The electric vehicle revolution is accelerating rapidly. Major vehicle manufactures in many countries are moving towards electric vehicles The electric revolution is accelerating rapidly.A significant transition is evident in major corporations, with car manufacturers moving towards electric vehicles. This shift isn't just a business trend; it's a geopolitical game-changer. In the 21st century, control over resources critical to EV production will determine global power, much like oil did in the 20th century.
One of the most vital resources for this revolution is cobalt. Understanding its significance and why Sri Lanka should focus on retaining and utilizing it is crucial.. This shift isn't just a business trend; it's a geopolitical game-changer. In the 21st century, control over resources critical to EV production will determine global power, much like oil did in the 20th century.
One of the most vital resources for this revolution is cobalt. Understanding its significance and why Sri Lanka should focus on retaining and utilizing it is crucial. The chart below will give you a clear understanding of the percentage of electric vehicle sales by country and worldwide, out of the total vehicles sold.
Geopolitics come hand in hand with the electric vehicle market. While Tesla, Ford, and Volkswagen are pouring billions of dollars into cracking the EV market, China and the United States are engaged in a geopolitical struggle to dominate the essential materials needed to build electric vehicles.
China's growth in EVs is what some experts call a "Chinese storm" in the global industry. Foreign automakers, including American brands, are now paying attention to Chinese players like BYD. The U.S. must become more competitive to capture a larger share of the electric vehicle market. Sri Lanka's neighbor, India, has an electric vehicle market that is expected to grow at a compounded annual growth rate of 90% this decade. Similarly, in India, we are seeing giant companies like Ola Electric, Ather Energy, TVS, Tata Motors, and even Hero pushing their boundaries to capture the EV industry.
There are five emerging value chain entities on which you could build your business in the EV industry.
The first segment is battery cell manufacturing, packaging, and BMS (Battery Management System). Each of these has an EBITDA margin of 15-20%. For those who don't know, a battery cell is the basic unit of a battery.
The second segment includes businesses that specialize in manufacturing various parts that make up an electric vehicle, from motors to inverters, contributing to the overall performance and efficiency of the EV.
The third segment is software and telematics, which also have an EBITDA margin of 15-20%. Just like your phone, EVs are run by software and electronic control units that manage battery performance, motor control, and user interface.
The fourth segment includes new-age OEMs (Original Equipment Manufacturers), with an EBITDA margin of 8-10%. Companies like Ather Energy produce, design, engineer, and assemble EVs.
The fifth segment is the charging ecosystem, which also has an EBITDA margin of 8-10%. This segment encompasses the infrastructure and services needed to charge electric vehicles.
The transition from fossil fuels to sustainable electric power has gone mainstream, especially in the auto industry, with cars and trucks now running on lithium batteries. Batteries make up 35-50% of the cost of EVs, making them not just functionally important but also economically significant.
Lithium and cobalt are the most important elements in the EV industry. If you look at where these materials are found, you'll uncover the secret to the next geopolitical battle. The global electric vehicle market is heating up, and China wants to dominate the future of electric vehicles. The U.S. is expected to add 1 million new EVs to its roads in 2024.
Sri Lanka, with its rich mineral resources, stands at a strategic point where it can leverage its cobalt reserves for national benefit. India is scrambling to secure rights to explore a cobalt-rich underwater mountain in the middle of the Indian Ocean, but its bid has come up against competing claims at a time when Sri Lanka is also looking to mine the region for precious minerals. The urgency behind India’s application comes from fears over China’s presence in the Indian Ocean, as the world’s second-largest economy already dominates the global cobalt supply chain.
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96% of the entire world's lithium comes from only four countries: Australia, Chile, China, and Argentina. Among these, Chile's lithium industry has taken center stage, boasting the world's largest reserves of lithium. Meanwhile, China has become the world's largest lithium processor, controlling 55% of the market.
Australia, on the other hand, is fortunate to have an incredible natural endowment of battery minerals. This unique advantage positions Australia as a key player in the global battery supply chain.
China clearly dominates the lithium and EV battery value chain from top to bottom. But China does not have a lot of cobalt reserves. Cobalt is the second most important element for an EV, and if you look at the data, more than 72% of the world's cobalt is produced by the Democratic Republic of Congo. Even if you combine the cobalt production of the next 10 countries, it does not match that of the Congo. China has significantly increased its control over the most valuable cobalt mines in the Congo. Out of the total 19 cobalt operations, China either owns or co-owns 15, which is why the majority of cobalt from the Congo is sold to China. By investing in military assistance and fostering strong local relationships, China secures its investments and builds long-term leverage in the Congo. China’s strategic investments and political maneuvers have solidified its dominance in the Congo, shaping the global mineral supply chain and raising concerns about resource security and geopolitical balance.
Sri Lanka has the opportunity to learn lessons from global examples, particularly the Democratic Republic of Congo. As a county Sri Lanka should keep cobalt resources remain under national control. Implement strict regulations to prevent foreign companies from dominating the extraction process, as seen in the Congo and also develop a strong legal framework to protect national interests and manage resource extraction sustainably. Sri Lanka can use its cobalt resources to attract leading battery and electric vehicle manufacturers by focusing on local processing and creating a conducive environment for foreign investment. By following a strategic approach, Sri Lanka can position itself as a hub for battery and EV manufacturing, attracting leading global players and driving economic growth.
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