When the history of our time is written, 20-30 years from now, it will be clear how China beat the U.S. in the race for the electric car market.
It was China’s industrial policy that done it.
China used policies best described by Joe Studwell in his book “How Asia Works.” It’s what Japan, South Korea, and Taiwan did. Government sets the strategy and tells business what it wants. It creates incentives allowing business to ignore short-term losses and do it. Then it pulls those incentives once the mission is accomplished, consolidating the market in the strongest hands.
Chinese policymakers also knew, from the beginning, that lithium would be to electric cars what the operating system was to PCs, the point of control for everything above. Lithium has become the world’s China White.
There is only one big winner in the electric car sweepstakes. China’s CATL dominates the battery space and is almost entirely home grown. Founder Robin Zeng is now richer than Alibaba’s Jack Ma, thanks to assuring ample supplies of lithium from his home country, but also Indonesia and the Congo.
American policymakers confused the result with the ingredient. We created incentives for building electric cars. Because we already had incumbents in cars, and because our oil companies saw lithium as competition, only one entrepreneur jumped on these incentives. Tesla is the industry’s dominant player because Elon Musk won, and used, your tax dollars to build it. He used the incentives to scale the production of luxury electrics, and he’s now moving down market.
Musk saw the importance of batteries just as Zeng did. Tesla has made some breakthroughs in battery design and built a gigafactory in Nevada to produce them. But it’s CATL that controls the market. Tesla wants CATL to build its next battery plant l but CATL won’t cut Tesla a special deal.
America lost the electric car war because America lost the battery war. America lost the battery war because China kept its eye on the ball while America’s industrial policy was weakened by powerful incumbents.
Now we’re behind the eight ball.
