Electric vehicles: need to bail out US-based automakers again?

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Will Dubitsky Will Dubitsky's picture
Electric vehicles: need to bail out US-based automakers again?

China, as the world’s largest vehicle market -- 28.9M in vehicle sales in China in 2017 compared to 17.2M in the US -- is defining an aggressive pace for global automakers to make the transition to electric vehicles with its sales/credit quota system on the minimum percentage of each manufacturer’s sales that must be New Energy Vehicles (NEV) (electric, plug-in hybrid and fuel cell vehicles).  These quotas begin with 10% in 2019, 12% in 2020 and 20% in 2025.  Chinese automakers and their respective foreign partners are scrambling to meet the challenge.   Foreign automakers must partner with a Chinese firm to do business in the world’s largest market.

China’s latest figures are now in, 777,000 electric vehicles and plug-in hybrids were sold in the country in 2017, a 53% increase over 2016 and representing 2.7% of overall 2017 vehicle sales of 28.9M.  The China Association of Automobile Manufacturers predicts a 40% increase in in 2018.  China’s Ministry of Finance is confident that China’s automakers will catch up and overtake global competitors.

Is the US-based industry ready to be competitive in the North American and global markets?

In the US, electric and plug-in hybrids accounted for 1% of 17.2M in new vehicle sales in 2017.  Several indicators suggest that the US-based automakers will not keep pace with their foreign competitors.

The soon to be outgoing CEO of Fiat Chrysler, Sergio Marchionne, has described the migration to electric vehicles as something which would crush the industry via “disintermediation”.  His reasoning is that the last set of vehicle components designed and manufactured by the automakers is the internal combustion engine and its powertrain components.  The rest of the vehicle components are outsourced.

Rumor now has it that Chrysler is seeking a new partner or purchaser, having invested little in electrification and being the vehicle manufacturer most dependent on trucks and SUVs.

Sergio Marchionne has a point, though.  Much of the electric motor and battery components of the Chevrolet Volt and Bolt are supplied by LG Chem.  Toyota engaged in a joint feasibility study with Panasonic on new battery technologies.  Samsung’s SDI battery manufacturing facility in Hungary will be a principle supplier for Volkswagen electric vehicles and plug-in hybrids.  Tesla and Panasonic are partners on battery manufacturing.

Then there is the matter of the US Corporate Average Fuel Economy (CAFE) standards (average fuel economy of vehicles sold by an automaker in a given year), for the 2022 to 2025 period.   Thanks to the growing popularity of SUVs and light duty trucks, representing two-thirds of 2017 US passenger vehicle sales, the CAFE for all vehicles sold in the US plateaued at 9.4L/100km from 2014 to 2017.  The best-selling vehicle in the world is the Ford F-150 pick-up truck.

As for GM, while it likes to boast about the Bolt and Volt, trying to find just one of these models in any region is quite the challenge.

The reality is the current mix of North American sales is welcome for the US automakers since the difference between the cost of manufacturing a vehicle and its selling price is three times higher for SUVs and light duty trucks, than for conventional passenger vehicles.

Adding to the pending growing gap between the US-based automakers and their competitors, is a wild card, the Trump administration.  Scott Pruitt, the Environmental Protection Agency administrator, appears to be determined to roll back, freeze or eliminate the CAFE standards for 2022 to 2025. 

The US National Highway Traffic Safety Administration (NHTSA) is expected to propose revising the CAFE standards for 2022 to 2025 in a report due March 30, 2018.

This is where things get complicated. 

First, 14 US states are prepared to challenge the US federal government in the courts in the event that the Trump administration modifies the CAFE standards.  Second, California and 12 other states have a waiver from federal CAFE regulations that would allow them to maintain the currently proposed CAFE rules for 2022 to 2025.  Third, California, nine other US states and Québec have quotas for zero and low emission vehicles which are set at 3% of sales in 2018 and incrementally rise to 15.5% in 2025.

On January 26, 2018, California upped the ante from an objective of having 1.5M zero emission vehicles (ZEVs) on its roads by 2025 to 5M ZEVs by 2030.  To achieve the new objective the state will invest $2.5B between now and 2025 on increasing the numbers of charging stations from 14,000 now to 250,000 and hydrogen fueling stations from 1,500 presently to 10,000, plus enhance rebate and incentive programs.  This new objective implies that about 40% of vehicles sold in the state in 2030 will be ZEVs, well-aligned with California’s intention to ban internal combustion engine new vehicles in 2040.

The combined impacts of the above-described factors are difficult to predict, but could result in a checkerboard North American market for which the distribution/availability of vehicle models would vary from one regional jurisdiction to another.

No wonder the new CEO of Ford, Jim Hackett, has left the leadership of Ford’s electrification agenda to its China division and Chinese partner, Zotye.  Behind closed doors, Ford is lobbying the Trump administration to weaken CAFE and is joined by Chrysler and GM.

Meanwhile, Volkswagen plans to have 80 electric vehicle models on the market by 2025 and achieve 20% to 25% of its sales in the electric vehicle category for that year; Audi figures that 30% of its sales will be electric and partially electric by 2025; Mercedes is working on plug-in hybrid variants of all of its sedan and SUV volume models by 2022;  Tesla hopes to be able to produce 500,000 vehicles, excluding trucks, in 2019;  Volvo, will have electrified versions of every model, including plug-in hybrid versions, beginning 2019, will offer an electric XC40 and expects to have 1M electrified vehicles on the roads by 2025;  BAIC and Changan Automobile Co, respectively the largest and fifth largest automakers in China, will go 100% electric by 2025; and BMW intends to have electric and/or plug-in hybrid versions of every BMW model, with plug-ins anticipated to reach 25% of BMW 2025 sales.

I could go on, but the point is already made that the non-US-based automakers are prepared to meet the challenges associated with the phenomenal and near-immediate zero and low emission vehicle requirements of China plus the more stringent than US standards of Europe.

This brings us back to a variation of the two fundamental questions raised in this article.  Is the Government of Canada going to act to foster a substantive and rapid transition to zero and low emission vehicle market in Canada?  Is the Government of Canada going to participate along with the US government in the bailing out of US-based automakers a second time while sacrificing Canadian jobs in the process?   The answer to the first question is no and to the second question, there is a real possibility.

Note, the Californian population is about the same as all of Canada.

 

Mr. Magoo

Quote:

This brings us back to a variation of the fundamental question raised earlier in this article.  Is the Government of Canada going to act on fostering a substantive and rapid transition to zero and low emission vehicle market in Canada or would it prefer to participate along with the US government in the bailing out of US-based automakers a second time while sacrificing Canadian jobs in the process? 

Note, the Californian population is about the same as all of Canada.

If U.S. sales of vehicles are already only 2/3 of Chinese sales, and if all of Canada's population = one of fifty U.S. states, is this really going to be the lynchpin that decides whether polar bears live, or go extinct?

You're basically saying that Canada is a mere fraction of a market that is, itself, a fraction of a bigger market (and that's not even including the rest of Asia, Europe, Africa or South America) then why would you drop this baby-in-a-basket on the doorstep of Canada?  Not saying we shouldn't buy a Volt the next time we buy a car, but what about Malta, with a population only slightly less than Hamilton, ON?

arborman

Mr. Magoo wrote:

If U.S. sales of vehicles are already only 2/3 of Chinese sales, and if all of Canada's population = one of fifty U.S. states, is this really going to be the lynchpin that decides whether polar bears live, or go extinct?

The old saw that Canada is small and anything we do won't matter so why do anything?

Percentages compound over time.  A fraction of a percentage to the good is still to the good, and will help.

 

Rikardo

Very interesting.  In China much of the electricity is from coal.

kropotkin1951

Rikardo wrote:

Very interesting.  In China much of the electricity is from coal.

It always has been the main source as it is in parts of Canada and most of the US. However they are working to change that reality. This article is a little old but still relevant. NS, Sask and Alta all generate between 45 and 48% of their electricity from coal.

At the start of 2017, China announced that it would invest $360 billion in renewable energy by 2020 and scrap plans to build 85 coal-fired power plants. In March, Chinese authorities reported that the country was already exceeding official targets for energy efficiency, carbon intensity, and the share of clean energy sources. And just last month, China’s energy regulator, the National Energy Administration, rolled out new measures to reduce the country’s dependence on coal.

These are just the latest indicators that China is at the center of a global energy transformation, which is being driven by technological change and the falling cost of renewables. But China is not just investing in renewables and phasing out coal. It also accounts for a growing share of global energy demand, meaning that its economy’s continuing shift toward service- and consumption-led growth will reshape the resource sector worldwide.

https://www.weforum.org/agenda/2017/08/how-china-is-leading-the-renewabl...

 

https://www.nrcan.gc.ca/science-data/data-analysis/energy-data-analysis/...

 

Aristotleded24

The impacts of mining for litium:

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Even before the pandemic, alarm was mounting about sourcing lithium. Dr Thea Riofrancos, a political economist at Providence College in Rhode Island, pointed to growing trade protectionism and the recent US-China trade spat. (And that was before the trade row between China and Australia.) Whatever worries EU policymakers might have had before the pandemic, she said, “now they must be a million times higher”.

The urgency in getting a lithium supply has unleashed a mining boom, and the race for “white oil” threatens to cause damage to the natural environment wherever it is found. But because they are helping to drive down emissions, the mining companies have EU environmental policy on their side.

“There’s a fundamental question behind all this about the model of consumption and production that we now have, which is simply not sustainable,” said Riofrancos. “Everyone having an electric vehicle means an enormous amount of mining, refining and all the polluting activities that come with it.”

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In Chile, the battle over the impact of mining has been going on for years. Born and brought up in the copper-producing region of O’Higgins in central Chile, community activist Ramón Balcázar, now 36, became aware of the potential damage of large-scale mining at an early age. Long-running disputes – over land use, water rights and chemical contamination – provided the background to his youth in the 90s. Then, six years ago, he moved to the northern outpost of San Pedro de Atacama. On the lip of the country’s famed Andean salt flats, the town looks out to a coarse, sun-baked carpet of crystalline whites and smudgy grey. There, under this huge, cloudless desert sky, Balcázar finally felt able to breathe freely.

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He did not know it, but he had walked into another battle zone. San Pedro lies on the westernmost point of a mining area that spreads north across the Atacama desert to Bolivia and west into Argentina. Fifty times drier than California’s Death valley, the area’s parched surface conceals an underworld rich in minerals. Historically, mining companies have exploited its lucrative deposits of copper and, to a lesser extent, iodine and nitrates. By some estimates, it also contains as much as half the world’s lithium reserves. In the early to mid-2010s, when talk of lithium-ion batteries began circulating in every mining town, a raft of new licences were requested, investments made, and extraction facilities expanded. The area became known as the “lithium triangle”.

The mining companies insist their operations are sustainable. Balcázar, speaking from Mexico City, where he is studying for a graduate research degree, said they have no evidence for this claim. No one knows what effects lithium extraction on such a large scale will have on the Atacama’s fragile natural ecosystem. Unlike in Portugal, lithium here is found in brine, so the mining operations use no dynamite and no earthmovers, and threaten to leave no unsightly craters. Instead, they consist of a series of large, neatly segregated evaporation pools filled with millions of litres of brine that have been pumped from below the surface and left to evaporate in the sun.

The fears of residents like Balcázar are focused on the area’s cavernous, subterranean aquifers, from where the brine is pumped. Here, they maintain, a disaster is unfolding. There is a risk that the reserves of clean water, which are found in a separate layer above the brine deposits, may become contaminated.

Balcázar has been working with the Plurinational Observatory of Andean Salt Flats, a network of expert scientists and concerned citizens, to chart changes to the local ecology. The weight of their evidence – shrinking pasturelands, failing crops, disappearing flora and fauna – all point towards a process of desertification which they believe is exacerbated by lithium extraction. The impact of disturbing a “huge, complex hydrological system” is not visible from one day to the next, said Balcázar. “But the two are interlinked, without any doubt.”

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Shifting away from petrol and diesel is not the only concern. Manufacturing any car, electric or otherwise, causes carbon emissions, be it from the coal used to smelt the steel for its body work or the diesel oil burned when shipping its electronic components across oceans. The extra materials and energy involved in manufacturing a lithium-ion battery mean that, at present, the carbon emissions associated with producing an electric car are higher than those for a vehicle running on petrol or diesel – by as much as 38%, according to some calculations. Until the electricity in national grids is entirely renewable, recharging the battery will involve a degree of dependence on coal or gas-fired power stations.

Lithium accounts for a small part of the battery’s cost, which means there is less incentive for manufacturers to find an alternative. As it is, recycling lithium costs more than digging it out of the ground. For Hanisch, one of the chief costs comes at the end of the process: converting the recovered lithium from its recycled state (lithium sulphate) into a battery-ready form (lithium carbonate). Without the resources to build his own chemical plant, Duesenfeld sends his end product – a grainy composite of precious metals known as “black mass” – to a hydrometallurgical facility for final processing.

For existing recycling plants, lithium is not where the money lies, said Linda Gaines, an expert in battery recycling systems at Argonne National Laboratory in Illinois. As she said: “The main purpose is to recover the cobalt, as well as nickel and copper. The lithium doesn’t add much.”

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This is discouraging for the opponents of lithium mines in Portugal, but Šefčovič offered them a crumb of comfort. The decision to mine has to be taken in dialogue “with local communities”, he asserted, adding that “we need to assure these communities that these projects are not only of the greatest importance, but will also benefit the region and the country”.

The modern corporate responsibility movement is built on such logic. First, it does not promise to eliminate all negative industrial impacts. Instead, it pledges to “manage” them, and then to balance out any damage with compensatory “benefits”, to use Šefčovič’s phrase. In the case of Savannah’s mine in northern Portugal, the company concedes there will be local environmental impact, but argues that it will be outweighed by the upsides (inward investment, jobs, community projects).

Godofredo Pereira, a Portuguese environmental architect based at the Royal College of Art in London, is sceptical. His first-hand observations of the exploitation of Chile’s salt flats suggest that offers of dialogue can be superficial. Even in Atacama, where international accords give indigenous groups the right to “free, prior, informed consent”, detractors such as Balcázar struggle to be heard. Instead, the view of pro-mining community groups is taken as universal. If necessary, the obligation to gain consent can be weakened simply by defining lithium as a mineral of “strategic” or “critical” national value – which is easy enough, given lithium’s contribution to slowing global heating and cleaner air.

Nor, very often, do the promised trade-offs turn out to be quite what they initially seem, according to Pereira. The voluntary nature of corporate responsibility means mining firms can backtrack if it suits them. Even when local groups succeed in negotiating a fixed royalty (3.5% of sales, in the case of one major extractor in Atacama), communities frequently split in the subsequent fight for the spoils.

That's even assuming there is enough lithium to go around for everyone to own an electric car, which there may not be.