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The future of cars depends on China

Thursday 25 March 2021

Powertrains are going electric – and Beijing controls the necessary raw materials

A curious visitor to Planet Earth would have a lot of questions about cars. For instance:

  1. Why so many?
  2. Why are they allowed to take up so much space?
  3. Why are they allowed to emit so much pollution?

Returning in ten years, the visitor would see question three being answered in a progressive, problem-solving way. Across much of the world, internal combustion engines will have been replaced by battery electric powertrains. The air will be cleaner. Cities will be quieter. Climate change might even have slowed down.

Questions one and two, though, are less likely to be addressed with the same appetite for change.

There are nearly a billion and a half cars in the world – about ten times more than there were horses a century ago. There are 1.4 cars for every adult American and nearly one for every two residents of the UK. In the US there are a billion parking spaces; four per car. More than half the surface area of many central business districts has been surrendered to cars, most of which are stationary nine tenths of the time and largely empty even when moving.

In suburban Europe the capitulation to the car is almost as complete. Endless strips of living space have been handed to parked cages of steel and velour. Some cities have squeezed cars from their centres, but otherwise there’s little sign of this extraordinary space invasion pulling back – and thereby hangs a tale that helps explain a recent brief appearance on Chinese state TV by Elon Musk.

The Tesla founder used his appearance earlier this week to praise China to the skies. He said he was confident that the country’s future was “going to be great, and that China is headed towards being the biggest economy in the world and a lot of prosperity in the future”.

Why the toadying? There seem to be three reasons. The first is that Musk operates China’s first fully foreign-owned car factory just outside Shanghai, and knows Beijing could revert on a whim to its old practice of requiring people like him to work through joint ventures.

Second, Chinese officials have started saying Tesla cars, packed as they are with computing power, could pose a security risk to China by hoovering up their users’ data and beaming it back to the US. And third, even if Musk didn’t build cars in China, Beijing could cause him no end of trouble by shutting off his access to the exotic metals on which electric cars depend.

These metals, so-called rare earths with rock star names like Scandium and Thulium, are the true celebrities of the personal transport revolution Musk has kicked into high gear. They aren’t in fact especially rare, but they are essential for the magnets at the heart of every electric motor, and China overwhelmingly dominates their supply.

Ninety-eight per cent of Europe’s need for rare earths is met by China. The US had its own world-beating stockpile, but sold it off in the 1990s. The stockpile could be replenished locally, but that would be expensive and the future of electric cars depends on driving battery costs down, not up.

“China could close down Tesla and Panasonic [its main battery supplier] in five weeks,” says the CEO of a specialist metals firm with a contract from the US government to find new sources of rare earths. “It won a war no one else knew they were fighting until they’d lost it.”

None of this would matter but for the answers to questions one to three above. Demand for rare earths – and the lithium needed for lithium-ion batteries – is expected to rise steeply for at least a decade because of the electric switch and because we’ve stubbornly refused to give up on buying, owning and driving cars.

We like them. For all the time we waste in them, we don’t seem to be ready to forsake them.

To be clear, there are alternatives. For most journeys, we could ditch cars in favour of electric micro-scooters, and some of us already are. We could buy personal transport subscriptions instead of owning cars ourselves, so there would be fewer of them, taking up less space. This too is happening. Or we could leave the driving to robots summoned by apps – and maybe eventually we will. But for now the motoring mainstream is clinging to the idea of car-sized cars that we can park outside our homes, seats covered in dog hairs, knowing they’ll be there when we need them, even if we’ve lost our phones.

“People enjoy driving,” says a senior executive at one of the crowd-sourced apps that make driving even more enjoyable by steering us away from traffic jams. No kidding. There’s a reason Top Gear is in its 30th year. There’s a reason people talk about car culture (it exists), and an under-appreciated part of Elon Musk’s genius is his careful hewing to that culture’s norms.

Years ago, I visited Tesla’s HQ in Palo Alto as the supposedly revolutionary Model S was being born, and I remember being struck by how like a Ford Mondeo it looked. Or a Vauxhall Insignia; your basic suppository. It looked normal and just happened to handle better and accelerate faster than almost any other car in history. 

It was a respectful advance on the status quo, not a scornful one. The Model S was a car-sized, car-shaped car that you could own, polish, sing in and brag about. Musk understood that even Bay Area futurists didn’t want an electric car that looked like something out of Sleeper. Buyers and investors rewarded him handsomely, and VW got the message. As noted in last week’s Sensemaker Special, the German giant has copied Tesla in every important detail as it retools for an electric future.

Whether either company has got the message about raw materials is another matter. Our curious visitor might say “if you guys insist on sticking with cars, look out for China,” but we’ll probably be too busy polishing and singing and bragging to pay much attention.

The Tortoise summit on the Future of Cars starts at 9am GMT tomorrow, Friday 26 March. If you haven’t already, book your place now.

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