The electric vehicle market has sparked a boom for a number of commodities needed for the batteries of the vehicles and the demand for those vehicles is not letting up any time soon. Tesla, the leading producer of electric vehicles announced plans to build its first factory outside the United States in Shanghai, becoming the first wholly foreign-owned automaker in China.
Tesla said construction would begin in the near future, once official permits are obtained. It said production would begin two to three years after that and eventually increase to 500,000 vehicles annually.
Time reported that the announcement comes amid mounting U.S.-Chinese tension over technology and follows Beijing’s April promise to end restrictions that required foreign automakers to work through local partners.
China is the world’s biggest electric vehicle market but Tesla and other producers including GM and Nissan Motor Co. had been reluctant to transfer manufacturing to this country due to the requirement to share technology with Chinese partners that might become rivals.
Tesla began selling cars in China in 2014, shipping them from its California factory, which added a 15 percent import duty to the price.
Despite that, China quickly became its No. 2 market after the United States.
“Tesla is deeply committed to the Chinese market,” the company said in a statement.
Tesla is among companies hit by additional 25 percent import duties imposed by Beijing in retaliation for a tariff hike by U.S. President Trump in a dispute over technology policy.
Tesla has discussed opening a factory in China since at least 2016. “Still need to see how it gets paid for, which has been a concern,” Osborne added.
The new factory could increase demand for a number of commodities. According to Benchmark research and reported by Mining.com, Tesla’s current gigafactory in Nevada, along with its Japanese plant will consume about 16 kt (17,600 st) of lithium (hydroxide), 1.5 kt (1,650 st) of cobalt, 25 kt (27,500 st) of graphite and 17.5 kt (19,300 st) of nickel.
And it’s not just Tesla Automakers are pouring billions of dollars into developing electric car models for China.
GM, Ford Motor Co., VW, Nissan and other competitors have announced ventures with local automakers to develop models for China’s lower-income market.
Sales of pure-electric passenger vehicles in China rose 82 percent last year to 468,000, according to an industry group, the China Association of Automobile Manufacturers. That was more than double the U.S. level of just under 200,000.
Beijing is using access to its market as leverage to induce global automakers to help Chinese brands develop battery and other technology.
Auto brands in China are required to make electric vehicles at least 10 percent of their sales starting next year or buy credits from competitors that exceed their quotas. Later, they face pressure to raise those sales in order to satisfy fuel efficiency requirements that increase annually.
Germany’s BMW AG announced a partnership with China’s biggest SUV maker, Great Wall Motor, to produce electric versions of its MINI cars.