[SCMP Column] Halt, Proceed with Care

September 11, 2017

As a devout and tiresomely dogmatic opponent of car ownership in Hong Kong, I am rather surprised at myself for getting quietly interested and excited by the world’s blossoming love-affair with electric cars.

Perhaps it is all the marketing hype around those sleek, silent Teslas and the imminent launch of its new, more modestly priced Model 3. Perhaps it is the fact that Volvo has just announced that every new Volvo launched from 2019 will be electrified in some capacity. Perhaps too that at least 12 global auto-makers have one electric car or other on the launch pad, and that at least four of them are negotiating electric car joint ventures in China.

But before anyone gets too carried away – or leaps to the naïve and mistaken conclusion that I’m about to buy a car – let’s remember the colossal practical obstacles en route to purging our roads and cities of the internal combustion engine.

As of the middle of 2017, and in spite of the meteoric rise in electric car use over the past two years, they still account for less than 0.2 per cent of cars on the road. True, Norway has impressed the world, with 29 per cent of cars now electric. Holland is also doing remarkably well with 6.4 per cent, and Sweden at 3.4 per cent. But most countries worldwide – including Hong Kong which was performing very well until the government on April 1 this year reimposed the First Registration Tax on electric cars, lifting prices by 50-80 per cent – report that electric cars account for 1.5 per cent of the total car population or less.

In short, there is a very long way to go, with a daunting array of obstacles already in plain view. The first, and most obvious, is the very high cost of electric cars, and the importance of government-orchestrated subsidies to give them a leg up. No subsidy, no shift in consumer behaviour.

Happily, I think this problem may solve itself quite quickly, because around half of the cost of most electric cars is due to the cost of the battery. The world’s leading car battery manufacturers are making giant strides in improving the “energy intensity” of the new lithium-ion batteries – which means the cars can travel further and, and have more “oooomph” – and more important, lowering the cost of making them. The electric car makers are promising that the new models will soon be price competitive even without subsidy.

The second well-discussed problem is access to recharging points when a battery runs low. Few cities worldwide are yet anywhere near building a recharging infrastructure that would allow widespread use of electric cars. Most proud Tesla owners in Hong Kong today have paid a giddy sum to make sure their battery is reliably topped up. This problem worldwide is going to take much longer to solve.

To discover the third key problem, you need to look at the world’s commodity futures markets – and the sharp jump in global prices for lithium and cobalt – two key ingredients in building lithium-ion batteries. While global production of lithium – which mainly comes from Australia, Argentina or Chile as a by-product of copper and nickel – has tripled in the past two years, prices have more than doubled. So too for cobalt, with the world relying on the Congo for around 75 per cent of global supply.

The good news is that there seems to be a virtually boundless future supply of both lithium and cobalt, but the challenge is to measure and meet demand. Forecasts range from 7m to 25m electric cars on our roads by 2030 – an alarmingly wide range for anyone trying to estimate future demand for lithium or cobalt.

For example, while a typical lithium-ion battery in a smartphone battery needs around 6 grams of cobalt, a typical lithium-ion car battery needs 15kg – yes, kilogrammes. That is 2,500 times as much. Cobalt production worldwide today that stands at 2000 tonnes a year is expected to rise to 90,000 tonnes by 2030. Industry experts say annual production of lithium will have to rise from 182,000 tonnes today to 3.1 million tonnes 20 years from now – all to meet the rising demand for car batteries.

Needlesstosay, there is a worldwide scramble going on at present to locate, and begin extracting both minerals. And behind this is a burgeoning battery-making industry, in which Chinese companies seem headed to overtake global leaders like Panasonic from Japan, and LG and Samsung from Korea. Lots of hype has been beamed on Tesla’s “gigafactory”, but the two global leaders in making lithium-ion batteries are CATL in Ningde in China, and Lishen in Tianjin. By 2020, it is predicted that 9 of the 14 leading lithium-ion battery makers will be in China (many foreign joint ventures), with China accounting for over 80 per cent of production.

This is perhaps not surprising, since China is already the world’s largest market for electric cars. With around 2 million electric cars now on the road worldwide, 760,000 registered last year alone, almost 40 per cent of these are in China. That is twice as many as are on the roads in the US.

And it takes no account of the massive Chinese investment in 200 million menacingly silent electric two-wheelers, up to 4 million “low speed electric vehicles”, and in the country’s truck and bus fleets and taxis. With its huge urban pollution challenges, China’s leaders long ago recognised that the most important contribution to reducing carbon emissions would not be to build electric passenger cars, but to prioritise electrifying fleet vehicles, which account for the great majority of road miles travelled in any one year.

One further major challenge is only now beginning to attract attention: what to do with the big lithium-ion batteries when they run out? Experts predict that by 2025 we will need to dispose of 11m tonnes of spent batteries every year, with steep growth after that. Recycling huge lithium-ion batteries is set to be massively more challenging than recycling today’s car batteries, but simply unloading them into landfill will be unacceptable. Surely our carmakers would be wise to assume responsibility even today. What makes me think they will not volunteer eagerly?
David Dodwell researches and writes about global, regional and Hong Kong challenges from a Hong Kong point of view. Opinions expressed are entirely his own. 
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