The extent to which European industries are intertwined with Chinese raw materials or preliminary products is now being closely scrutinized on many fronts. The results of numerous studies continue to astound, as they reveal the carelessness with which entire industries have become dependent on the People’s Republic of China.
Christiane Kuehl has looked at what recent studies have discovered about these dependencies, using lithium-ion batteries as an example. The results are sobering.
Meanwhile, China’s authorities have fined the first seven companies involved in the recent cooking oil scandal. However, the investigations are still ongoing, and it is quite possible that, metaphorically at least, a few heads will roll.
At least that’s how the authorities have always handled it in the past: prison sentences for the small fry to keep the mob quiet. A minister’s resignation – that would be something. But that would probably bring the failure and thus the anger of consumers too close to the center of power in the country. And that’s certainly not where the Party wants to see it.
China’s cleantech industries are pushing onto the global markets. The companies are exporting – and also want to set up their own production sites in many countries. Many countries increasingly depend on China’s solar systems, wind turbines and batteries – and so there are more and more studies analyzing the risk of these dependencies. Not only security and economic aspects, but also the risks of stalling the energy transition are being more and more scrutinized. Otherwise, the likelihood of wrong political decisions will grow.
According to a recent study by the European Council on Foreign Relations (ECFR), Europeans need to analyze all sides of this triangle if they want to reduce the risk of their relations with China: “Shrink the exposure along one side of the triangle, and risks will grow along another side.” A typical example: Punitive tariffs on electric cars or solar modules, make them more expensive and could slow down climate policy.
China’s companies are now almost as dominant in EV batteries as they are in photovoltaics. They produce around two-thirds of the world’s lithium-ion batteries. China is home to five of the ten battery manufacturers with the world’s largest market share, with CATL and BYD leading the field by a wide margin. Just like solar cells and electric cars, batteries are part of the so-called “New Three” (新三样), which Beijing aims to develop into global export hits. At the same time, EV batteries are crucial to the EU’s path toward net zero by 2050.
Europe also needs batteries for grid energy storage, which is essential for a stable power supply given the fluctuations in renewable energies. EU demand for energy storage capacity is expected to increase from currently 60 gigawatts (GW/mainly in the form of hydropower storage) to 200 GW in 2030 and 600 GW in 2050.
Without China, getting enough batteries for all of this at tolerable prices would be difficult. Around 30 percent of the batteries in electric cars sold in the EU in 2023 came from Chinese manufacturers. Worldwide, batteries were the cheapest in China at an average of 126 US dollars per kilowatt-hour, while prices in the USA and the EU were 11 and 20 percent higher, respectively.
According to the ECFR study, Chinese companies’ experience with efficient production processes and their technological edge in the more energy-efficient and cheaper lithium iron phosphate batteries contribute to these low prices, in addition to many years of government subsidies. “As the battery makes up around 40 percent of the total value of an electric vehicle, access to lower-cost Chinese inputs allows European automakers to reduce the cost of their models,” write the authors, who include German China expert Janka Oertel.
Chinese manufacturers dominate the entire supply chain. “Following years of investments in mining assets across the world, China controls around 41 percent of the world’s cobalt, 28 percent of its lithium, and 78 percent of its graphite, which is mostly mined in China directly,” the ECFR study states. This dominance is even more pronounced in the processing of these minerals. “Moreover, China produces 77 percent of cathodes and 92 percent of anodes, which are crucial intermediary inputs for battery cells.”
Companies like CATL not only export but also build factories in Europe. “Chinese stakes in the European battery sector can bring opportunities to Europe in the form of jobs and potential technology transfer,” the ECFR study says. “But they also increase the risk of European and other third country manufacturers being pushed out of the European market, further increasing Europe’s dependency on Chinese batteries.”
This is nothing new so far. The decisive factor is the conclusions drawn from the situation described. The study does not claim to answer these questions – but rather sees its task as initiating the necessary thought processes through various scenarios. Specifically, the study points out that the product risk of Chinese batteries will increase with the growing networking of car traffic and the resulting data streams.
The US think tank CSIS has also been looking into the issue. Almost 13 percent of EU battery production capacity is currently in Chinese hands, writes China economic expert Ilaria Mazzocco. If plants planned and under construction are included, this percentage will soon rise to 23.5 percent. “These numbers clearly show that already today Europe’s targets for expanding battery manufacturing hinge on openness to FDI from China.”
According to Mazzocco, China’s stake is particularly high in Hungary and Germany. Companies producing batteries in Germany include CATL and Gotion. However, while China’s stake in Germany decreases due to new, more diverse capacities, it still increases in Hungary.
Mazzocco also explains that it is becoming increasingly difficult to identify nationalities within interwoven company structures. What is a Chinese company? “Take the case of InoBat, the battery company headquartered in Slovakia and incorporated in Norway that has at least two factories in the pipeline in Europe and an active R&D center in Slovakia. In September 2023, the Chinese battery firm Gotion acquired a 25 percent stake in InoBat and signed a pre-joint venture agreement to build a factory in Europe.” Moreover, VW is Gotion’s largest single shareholder with just under 25 percent.
A de-risking policy should consider several factors in this situation, writes Mazzocco’s colleague Scott Kennedy. For example, whether Chinese investments displace desirable investments from other countries or harbor political risks should be examined. The latter is currently not a problem, except for Hungary. Under Viktor Orbán, the country is already China’s closest friend in the EU.
Mazzocco also urges decision-makers to assess the impact of Chinese factories on EU efforts to diversify the supply chain. This will not be the case “if these factories were to continue to rely exclusively on components from China, bringing very little value added and production to Europe.” In general, Mazzocco believes that a strong industrial policy is needed to support domestic cleantech industries on the one hand and to promote targeted direct investment on the other. Just as the United States is already doing.
Brian Niccol will be given a private jet so that he can fulfill his new role as Starbucks CEO. Niccol is said to still live in California, despite the US coffee chain’s headquarters being much further north in Seattle. It would perhaps be better for Starbucks’s future if Niccol used his jet for regular trips to China. After all, that is where the company’s biggest problems are.
The problem with the future boss, who starts his job in September, is that Niccol has virtually no China experience. Starbucks chose him because he successfully led his previous employer, the US fast food chain Chipotle Mexican Grill, out of a crisis after a food scandal. However, Chipotle does not operate in China and Niccol has not had any specific leadership roles in his career that would have brought him into direct contact with the Chinese market.
This lack of experience with China could now pose a challenge. After all, current developments in China are alarming for Starbucks. Sales in the region fell by 14 percent in the last quarter alone compared to the previous year, despite coffee becoming increasingly popular in China. On the one hand, the declining customer numbers are due to the general weak consumption in China. However, another important factor is the extremely tough competition.
The most dangerous Chinese contender for Starbucks is Luckin Coffee. Just a few years ago, the company seemed to be on the brink of failure. In 2020, it became known that Luckin Coffee had massively falsified its sales to improve its financial figures. The result was a delisting from the US Nasdaq stock exchange. However, the investor fraud had no impact on the company’s expansion in China.
Luckin Coffee has over 16,000 stores in China, while Starbucks operates around 7,300. This gives Luckin Coffee a much larger presence, especially in smaller cities. In light of declining sales, the impact of the announced China expansion to 9,000 stores nationwide by the end of 2025 is crucial for Starbucks.
There’s no denying that the company is making every effort to appeal to its Chinese customers. Earlier this year, Starbucks made a splash by launching a pork-flavored coffee – well aware that Chinese tastes often run counter to Western consumption patterns.
Competition with Luckin Coffee will also increase massively for Starbucks outside China. The company already presents the Americans with growing competition in Southeast Asia and is also looking to expand into the USA.
So Brian Niccol, a keen golfer who was named Business Person of the Year by both Bloomberg and Fortune in 2019, has his work cut out for him. The 50-year-old is generally held responsible for the huge upswing of the Mexican barbecue restaurant Chipotle, which Niccol ran from 2018 until a few weeks ago. The company doubled its revenue and multiplied its profits under Niccol’s wing. Chipotle’s share price soared during this time. He was popular with employees because he expanded employee benefits.
Only time will tell whether he will choose the same strategy for Starbucks’ Chinese market. Niccol’s decisions are reportedly worth a package to the coffee chain that could earn the new CEO up to 113 million US dollars during his tenure. “Niccol has proven himself to be one of the most effective leaders in our industry, generating significant financial returns over many years,” a Starbucks spokesperson told Fortune.
Starbucks’ share price has already made a big leap. When the news of Niccol’s appointment became public, the company’s shares climbed 24.5 percent on the US stock exchange, while Chipotle fell by 7.5 percent. Joern Petring
What looks like a painting of a barren tree is actually a bird’s-eye view of a watercourse at the edge of a country road, visible at the bottom of the picture. The photo was taken by photographer Tang Dehong in Nyima, Tibet.
The extent to which European industries are intertwined with Chinese raw materials or preliminary products is now being closely scrutinized on many fronts. The results of numerous studies continue to astound, as they reveal the carelessness with which entire industries have become dependent on the People’s Republic of China.
Christiane Kuehl has looked at what recent studies have discovered about these dependencies, using lithium-ion batteries as an example. The results are sobering.
Meanwhile, China’s authorities have fined the first seven companies involved in the recent cooking oil scandal. However, the investigations are still ongoing, and it is quite possible that, metaphorically at least, a few heads will roll.
At least that’s how the authorities have always handled it in the past: prison sentences for the small fry to keep the mob quiet. A minister’s resignation – that would be something. But that would probably bring the failure and thus the anger of consumers too close to the center of power in the country. And that’s certainly not where the Party wants to see it.
China’s cleantech industries are pushing onto the global markets. The companies are exporting – and also want to set up their own production sites in many countries. Many countries increasingly depend on China’s solar systems, wind turbines and batteries – and so there are more and more studies analyzing the risk of these dependencies. Not only security and economic aspects, but also the risks of stalling the energy transition are being more and more scrutinized. Otherwise, the likelihood of wrong political decisions will grow.
According to a recent study by the European Council on Foreign Relations (ECFR), Europeans need to analyze all sides of this triangle if they want to reduce the risk of their relations with China: “Shrink the exposure along one side of the triangle, and risks will grow along another side.” A typical example: Punitive tariffs on electric cars or solar modules, make them more expensive and could slow down climate policy.
China’s companies are now almost as dominant in EV batteries as they are in photovoltaics. They produce around two-thirds of the world’s lithium-ion batteries. China is home to five of the ten battery manufacturers with the world’s largest market share, with CATL and BYD leading the field by a wide margin. Just like solar cells and electric cars, batteries are part of the so-called “New Three” (新三样), which Beijing aims to develop into global export hits. At the same time, EV batteries are crucial to the EU’s path toward net zero by 2050.
Europe also needs batteries for grid energy storage, which is essential for a stable power supply given the fluctuations in renewable energies. EU demand for energy storage capacity is expected to increase from currently 60 gigawatts (GW/mainly in the form of hydropower storage) to 200 GW in 2030 and 600 GW in 2050.
Without China, getting enough batteries for all of this at tolerable prices would be difficult. Around 30 percent of the batteries in electric cars sold in the EU in 2023 came from Chinese manufacturers. Worldwide, batteries were the cheapest in China at an average of 126 US dollars per kilowatt-hour, while prices in the USA and the EU were 11 and 20 percent higher, respectively.
According to the ECFR study, Chinese companies’ experience with efficient production processes and their technological edge in the more energy-efficient and cheaper lithium iron phosphate batteries contribute to these low prices, in addition to many years of government subsidies. “As the battery makes up around 40 percent of the total value of an electric vehicle, access to lower-cost Chinese inputs allows European automakers to reduce the cost of their models,” write the authors, who include German China expert Janka Oertel.
Chinese manufacturers dominate the entire supply chain. “Following years of investments in mining assets across the world, China controls around 41 percent of the world’s cobalt, 28 percent of its lithium, and 78 percent of its graphite, which is mostly mined in China directly,” the ECFR study states. This dominance is even more pronounced in the processing of these minerals. “Moreover, China produces 77 percent of cathodes and 92 percent of anodes, which are crucial intermediary inputs for battery cells.”
Companies like CATL not only export but also build factories in Europe. “Chinese stakes in the European battery sector can bring opportunities to Europe in the form of jobs and potential technology transfer,” the ECFR study says. “But they also increase the risk of European and other third country manufacturers being pushed out of the European market, further increasing Europe’s dependency on Chinese batteries.”
This is nothing new so far. The decisive factor is the conclusions drawn from the situation described. The study does not claim to answer these questions – but rather sees its task as initiating the necessary thought processes through various scenarios. Specifically, the study points out that the product risk of Chinese batteries will increase with the growing networking of car traffic and the resulting data streams.
The US think tank CSIS has also been looking into the issue. Almost 13 percent of EU battery production capacity is currently in Chinese hands, writes China economic expert Ilaria Mazzocco. If plants planned and under construction are included, this percentage will soon rise to 23.5 percent. “These numbers clearly show that already today Europe’s targets for expanding battery manufacturing hinge on openness to FDI from China.”
According to Mazzocco, China’s stake is particularly high in Hungary and Germany. Companies producing batteries in Germany include CATL and Gotion. However, while China’s stake in Germany decreases due to new, more diverse capacities, it still increases in Hungary.
Mazzocco also explains that it is becoming increasingly difficult to identify nationalities within interwoven company structures. What is a Chinese company? “Take the case of InoBat, the battery company headquartered in Slovakia and incorporated in Norway that has at least two factories in the pipeline in Europe and an active R&D center in Slovakia. In September 2023, the Chinese battery firm Gotion acquired a 25 percent stake in InoBat and signed a pre-joint venture agreement to build a factory in Europe.” Moreover, VW is Gotion’s largest single shareholder with just under 25 percent.
A de-risking policy should consider several factors in this situation, writes Mazzocco’s colleague Scott Kennedy. For example, whether Chinese investments displace desirable investments from other countries or harbor political risks should be examined. The latter is currently not a problem, except for Hungary. Under Viktor Orbán, the country is already China’s closest friend in the EU.
Mazzocco also urges decision-makers to assess the impact of Chinese factories on EU efforts to diversify the supply chain. This will not be the case “if these factories were to continue to rely exclusively on components from China, bringing very little value added and production to Europe.” In general, Mazzocco believes that a strong industrial policy is needed to support domestic cleantech industries on the one hand and to promote targeted direct investment on the other. Just as the United States is already doing.
Brian Niccol will be given a private jet so that he can fulfill his new role as Starbucks CEO. Niccol is said to still live in California, despite the US coffee chain’s headquarters being much further north in Seattle. It would perhaps be better for Starbucks’s future if Niccol used his jet for regular trips to China. After all, that is where the company’s biggest problems are.
The problem with the future boss, who starts his job in September, is that Niccol has virtually no China experience. Starbucks chose him because he successfully led his previous employer, the US fast food chain Chipotle Mexican Grill, out of a crisis after a food scandal. However, Chipotle does not operate in China and Niccol has not had any specific leadership roles in his career that would have brought him into direct contact with the Chinese market.
This lack of experience with China could now pose a challenge. After all, current developments in China are alarming for Starbucks. Sales in the region fell by 14 percent in the last quarter alone compared to the previous year, despite coffee becoming increasingly popular in China. On the one hand, the declining customer numbers are due to the general weak consumption in China. However, another important factor is the extremely tough competition.
The most dangerous Chinese contender for Starbucks is Luckin Coffee. Just a few years ago, the company seemed to be on the brink of failure. In 2020, it became known that Luckin Coffee had massively falsified its sales to improve its financial figures. The result was a delisting from the US Nasdaq stock exchange. However, the investor fraud had no impact on the company’s expansion in China.
Luckin Coffee has over 16,000 stores in China, while Starbucks operates around 7,300. This gives Luckin Coffee a much larger presence, especially in smaller cities. In light of declining sales, the impact of the announced China expansion to 9,000 stores nationwide by the end of 2025 is crucial for Starbucks.
There’s no denying that the company is making every effort to appeal to its Chinese customers. Earlier this year, Starbucks made a splash by launching a pork-flavored coffee – well aware that Chinese tastes often run counter to Western consumption patterns.
Competition with Luckin Coffee will also increase massively for Starbucks outside China. The company already presents the Americans with growing competition in Southeast Asia and is also looking to expand into the USA.
So Brian Niccol, a keen golfer who was named Business Person of the Year by both Bloomberg and Fortune in 2019, has his work cut out for him. The 50-year-old is generally held responsible for the huge upswing of the Mexican barbecue restaurant Chipotle, which Niccol ran from 2018 until a few weeks ago. The company doubled its revenue and multiplied its profits under Niccol’s wing. Chipotle’s share price soared during this time. He was popular with employees because he expanded employee benefits.
Only time will tell whether he will choose the same strategy for Starbucks’ Chinese market. Niccol’s decisions are reportedly worth a package to the coffee chain that could earn the new CEO up to 113 million US dollars during his tenure. “Niccol has proven himself to be one of the most effective leaders in our industry, generating significant financial returns over many years,” a Starbucks spokesperson told Fortune.
Starbucks’ share price has already made a big leap. When the news of Niccol’s appointment became public, the company’s shares climbed 24.5 percent on the US stock exchange, while Chipotle fell by 7.5 percent. Joern Petring
What looks like a painting of a barren tree is actually a bird’s-eye view of a watercourse at the edge of a country road, visible at the bottom of the picture. The photo was taken by photographer Tang Dehong in Nyima, Tibet.
