The EV Supply Chain Dilemma: Are We Ready for China's Cobalt Grip?

Electric vehicles (EVs) are rapidly gaining traction in India, with EVs now accounting for nearly 7% of all cars sold—a significant leap from the 1.3% penetration in 2022. While still lower than the Asian average of 18%, this growth reflects the increasing consumer affinity towards electric vehicles. With the Indian government’s ambitious EV30@30 goal—to have 30% of all cars sold in the country be electric by 2030—the shift to sustainable transportation is becoming a reality.

However, as we embrace this transition, there’s one critical component we must keep in mind: batteries. And more specifically, cobalt, a key raw material used in lithium-ion batteries. Currently, around 50% of global cobalt production is utilized for batteries in EVs, making it a crucial element in the electric revolution. While cobalt also has applications in aerospace, medicine, and the ceramics industry, for the purpose of this discussion, we’ll focus on its significance for EVs.

The Global Cobalt Supply Chain: A Quiet Power Shift

When you look at the top cobalt-producing countries—such as the Democratic Republic of Congo (DRC) and Indonesia—you won’t immediately see China as a major producer. So why, then, is the U.S. concerned about China’s growing dominance in cobalt?

Let’s delve deeper. While the DRC leads in cobalt production, a closer examination of the top 10 cobalt mines in the DRC reveals something interesting: Chinese companies own or control over half of these mines. A notable player is CMOC Group, a Chinese firm that holds significant stakes in several of these key mines. What’s even more striking is that CATL, the world’s largest EV battery manufacturer, owns nearly 25% of CMOC.

This means that China indirectly controls a substantial portion of the world’s cobalt supply, a strategic move that could give them significant leverage in the global EV market.

China’s Long Game: Strategic Investments and Market Control

Chinese companies now own over half of the cobalt production in the DRC and Indonesia, and nearly 85% of the output from Papua New Guinea. By 2030, these two countries—DRC and Indonesia—are projected to supply 84% of the world’s cobalt. In addition, China has plans to invest $7 billion in the DRC over the next decade to bolster mining infrastructure.

This might seem puzzling given that cobalt prices are currently at an all-time low. But here's where China’s strategy becomes apparent. The U.S. has accused Chinese companies, particularly CMOC, of flooding the market with cobalt, driving down prices and making it less attractive for other players to invest. CMOC, on the other hand, claims this oversupply is a natural result of increased copper output, as cobalt is a byproduct of copper mining.

The EV Market and the Looming Supply Chain Challenge

By 2030, when EVs are expected to dominate the global car market—India’s sales are projected to hit 30%, while the world average could range from 37% to 60%—China will have a sizable control of the cobalt supply chain. Companies like Volvo have already pledged to go 90-100% hybrid by 2030, reflecting the rapidly growing demand for EVs.

What does this mean for the future? China’s current losses in cobalt prices seem to be a long-term strategic investment. By securing a large portion of the world’s cobalt production, China is positioning itself to control a critical resource as global dependency on EVs grows.

Will China Corner the Cobalt Market?

If you think China wouldn’t go as far as to restrict cobalt supply, consider this: In 2022, China restricted the export of gallium, germanium, and graphite—materials critical to industries such as electronics, semiconductors, and EVs. China was responsible for 98% of the world’s gallium production, 60% of germanium, and a majority of the global graphite supply. This move caused significant disruption in global supply chains.

Given China’s past actions, the possibility of cobalt becoming a strategic chokehold in the future is not far-fetched. As the world moves towards electric mobility, it’s crucial to keep an eye on this shifting power dynamic.

As India pushes forward with its EV30@30 goal and the global demand for electric vehicles soars, the geopolitical landscape surrounding the critical materials that power EVs—like cobalt—will become more and more pivotal. With China already securing a significant stake in the cobalt market, it’s clear that the global EV race is as much about resource control as it is about innovation.