China’s role key to global energy transition amid climate challenges, ET Auto

India sources 75% of li-ion batteries from ChinaNew Delhi: The global economy is at a pivotal juncture, with long-held principles and practices being re-evaluated, and in some cases, losing their relevance. As the world grapples with the challenges of climate change, the Economic Survey 2024-2025 highlighted on Friday that the road to energy transition inevitably runs through China.

Underscoring China’s central role in global supply chains, the survey said that the effects of the rise of this region as a manufacturing colossus are seen in automobile (especially electric vehicles) manufacturing, mining and refining capacity for critical minerals (copper, lithium, nickel, cobalt, graphite) and in clean energy equipment.

“China’s rise in the global auto market has disrupted the long-term incumbents in economies like Germany and Japan, and it dominates the global distribution of critical minerals and other economic resources, creating potential dependencies for posterity,” the survey said.

In line with the ‘Make in India’ initiative, it noted that the global trend of outsourcing manufacturing to China, which gained momentum during the era of globalization, is now set for a reset.

China houses nearly 80% of the world’s battery manufacturing capacity, pivotal to the energy transition. In 2022 alone, China allocated USD 546 billion towards various investments in solar and wind energy, electric vehicles, and battery technologies via US and EU investments in these sectors, which amounted to USD 321 billion in the same year.

“China’s vertical integration across the entire EV supply chain, from mining to EV manufacturing, has enabled it to retain its global dominance in this sector. It is also pertinent to note that about 70% of the world’s rare earth minerals, which are critical resources for high-storage batteries, are processed by Chinese companies,” it said.

For now, India sources 75% of lithium-ion batteries from China, and it has near negligible production capacity for key components like polysilicon, ingots, and wafers.

The survey highlighted that the absence of viable alternative battery technologies strengthens China’s dominant position in lithium-ion batteries. Going forward, policies for EVs must focus on de-risking supply chains by promoting a more self-reliant ecosystem driven by increased R&D in advanced battery technologies, such as sodium-ion and solid-state batteries. “Securing intellectual property in this domain can prove invaluable,” it said.

“India must aim to establish technology transfer agreements with other nations that are also seeking to diversify their supply chains. Partnerships with other aspiring nations can help distribute the high costs of securing a comparative advantage in the global market,” the survey added.

• Published On Jan 31, 2025 at 04:40 PM IST

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