Storm Clouds Gathering: Is the Electric Car Dream On the Brink of Facing a Supply Nightmare.
The path toward an all-electric future for cars may be encountering a major roadblock. Rising trade tensions between world powers, particularly the United States and China, are casting a long shadow over the electric vehicle (EV) universe. The cause of the concern. China's decision to halt exports of critical rare earth elements.
Why are these resources so important. Well, they are the unsung helpers in enabling permanent magnets – a core component within the electric motors that power our EVs. And without a stable supply chain, it is a tall order to build those motors.
China's Dominant Role in a Critical Supply Chain
As a matter of course, China enjoys a virtual monopoly worldwide when it comes to rare earth elements. It is an East Asian country which produces 90% of permanent magnets produced worldwide. Not only does China lead when it comes to raw materials but it also controls almost the entire processing chain of these elements. For over a month now, shipments of these essential materials have reportedly been suspended due to escalating trade tensions.
Tick-Tock: Are Worldwide EV Factories in Limbo.
Insiders are warning of alarm. United States and European suppliers are reportedly running with progressively lean inventories of the rare earths – perhaps only enough to drive production for another four to six weeks. Rumors even exist that pre-assembled modules of magnets are already in short supply.
The gloomy forecast by some analysts is that this situation would bring electric car manufacturing outside of China to a grinding halt as early as mid-June. If it does, the repercussions would be more devastating than the shortage of chips that shook the entire auto sector in 2021 and 2022. It is more than a supply chain hiccup; it would be a crisis for the new EV sector.
