Rare earth lithium batteries stage a major comeback. Are global automakers hitting the brakes?

The so - called "Mr. Know - it - all" is in a complete meltdown and has directly launched a combined punch of "100% tariffs + critical software control".

The global stock markets have also taken a nosedive. The U.S. stock market experienced a "Black Friday" on October 10th. The three major stock indexes all tumbled sharply. Among them, the Nasdaq and the S&P 500 recorded their largest single - day declines since April. The market value of the seven major U.S. technology giants evaporated by about $770 billion (550 million yuan) overnight, equivalent to the market value of three Contemporary Amperex Technology Co., Limited. After the holiday, the A - share market in China was not spared either, going through a roller - coaster ride of sharp ups and downs.

What on earth has made the "Mr. Know - it - all" so furious? It all started with our powerful counter - attacks, as we played four aces in a row!

First up is rare earths! From various equipment for rare earth mining to rare earth ores themselves, and then to several important medium and heavy rare earths such as holmium, some of them have been included in the export control list. Next is lithium - ion batteries! High - energy - density lithium - ion batteries themselves, as well as the equipment and technology related to the positive and negative electrode materials for their production, have been added to the control list. Finally, super - hard materials have also been included in the control list. In the future, you need to obtain an "export permit" before exporting these precious items.

This series of actions has not only sent shockwaves through the global high - tech industry but also made overseas automakers anxious. So, how will it specifically affect the automotive industry, especially the landscape of new energy vehicles?

Rare Earth Control Shakes the World

When it comes to rare earths, many people may think that they have little to do with the automotive industry. But in fact, rare earths play an extremely crucial role in the automotive industry, especially in the field of new energy vehicles.

Rare earths do not refer to "rare" metals but include 17 elements such as neodymium, cerium, lanthanum, yttrium, and dysprosium. These elements are widely used in various core components of vehicles, from fuel - powered cars to new energy vehicles, such as fuel injection systems, three - way catalysts, power steering systems, motors, batteries, in - vehicle sensors, lighting, audio systems, and cameras.

To put it simply, the role of rare earths in the automotive industry is like the role of salt in a dish - it may not be in large quantity, but it is indispensable. Without this bit of "salt", you can't start cooking.

Actually, as early as April this year, export control measures were implemented for seven categories of medium and heavy rare earth - related items, and on October 9th, the export control measures for rare earths were further upgraded.

This means that the global automotive industry has to face a reality: without Chinese rare earths, automobile production will be affected. Some overseas automakers have already sounded the "production halt alarm". For example, Suzuki Motor had to suspend several production lines in June this year because it couldn't receive rare earth - related components from China in time.

The industry associations of mainstream automakers such as General Motors, Toyota, Volkswagen, and Hyundai have also jointly issued a warning, saying that if they can't obtain rare earth raw materials stably, there is a high risk of production halts at U.S. automobile factories.

So, why do we have such a huge say in the rare earth market? Behind this is years of technological accumulation and industrial chain layout. Not only rare earth products but also the related "magic touch" - the equipment and technology for rare earth mining - are our unique know - how.

Although only 70% of global rare earth mining takes place in China, nearly 90% of rare earth separation and processing and 99% of heavy rare earth separation and processing are controlled by our country.

In other words, there are almost no links in the global rare earth industrial chain that do not rely on our country's materials and technology.

Moreover, the impact of rare earths on chip manufacturing cannot be ignored. The announcement states that rare earth materials and their processing technologies required for logic chips of 14 nm and below and storage chips of 256 layers and above are included in the export control list and require case - by - case approval.

So, does ASML need rare earths to produce lithography machines? If so, they need to apply for a permit from us first. Does TSMC need rare earths to produce advanced - process chips for NVIDIA and AMD? If so, they also need to apply for a permit. Needless to say, this also applies to various military - industrial enterprises. This undoubtedly buys valuable time and development space for China's domestic chip industry and sets a high threshold for the global semiconductor supply chain's plan to "de - Chinaize".

Lithium - Ion Batteries Hold the Lifeline of the Automotive Industry

While taking action on rare earths and chips, lithium - ion batteries and artificial graphite anode materials have also been included in the scope of export control. This move is directly aimed at the "core" of new energy vehicles - power batteries.

As soon as the news came out, the lithium - ion battery sector in the A - share market tumbled. The index dropped by nearly 7% in a single day. Among more than 400 concept stocks related to lithium - ion batteries, nearly 90% declined.

Many people may have a question: Why, when export control measures are imposed on rare earths and rare earth refining technologies, the related sectors rise, but when export control is imposed on lithium - ion battery products, the lithium - ion battery sector falls? Is it a negative factor?

Actually, that's not the case. About 70% of lithium - ion batteries are manufactured in China, and we also have the say in this field. Automobile - powerhouses in Europe and the United States that want to develop new energy vehicles all have to buy lithium - ion batteries from China. In the first eight months of this year, the cumulative sales of domestic power and other batteries reached 920.7 GWh, of which 173.1 GWh were exported, a year - on - year increase of 48.5%, accounting for 18.8% of the total sales during the same period.

It can be said that lithium - ion batteries have become the engine of our export growth.

So, why is export control being imposed on lithium - ion battery products? In fact, this control measure is not only to prevent the outflow of technology but more importantly, to stabilize the domestic lithium - ion battery industrial chain and prevent profit dilution caused by low - price competition.

By restricting the export of high - energy lithium - ion batteries with an energy density greater than 300 Wh/kg, in fact, a "technological barrier" has been set up for the global lithium - ion battery industry.

Currently, some high - end ternary lithium - ion batteries and semi - solid batteries can already reach this energy density and are widely used in cutting - edge fields such as drones and electric aviation. The energy density of lithium iron phosphate batteries is concentrated around 200 Wh/kg and is not included in the export control list.

In the short term, export control will undoubtedly put some pressure on the performance of some lithium - ion battery equipment, material, and cell enterprises. Since enterprises need to apply for export licenses, the increase in time and capital costs may lead to greater uncertainty in exports. Especially for some enterprises that rely on overseas markets, they may be greatly affected.

But in the long run, this control policy is actually a form of protection and empowerment for the domestic lithium - ion battery industry. By restricting the outflow of advanced lithium - ion battery technology, it can not only avoid excessive diffusion of technology but also help domestic leading enterprises consolidate their market positions and enjoy higher profit margins. In the future, as technology continues to advance, these technological "moats" will become deeper, and enterprises will be able to benefit from them.

Summary

It should be noted that our export control is not a ban on exports. For the vast majority of countries and industries, it actually has little impact. Those who try to restrict us will surely face counter - measures.

On a deeper level, this is China's strategic transformation from "selling raw materials" to "mastering technology". Once we were just suppliers of global resources, but now we are gradually becoming key nodes in the global industrial chain.

Now, we have enough strength to hold the cards at the international negotiation table. Those who want to put pressure on us need to think twice before they act, as they need to consider whether they can still obtain key resources from us.

This article is from the WeChat official account “Autostinger” (ID: autostinger), author: Peng Fei. Republished by 36Kr with permission.