — you work at one company, learn something, move on to another company, learn something more, and so on.”

Once its battery and EV industries are sufficiently scaled up, China has ambitions to sell its vehicles to the rest of the world — another stage in global EV domination. But one wonders whether that is where the war gets evened out. As it stands, the marquee EV brand is Tesla, desired around the world, with VW somewhere up there in the pantheon with its Audi E-tron and Porsche Taycan. China can get its people trained by Tesla, but by the time they are, Tesla CEO Elon Musk may have substantially moved on from what they learned.

Closer to the mass market, GM is also on a different plane from the Chinese automakers and will be hard to beat in global sales.

An analogy to what is coming may be the smartphone market: Apple sells just around 12% of the world’s smartphones, with Android as the dominant player. But Apple gobbled up about two-thirds of the profit last year because of the businesses built off the iPhone platform. Who, then, truly dominates smartphones — Android or Apple?

In EVs, China may continue to sell the most EVs for decades and beyond. But that will not necessarily mean it will own the most-used and highest-valued technology, the leading brands, nor earn the most money. An amicable distribution of the spoils would be the least-disruptive way to settle the conflict. But that is not the type of peace settlement the combatants are likely to favor.