US-China Tensions Keep Electric Vehicle Battery Costs High, Says Ford Supplier
The billionaire chairman of SK Group, a key supplier to Ford Motor Co., has highlighted that ongoing tensions between the US and China will continue to drive up the prices of electric-vehicle (EV) batteries. Chey Tae-won, in a rare interview, explained that geopolitical factors and disruptions in the supply chain have impacted the cost of batteries. The Biden administration aims to reduce the auto industry's reliance on China for future powertrains, leading to partnerships between South Korean companies like SK On Co. and US automakers. However, sourcing raw materials and components from outside China to meet requirements for EV tax credits is a significant challenge. Battery costs account for about 40% of the total cost of EVs, and their sustained high prices delay the timeline for EVs to achieve cost parity with combustion engine vehicles.
Navigating varying regulations in different countries and regions has also become more difficult, creating fragmentation in the market. Chey emphasized the need for a more consistent and unified approach to global commerce. SK Group, known for its operations in batteries, chips, chemicals, and telecoms, is the second-largest chaebol in South Korea. Chey welcomed the permission granted by Washington for Korean semiconductor companies to continue shipping chipmaking equipment to China. However, he expressed concerns about oversupply and shrinking returns in the broader semiconductor market.
In conclusion, the tensions between the US and China have implications for the cost of EV batteries, hindering the goal of achieving wider adoption of electric vehicles. The challenges of diversifying supply chains and navigating regulatory complexities call for global solidarity and a unified approach to address climate change.
US-China Tensions and the Impact on New Businesses in the EV Sector
The ongoing tensions between the US and China are creating a challenging landscape for new businesses in the electric vehicle (EV) sector. According to Chey Tae-won, chairman of SK Group, these geopolitical factors are driving up the cost of EV batteries, which account for about 40% of the total cost of EVs. This not only impacts the bottom line for EV manufacturers but also delays the timeline for EVs to reach cost parity with traditional combustion engine vehicles, potentially slowing down the adoption of EVs.
Supply Chain Challenges and Market Fragmentation
The situation is further complicated by the need to diversify supply chains and source raw materials and components from outside China to meet requirements for EV tax credits. This is a significant challenge, especially for startups and smaller businesses that may lack the resources and global networks of larger companies. Additionally, the varying regulations in different countries and regions are creating market fragmentation, making it more difficult for businesses to navigate the global commerce landscape.
Call for Global Solidarity
In this context, Chey's call for global solidarity and a more unified approach to global commerce is particularly relevant. New businesses in the EV sector need to be proactive in addressing these challenges, exploring innovative solutions, and fostering international collaborations. Despite the current difficulties, the drive towards a greener future offers numerous opportunities for growth and innovation.
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