The Story of China’s Jump on the U.S. in the Lithium Triangle
The first thing to know is that Chinese companies have shown up in Argentina
Last month, the CEO of China’s Jiankang Auto showed up in the Argentine capital of Buenos Aires to follow up on a big deal he had signed — for an ongoing supply of battery-grade lithium for China’s insatiable electric vehicle industry. A few weeks later, BMW signed its own deal for Argentine lithium, a $334 million agreement for supply starting next year.
But Argentina, part of an oblong-shaped triad of Latin American countries possessing about two-thirds of the planet’s lithium, is no longer satisfied being the mere object of supply-desperate countries and companies out to win the global electric vehicle race. It wants to be a bigger player, and it is leveraging its lithium to get there.
The goal: to make Argentina a hub for the manufacture of lithium-ion batteries and EVs for the South American market, Matias Kulfas, the country’s minister of production, told me in a video call to Buenos Aires last night. “We don’t want Argentina to be left out of the process,” Kulfas said, “because we know Argentina is in a position to hold an important place in the process.”
Argentina’s posture is instructive. About mid-decade, automobile economists expect the sticker price of EVs to drop to parity with gasoline-driven vehicles, and for that to help to finally trigger a boom in the sale of electrics. Automakers expect their sales to begin to take off in the second half of the decade, and to rise from there.
Ahead of that bonanza, companies and countries are scouring the Earth for raw material — a supply chain to make batteries. Until recently, China — by far the most aggressive player in EVs and lithium-ion batteries — had managed to snag massive long-term contracts for cobalt, nickel and lithium, all-but locking up the supply in important mining countries for these strategic battery metals. But now, in exchange for its lithium, Argentina suggests a possible hardening of the bargaining position in the extractive countries: Going forward, they seem likely to demand a far greater part of the value chain.
Argentina also demonstrates the persistent state of play: It has the third-largest proven reserves of lithium on the planet — about 14% of the total, according to the U.S. Geological Survey. China has been the most active and persistent suitor of this Argentine lode, the Europeans next, and that continues to be the order of play.
In February, Jiankang signed memorandums of understanding to build a lithium-ion battery factory and a plant to make electric bus chassis in the country, according to Kulfas and local press coverage of the deals. Jiankang is part of Gotion High-Tech, China’s №3 battery-maker, of which Volkswagen is the largest shareholder, with a 26.5% stake in the company. In March, Jiankang CEO Zhang Yue himself traveled to Buenos Aires to get immersed in the detail of how those investments would take shape, and how the lithium supply would fit in.
But only one American company has shown up there, Kulfas said — Livent, a Philadelphia-based lithium supplier. Livent supplies Tesla. It is also who BMW signed its own supply deal with. Even though BMW will obtain its lithium through a middleman company, it still walked the new political line: “They also expressed their interests in a project for the production of batteries and electric vehicles in Argentina,” Kulfas said.
Some of this obviously is politics — memorandums of understanding are barely worth the paper they are written on — and it’s not clear to what degree what appear to be promises will actually materialize. A BMW spokesman told me that the company has no plans for EV or battery production in Argentina. And, earlier this week in Buenos Aires, a senior BMW official appeared to say that what the company really has in mind is helping the government to establish a value chain between mine and the EV market, including public EV charging, “smart” cities technology, and clean energy. “We want to provide a great boost and establish a link between the government and battery manufacturers, to establish an industrialization of lithium that goes beyond the extraction of raw material," said Alexander Wehr, CEO of BMW Latin America.
Yet, that no other American company has appeared in Buenos Aires to at least hedge their bets is somehow apropos of a moment in which, when it comes to the global battery race, the U.S. is only just awaking and getting out of bed, while China and Europe have been long out of the house and at work. President Biden’s plan for $174 billion in EV investment may change U.S. behavior, but until now, the country has been the laggard compared with its rivals.
What’s wrong with the U.S., I asked Kulfas. “The only thing I can answer,” he said, “is that on our side, we are fully committed and interested in generating projects with all countries that are interested in this industry.”
“What I see and what we all see is a very changing scenario,” Kulfas said, “a scenario that will be changing speedily, quickly and will reach all over the world to all countries. There will be a massive demand and rush for electric vehicles. What we expect or believe is that Argentina can hold a position. Of course, it can’t be the leader because the project I mean worldwide has been started by other countries. But it has a good chance of holding an important, prevalent position.”