WEBVTT - Power Play: EU Courts Chinese Battery Manufacturers 0:00:00.320 --> 0:00:02.840 This is Tom Rowland's Reese and you're listening to Switched on, 0:00:03.040 --> 0:00:06.040 the podcast brought to you by BNF. In an era 0:00:06.120 --> 0:00:09.600 of trade wars, tariffs and global oversupply of key renewable technologies, 0:00:09.760 --> 0:00:13.320 keeping the European Union's battery manufacturing sect competitive is proving 0:00:13.320 --> 0:00:15.880 a challenge. In a bid to stimulate growth and secure 0:00:15.880 --> 0:00:19.919 its domestic automotive industry, the EU proposed its Industrial Action Plan, 0:00:20.079 --> 0:00:23.360 bringing about a new protectionist stance for Europe. Where others 0:00:23.360 --> 0:00:26.280 have thrown up near insurmountable barriers to entry, the EU's 0:00:26.320 --> 0:00:28.280 plan is somewhat different and could see some of the 0:00:28.360 --> 0:00:31.960 Chinese battery giants enter interjoint ventures with European companies to 0:00:32.000 --> 0:00:35.360 build out the manufacturing capacity on the continent at scale. 0:00:35.479 --> 0:00:37.960 And seeing as we're discussing batteries today, we also take 0:00:37.960 --> 0:00:40.760 time to assess BYD's brand new pack. The company says 0:00:40.800 --> 0:00:42.600 that some of their new evs will soon be able 0:00:42.600 --> 0:00:44.600 to add two hundred and fifty miles range in just 0:00:44.680 --> 0:00:47.360 five minutes of charging. This battery could potentially be a 0:00:47.360 --> 0:00:49.960 game changer. Today I'm joined by b and EF energy 0:00:49.960 --> 0:00:52.600 storage analyst Andy Leach and from our Trade and Supply 0:00:52.680 --> 0:00:55.639 Chains Team analyst Matthew Hales, who share findings from their 0:00:55.640 --> 0:00:59.480 recently released research notes titled Plan to save EU battery making, 0:00:59.520 --> 0:01:03.280 Marx Protect Shift and Chinese battery makers double down on 0:01:03.360 --> 0:01:06.080 European factories, which b and EF clients can find at 0:01:06.120 --> 0:01:09.319 BNF go on the Bloomberg terminal or on BNF dot com. 0:01:09.400 --> 0:01:22.080 All right, let's get to talking about EU battery manufacturing. Andy, 0:01:22.280 --> 0:01:22.840 welcome to. 0:01:22.800 --> 0:01:24.280 The pod, Thank you very much. 0:01:24.640 --> 0:01:26.160 And Matthew welcome to the pod. 0:01:26.319 --> 0:01:27.680 Thank you very much for having me back. 0:01:28.080 --> 0:01:30.640 So this EU action plan around batteries, can you tell 0:01:30.720 --> 0:01:32.920 us what it's all about before we dive into the details. 0:01:33.120 --> 0:01:33.680 Absolutely. 0:01:33.760 --> 0:01:33.840 So. 0:01:34.280 --> 0:01:37.080 The kind of the main outline of what this policy 0:01:37.160 --> 0:01:40.280 is about is it's a action plan about the auto 0:01:40.360 --> 0:01:43.320 industry in the EU. It comes from a kind of 0:01:43.480 --> 0:01:46.480 collaborative discussion that the EU and auto industry players have 0:01:46.520 --> 0:01:50.160 been having over the last month, and it's a proposed plan. 0:01:50.200 --> 0:01:53.760 It's not a policy legislation in itself. Everything within this 0:01:53.840 --> 0:01:56.840 document still has to go through the EU policy process, 0:01:56.840 --> 0:01:58.400 which can take up to a year. Might be a 0:01:58.400 --> 0:02:01.440 bit quicker given the importance of this stuff, but because 0:02:01.440 --> 0:02:04.640 it's to do with the automotive industry and the transition. 0:02:04.920 --> 0:02:08.400 It contains a lot about EV manufacturing and therefore batteries. 0:02:08.760 --> 0:02:10.920 And just before we go into the details, I mean 0:02:10.960 --> 0:02:13.679 you mentioned it might become law in less than a year. 0:02:13.800 --> 0:02:16.280 I mean, do you feel like there's broad political consensus 0:02:16.360 --> 0:02:17.480 that this is a good thing. 0:02:17.880 --> 0:02:23.000 Absolutely, So many of the automakers have been under pressure 0:02:23.160 --> 0:02:26.120 at the moment with the emission standards that the European 0:02:26.240 --> 0:02:28.960 Union has set. So what those emission standards are is 0:02:29.040 --> 0:02:32.240 that by twenty twenty five, so this year, automakers were 0:02:32.240 --> 0:02:36.440 supposed to reduce the emissions of the fleet of cars 0:02:36.440 --> 0:02:39.320 that they produce compared to twenty twenty one levels by 0:02:39.360 --> 0:02:43.280 fifteen percent. Given the intense price competition from Chinese electric 0:02:43.360 --> 0:02:47.720 vehicles coming into Europe and also slower EV demand in Europe, 0:02:47.760 --> 0:02:49.920 what this has led to is it's pretty tricky for 0:02:50.000 --> 0:02:53.840 auto makers to meet those targets, and so the EU 0:02:53.960 --> 0:02:57.079 is offered to, instead of having stringent twenty twenty five targets, 0:02:57.280 --> 0:03:00.800 spread those reductions between twenty twenty five and two twenty seven. 0:03:01.120 --> 0:03:03.160 I'm just curious to know about how this fits into 0:03:03.200 --> 0:03:05.920 the broader context of the EU's on shuring ambitions. And 0:03:06.400 --> 0:03:10.080 you know, one just very sort of basic question is, 0:03:10.320 --> 0:03:13.240 given what you've just said, could the European automotive sector 0:03:13.600 --> 0:03:17.040 not just rely on batteries imported from China in order 0:03:17.080 --> 0:03:19.720 to scale their EV manufacturing and sort of meet those 0:03:19.760 --> 0:03:21.440 stringent emissions requirements. 0:03:22.000 --> 0:03:24.600 Yes, the short answer is yes, they can do this. However, 0:03:24.840 --> 0:03:27.799 this would mean a loss of jobs in EU countries 0:03:27.840 --> 0:03:32.480 where the automotive industry has been instrumental in providing industrial jobs. 0:03:32.480 --> 0:03:36.520 Across many countries in the EU, there are also local 0:03:36.680 --> 0:03:40.080 battery manufacturing facilities. These are typically at the minute owned 0:03:40.280 --> 0:03:43.240 and operated by companies which are based out of East Asia, 0:03:43.320 --> 0:03:45.680 not actually China too much at the minute, but mostly 0:03:45.760 --> 0:03:49.600 South Korean and Japanese companies like LG, Samsung and Panasonic. 0:03:49.920 --> 0:03:51.880 Just to jump in and give some sort of broader 0:03:51.880 --> 0:03:54.960 context on the eve's on shoring ambitions and how this 0:03:55.000 --> 0:03:57.320 plays into it, I mean, if you're going through the timeline. 0:03:57.440 --> 0:04:00.680 In twenty twenty three, the EU reveal the Net Zero 0:04:00.840 --> 0:04:03.440 Industry Act, and what that was was a policy in 0:04:03.480 --> 0:04:07.680 which the EU first staked out targets for domestic manufacturing 0:04:07.760 --> 0:04:10.120 of clean technologies. That's all the bits that we need 0:04:10.160 --> 0:04:13.360 to achieve the energy transition and then within that year, 0:04:13.400 --> 0:04:15.520 in twenty twenty three and twenty twenty four, the EU 0:04:15.640 --> 0:04:18.120 and different member states in Europe were working out how 0:04:18.120 --> 0:04:21.240 to fund these industries, what pots of money to use, 0:04:21.240 --> 0:04:24.280 and how that would all work. The Commission asked Mario Draghi, 0:04:24.560 --> 0:04:28.599 the ex Prime Minister of Italy, to write a report 0:04:28.640 --> 0:04:31.800 about how the EU was lacking competitiveness, where it was 0:04:31.880 --> 0:04:34.880 lacking competitors and what reform was needed. That came out 0:04:34.960 --> 0:04:37.279 the end of twenty twenty four, and the EU Commission 0:04:37.360 --> 0:04:40.000 looked at what it should be implementing, and in twenty 0:04:40.080 --> 0:04:42.520 twenty five we've had what I can only describe as 0:04:42.520 --> 0:04:45.040 a flurry of policies. In the earliest part of the 0:04:45.120 --> 0:04:47.840 year we had something called the Competitiveness Compass, pretty much 0:04:47.920 --> 0:04:50.800 laying out how the EU is going to be regulating 0:04:51.000 --> 0:04:53.520 and writing new legislation over the next couple of years 0:04:53.520 --> 0:04:55.640 to achieve its on shoring goals. We then had the 0:04:55.640 --> 0:04:59.119 Clean Industrial Deal, looking more at heavy industries, but also 0:04:59.120 --> 0:05:01.760 there's some focus on on clean technologies. And then we 0:05:01.800 --> 0:05:04.880 have this in this action Plan for the automotive sector. 0:05:04.760 --> 0:05:07.400 And the goal is very much focused on on showing 0:05:07.440 --> 0:05:10.920 the entire supply chain for well, not just electric vehicles, 0:05:10.920 --> 0:05:13.360 but because we're talking about batteries, I suppose for this 0:05:13.400 --> 0:05:16.719 podcast specific electric vehicles, aiming to ensure the entire battery 0:05:16.800 --> 0:05:20.320 chain without you know, minimizing foreign dependencies. 0:05:19.680 --> 0:05:23.560 There absolutely so, the Netze Industry Act staked out targets 0:05:23.720 --> 0:05:26.840 across a bunch of technology. So across all these different technologies, 0:05:26.920 --> 0:05:30.719 the EU wants to meet forty percent of demand in 0:05:30.800 --> 0:05:34.000 twenty thirty for these different products. And this ranges quite 0:05:34.000 --> 0:05:37.000 a lot between the different types of technology. So batteries, 0:05:37.040 --> 0:05:39.760 for example, is a ninety percent target, which is much 0:05:39.839 --> 0:05:40.400 much higher. 0:05:40.640 --> 0:05:42.920 There's something I just want to sort of really fundamentally 0:05:43.200 --> 0:05:44.880 sort of get your take on, is whether this is 0:05:44.960 --> 0:05:49.039 good strategy because ninety percent for batteries and industry whether 0:05:49.040 --> 0:05:51.680 the EU, to my understanding, is quite a long way 0:05:51.720 --> 0:05:55.599 behind China, But that is critical to another industry, automotive, 0:05:55.800 --> 0:05:58.200 where the EU is not, you know, a million miles 0:05:58.240 --> 0:06:00.760 behind China, but needs to evolve to a electric vehicles. 0:06:00.800 --> 0:06:03.400 If we believe that's the future, then is it not 0:06:03.720 --> 0:06:08.200 creating its own roadblock to itself? If you know, by 0:06:08.200 --> 0:06:12.560 trying to own the entire supply chain so fully, is 0:06:12.600 --> 0:06:14.800 it not a gamble that you're going to lose the 0:06:14.839 --> 0:06:17.920 whole supply chain in terms of competitiveness, whereas a safe 0:06:17.960 --> 0:06:19.760 option might be to say, Okay, we're not going to 0:06:19.760 --> 0:06:22.200 compete with China on batteries, but we can make better 0:06:22.279 --> 0:06:25.200 cars than China, so let's focus on doing that using 0:06:25.320 --> 0:06:26.160 Chinese batteries. 0:06:26.560 --> 0:06:28.520 I think you're hitting the nail on the head with that, 0:06:28.560 --> 0:06:32.599 tom So the EU on capacity terms, is far behind 0:06:32.720 --> 0:06:36.280 China in cell manufacturing, but put even worse in things 0:06:36.279 --> 0:06:40.520 like component manufacturing anodes, cathodes, separators, and electrolyte. This industry 0:06:40.760 --> 0:06:44.000 is lacking and part of the problem has been previous policy. 0:06:44.120 --> 0:06:47.240 So other policy incentives have really focused around the big 0:06:47.240 --> 0:06:50.599 ticket item of cell manufacturing, pouring large amounts of money 0:06:50.720 --> 0:06:53.680 and subsidy into this, whereas components and other parts of 0:06:53.680 --> 0:06:56.360 the supply chain haven't received as much help, and as 0:06:56.360 --> 0:06:59.600 a consequence, those announcements haven't come. Now, trying to force 0:06:59.680 --> 0:07:02.000 this in a relatively short period of time going to 0:07:02.040 --> 0:07:05.200 twenty thirty is certainly going to be a challenge, particularly 0:07:05.560 --> 0:07:08.840 as Chinese manufacturers like bide c Atl and others are 0:07:08.880 --> 0:07:11.960 continuing to improve their products. So you're competing against the 0:07:12.000 --> 0:07:13.040 moving targets as well. 0:07:13.360 --> 0:07:16.840 So I think we've kind of set the broader landscape 0:07:16.920 --> 0:07:19.040 and you know, we've you've kind of painted the picture 0:07:19.080 --> 0:07:22.920 of the EU has targets, it has policies in the pipeline. 0:07:22.960 --> 0:07:26.080 Tell me about what's actually been happening in the European 0:07:26.120 --> 0:07:28.280 battery manufacturing space, because I think we've been talking about 0:07:28.320 --> 0:07:31.080 it in slightly abstract right now, but yeah, be good 0:07:31.080 --> 0:07:32.560 to get some more detail on that. 0:07:32.800 --> 0:07:35.600 Sure. So, as I mentioned, making batteries in the EU 0:07:36.120 --> 0:07:39.960 has to date largely been companies based in Asia, and 0:07:40.000 --> 0:07:42.000 as I said that of South Korea and Japan at 0:07:42.040 --> 0:07:44.320 the minute, and more and more of the announcements are 0:07:44.360 --> 0:07:46.640 coming from companies in China as well now. So in 0:07:46.680 --> 0:07:49.119 the start of this year we saw CATL, the world's 0:07:49.200 --> 0:07:53.960 largest battery manufacturing company, and CALB, another large Chinese manufacturer, 0:07:54.040 --> 0:07:58.119 both pressing ahead with billions of euros of investment seven 0:07:58.160 --> 0:08:01.520 and two billion, respectively. So seven billion euros for coatl's 0:08:01.520 --> 0:08:04.440 one hundred gigawor toarer factory in Hungary and two billion 0:08:04.640 --> 0:08:08.400 for Colb's fifteen gigaar tower factory in Portugal. And that 0:08:08.560 --> 0:08:11.000 is in front of the backdrop of the United States 0:08:11.000 --> 0:08:13.760 making it more difficult to invest. And at the same time, 0:08:13.800 --> 0:08:17.600 in Europe you're having local companies such as Northfault really struggling, 0:08:17.640 --> 0:08:19.360 filing for bankruptcy in the US at the end of 0:08:19.400 --> 0:08:22.520 last year and filing for bankruptcy at home only last month. 0:08:22.680 --> 0:08:25.480 So there is a battery industry in Europe. People are 0:08:25.520 --> 0:08:27.600 putting lots of money in but at the minute, the 0:08:27.680 --> 0:08:31.360 vast majority of capacity that exists is owned by Asian players, 0:08:31.360 --> 0:08:33.720 and a lot of the capacity which is likely to 0:08:33.720 --> 0:08:35.679 come online in the near future is probably going to 0:08:35.679 --> 0:08:37.800 be coming from work with Chinese players. 0:08:38.000 --> 0:08:41.760 So if Asian players are investing in manufacturing capacity in Europe, 0:08:41.880 --> 0:08:45.080 you know, from an EU perspective, that's not necessarily a 0:08:45.120 --> 0:08:48.439 bad thing. But I mean, is that perceived as something 0:08:48.520 --> 0:08:51.199 that the EU wants to try and balance out and 0:08:51.400 --> 0:08:53.920 more generally, how does the action plan shake up this 0:08:54.000 --> 0:08:55.120 picture you've just painted. 0:08:55.240 --> 0:08:57.520 I don't think it's a bad thing. As I mentioned earlier, 0:08:57.600 --> 0:09:00.280 Coatl is the largest battery of manufacturing company in the world. 0:09:00.360 --> 0:09:02.880 But not only are they the largest, but themselves among 0:09:02.920 --> 0:09:06.640 with others like Goshen and coelb BYD, they make very 0:09:06.679 --> 0:09:09.480 good quality products. So it's not like that they're making 0:09:09.800 --> 0:09:11.640 less good products. They're actually making some of the world 0:09:11.720 --> 0:09:14.040 leading products these companies. So I think it's good to 0:09:14.080 --> 0:09:16.760 have these companies building factories in Europe, and if they do, 0:09:16.840 --> 0:09:18.400 then that does come with local jobs. 0:09:18.640 --> 0:09:20.199 I mean, just as Andy was saying, I think, I 0:09:20.240 --> 0:09:22.880 think really what the EU Commission has done with this 0:09:23.200 --> 0:09:26.240 policy plan is it's just taken a stock take over 0:09:26.400 --> 0:09:29.120 how the battery industry has developed in Europe, realized that 0:09:29.200 --> 0:09:33.000 the homegrown manufacturers like Northfolt haven't been very successful where 0:09:33.120 --> 0:09:36.160 East Asian companies have been. And they're basically trying to 0:09:36.160 --> 0:09:39.520 come up with a way of incentivizing joint ventures between 0:09:39.679 --> 0:09:43.559 East Asian companies and European countries to have some level 0:09:43.600 --> 0:09:46.800 of knowledge transfer happen within Europe. And as Andy says, 0:09:46.960 --> 0:09:47.680 local jobs. 0:09:47.960 --> 0:09:51.200 That's interesting. So the key thing here is not about, 0:09:51.320 --> 0:09:54.680 you know, making it that European owned companies have some 0:09:54.760 --> 0:09:58.160 kind of unfair advantage in Europe. It's about joint ventures 0:09:58.240 --> 0:10:01.160 and ensuring knowledge transfer if there are is going to 0:10:01.200 --> 0:10:04.120 be manufacturing located in Europe. Is that really the sort 0:10:04.160 --> 0:10:06.160 of the essence of the action plan. 0:10:06.600 --> 0:10:09.400 So the action plan has got multiple elements and I 0:10:09.440 --> 0:10:11.920 think that's one of the main takeaways that we had 0:10:11.960 --> 0:10:14.040 from it. It's a bit of a shift from what 0:10:14.080 --> 0:10:16.240 the EU was saying before, where it was trying to 0:10:16.320 --> 0:10:19.720 have its own manufacturers make the batteries. This is something 0:10:19.760 --> 0:10:22.960 new in the clean tech space. This has done quite 0:10:22.960 --> 0:10:25.840 a lot. This is how China became so competitive in 0:10:26.160 --> 0:10:28.680 areas like solar back in the day, was through imposing 0:10:28.760 --> 0:10:31.600 joint ventures. And so what the Action Plan is doing 0:10:31.679 --> 0:10:33.800 is it's kind of a signal shift that the EU 0:10:33.880 --> 0:10:35.280 is open to these policies. 0:10:35.559 --> 0:10:38.079 So, I mean, we'll get onto the US in a second, 0:10:38.120 --> 0:10:40.400 because it's hard not to. But what's specifically in the 0:10:40.440 --> 0:10:44.239 Action Plan is there that is sort of incentivizing slash 0:10:44.360 --> 0:10:46.240 forcing joint ventures to happen. 0:10:46.840 --> 0:10:50.480 There's a couple of elements. The first is that there's 0:10:50.559 --> 0:10:53.559 an idea that foreign direct investment rules might be tweaked 0:10:53.600 --> 0:10:56.640 within the EU, so that if a East Asian company 0:10:56.679 --> 0:10:59.240 was trying to set up a manufacturing facility in the EU, 0:10:59.360 --> 0:11:02.280 there would have to be some form of joint venture happening. 0:11:02.520 --> 0:11:04.880 It's not clear at all at this point how that 0:11:04.920 --> 0:11:07.880 will be enforced, how strict that would be, what that 0:11:07.920 --> 0:11:10.720 will entail, but that will become apparent over the coming months. 0:11:10.880 --> 0:11:14.040 There's a second element of this, which is the EU 0:11:14.440 --> 0:11:18.800 is looking at something they've phrased as European content requirements. 0:11:19.080 --> 0:11:21.760 This is something that the EU has generally stayed away 0:11:22.160 --> 0:11:25.600 from before, just because the term local content requirements is 0:11:25.840 --> 0:11:28.600 seen as a breach of international trade law. A lot 0:11:28.640 --> 0:11:31.319 of the time, the EU is strongly committed to upholding 0:11:31.559 --> 0:11:35.079 WTO rules and being one of the free trade blocks 0:11:35.440 --> 0:11:38.960 in the world, but there's a growing shift happening within 0:11:39.000 --> 0:11:41.839 the Commission's mindset that they're going to have to start 0:11:41.840 --> 0:11:46.160 incentivizing European manufacturing in ways that they haven't previously done. 0:11:46.360 --> 0:11:48.559 So, you know, we've kind of been hinting at the 0:11:48.960 --> 0:11:53.160 US and we're recording this after America's Liberation Day with 0:11:53.559 --> 0:11:57.000 sort of an announcement of broad ranging tariffs around the world, 0:11:57.280 --> 0:12:00.920 and you know this is there were tariffs implemented before 0:12:00.960 --> 0:12:02.760 that they are more targeted and they'll be I'm sure 0:12:02.760 --> 0:12:04.920 there'll be some afterwards. But we're living in this crowd 0:12:04.960 --> 0:12:07.840 of a brewing global trade war with the US kind 0:12:07.880 --> 0:12:10.640 of at the center of the melee, and the EU 0:12:10.760 --> 0:12:15.559 has internet rejected protectionist policies with these announcements. Do you 0:12:15.600 --> 0:12:18.280 think that things like local content rules could start playing 0:12:18.320 --> 0:12:19.079 in a new direction. 0:12:19.760 --> 0:12:22.959 Absolutely so. I think the European content requirements is a 0:12:23.000 --> 0:12:26.000 pretty big shift on the EU front. If it's required 0:12:26.040 --> 0:12:28.959 that evs sold in the EU must have some form 0:12:29.000 --> 0:12:32.160 of a European battery, that's quite a big shift what 0:12:32.480 --> 0:12:34.680 the traditional over the world. 0:12:34.760 --> 0:12:37.520 You say it must have a European battery, I mean, 0:12:37.559 --> 0:12:40.120 does that mean in order to qualify for certain incentives 0:12:40.320 --> 0:12:42.040 or do you mean that there's just going to be 0:12:42.320 --> 0:12:45.760 you can't have an EV that doesn't have a certain 0:12:45.800 --> 0:12:47.240 proportion of local content. 0:12:47.520 --> 0:12:50.559 From my understanding, the actual way it's going to be 0:12:50.600 --> 0:12:53.480 implemented hasn't really been set out, but it is most 0:12:53.600 --> 0:12:55.880 likely to be actually selling into the EU. 0:12:56.480 --> 0:12:59.559 Right from my perspective, there are many places around the 0:12:59.600 --> 0:13:02.120 world that produce a lot of batteries. China's the largest. 0:13:02.320 --> 0:13:06.040 China is already being hit by tariffs and by the US, 0:13:06.080 --> 0:13:07.920 I should say, and we'll wait to see how these 0:13:08.160 --> 0:13:11.719 additional tariffs play out, but China already has enough manufacturing 0:13:11.760 --> 0:13:14.640 capacity to produce multiples of the world's battery demand. And 0:13:14.679 --> 0:13:16.640 if you take one of the larger markets out like 0:13:16.679 --> 0:13:19.760 the US, with a relatively large EV market and a 0:13:19.800 --> 0:13:22.600 growing stationary storage market. Out of the mix, there's going 0:13:22.679 --> 0:13:24.480 to be a lot of factory capacity and a lot 0:13:24.480 --> 0:13:27.160 of batteries being produced that need somewhere to go, whether 0:13:27.240 --> 0:13:28.960 or not they end up in the EU. I mean, 0:13:29.080 --> 0:13:31.240 maybe some of these policies, once we know exactly how 0:13:31.280 --> 0:13:33.800 they'll be implemented, might make that tricky, but they're likely 0:13:33.840 --> 0:13:35.120 to end up somewhere exactly. 0:13:35.120 --> 0:13:39.400 And these new tariffs which have been unlocked, because the 0:13:39.480 --> 0:13:42.079 imports will be coming into the EU most likely as 0:13:42.120 --> 0:13:45.400 the second most high value market compared to the US, 0:13:45.559 --> 0:13:47.640 it's going to put additional pressure onto the Commission in 0:13:47.720 --> 0:13:49.520 terms of how does it deal with that, How does 0:13:49.559 --> 0:13:52.160 it deal with the pressure of imports coming from elsewhere 0:13:52.200 --> 0:13:54.320 which are more cost competitive than what it can produce 0:13:54.360 --> 0:13:55.800 at home. And the EU is going to have to 0:13:55.880 --> 0:13:58.840 figure out whether it will apply trade barriers in terms 0:13:58.880 --> 0:14:01.520 of higher tariff or whether it's going to use these 0:14:01.559 --> 0:14:03.400 local content rules in some form. 0:14:03.960 --> 0:14:06.760 It's so interesting just the mind shift the world has 0:14:06.800 --> 0:14:10.679 gone through in the last however many years. Because you know, 0:14:10.720 --> 0:14:14.800 when you're describing there's overcapacity in China, America has shut 0:14:14.840 --> 0:14:16.640 the door and says doesn't want any of the batteries. 0:14:17.320 --> 0:14:19.720 You would just think someone else is going to benefit 0:14:19.760 --> 0:14:22.680 from some really really really cheap batteries and you know, 0:14:22.800 --> 0:14:24.960 can create all sorts of value off the back of that. 0:14:25.120 --> 0:14:27.840 But instead that's not the direction things going. This is 0:14:27.840 --> 0:14:30.240 not really a question, it's just a reflection, I suppose, 0:14:30.440 --> 0:14:32.920 on how different things are from the sort of the 0:14:32.920 --> 0:14:35.360 neoliberal world of not very long ago. 0:14:35.720 --> 0:14:37.640 One comment I could add to that, and what we 0:14:37.680 --> 0:14:40.240 saw last year was a very sort of steep decline 0:14:40.240 --> 0:14:42.960 in battery prices, and this wasn't a regional thing but 0:14:43.000 --> 0:14:46.240 a sectoral thing. EV demand was slower than we'd anticipated, 0:14:46.320 --> 0:14:48.720 and as a consequence, there was you know, were seeing 0:14:48.760 --> 0:14:51.680 a similar thing with batteries being produced in battery capacity 0:14:51.720 --> 0:14:54.120 out there without the demand, but in this sense because 0:14:54.160 --> 0:14:57.560 of consumer pressures rather than geopolitical ones. And as a consequence, 0:14:57.600 --> 0:15:01.680 we saw significantly more stationary storage build out than we'd anticipated. 0:15:01.680 --> 0:15:04.479 So while EV sales were down, it meant that another 0:15:04.560 --> 0:15:08.080 demand sector in stationary storage was up. And it's possible 0:15:08.240 --> 0:15:10.960 that we see something similar happen with the US making 0:15:11.000 --> 0:15:13.120 it difficult for imported batteries to come in. 0:15:13.400 --> 0:15:16.960 Yeah, it's interesting I remember my first ever time co 0:15:17.040 --> 0:15:20.520 hosting the switch to On podcast. We were talking about 0:15:20.760 --> 0:15:24.760 US protectionism around solar, and I remember saying, solar is 0:15:24.800 --> 0:15:30.080 famously this low margin business like manufacturing PV because of 0:15:30.120 --> 0:15:32.120 you know, over capacity, and so I was sort of 0:15:32.160 --> 0:15:35.120 just saying, like, is this really an industry worth fighting over? 0:15:35.160 --> 0:15:36.800 There must be other parts of the value chain with 0:15:36.840 --> 0:15:39.360 the margins are bigger. I find myself wondering, you know, 0:15:39.440 --> 0:15:41.600 listening to what you're saying, whether the same can be 0:15:41.680 --> 0:15:44.840 said around some of this fight to secure a battery 0:15:45.560 --> 0:15:48.520 manufacturing industry. Is you know, in the long term future 0:15:48.520 --> 0:15:50.200 of electric vehicles, is this just going to be the 0:15:50.280 --> 0:15:53.320 really low margin part of the business is there? Is 0:15:53.360 --> 0:15:56.520 it sort of somewhat misguided to be although it's a 0:15:56.560 --> 0:15:59.120 significant fraction of the value of an ev right now, 0:15:59.520 --> 0:16:01.160 do you go what I'm it makes it hard to 0:16:01.200 --> 0:16:03.640 see how anyone's going to make any money in this 0:16:03.800 --> 0:16:05.680 environment that seems to be evolving. 0:16:06.080 --> 0:16:08.440 I think there's a few different pressures at play, and 0:16:08.920 --> 0:16:11.120 cost is of course one of them, but there's also 0:16:11.160 --> 0:16:14.760 the geopolitical risk and supply chain risk of trade. And 0:16:14.960 --> 0:16:18.040 you mentioned when we're recording this podcast. Any days after 0:16:18.080 --> 0:16:20.200 a ginormous change in or what looks like it's going 0:16:20.240 --> 0:16:22.960 to be an absolutely ginormous change in global trade. Being 0:16:22.960 --> 0:16:25.640 able to have a secure supply chain is looking like 0:16:25.680 --> 0:16:28.040 a short supply chain in where we are today and 0:16:28.080 --> 0:16:30.800 the political and geopolitical climate we find ourselves in. So 0:16:30.840 --> 0:16:33.120 the shorter you can make that supply chain, the more 0:16:33.120 --> 0:16:35.880 confident and the less risk there is in that supply chain. 0:16:35.920 --> 0:16:38.240 And that's something that maybe five or ten years ago 0:16:38.400 --> 0:16:41.080 was less of a risk, and as a consequence, there's 0:16:41.080 --> 0:16:42.600 been a bit of a scramble in the last few 0:16:42.680 --> 0:16:45.280 years to try and unsure this. And yes, of course 0:16:45.280 --> 0:16:47.400 you need and want to be cost competitive, but there's 0:16:47.440 --> 0:16:50.240 also a supply chain risk play here as well. 0:16:50.400 --> 0:16:52.880 One thing, just to add to what Andy said there 0:16:53.080 --> 0:16:55.440 is the way that the EU and the US talks 0:16:55.440 --> 0:16:58.160 about this is different, and I think that's really interesting. 0:16:58.280 --> 0:17:02.200 The US has for the first time with its auto tariffs, 0:17:02.480 --> 0:17:05.639 and now the reciprocal tariffs are being implemented using the 0:17:05.680 --> 0:17:08.600 same bit of legislation, and it's a direct call for 0:17:08.640 --> 0:17:11.320 putting tariffs on clean tech products as a result of 0:17:11.359 --> 0:17:14.680 a national security risk. In the EU, it's not talked 0:17:14.680 --> 0:17:19.280 about in the same way it's about reducing reliance increasing diversification, 0:17:19.520 --> 0:17:22.320 and so they're slightly different terms, but the end product, 0:17:22.320 --> 0:17:24.800 I think best motto that Andy just said there, it's 0:17:24.840 --> 0:17:26.520 best supply chains short supply chain. 0:17:26.880 --> 0:17:29.439 Just for the sake of definitions for those of you 0:17:29.560 --> 0:17:33.000 not familiar with the term that Andy used ginormous. That 0:17:33.200 --> 0:17:36.879 is a compound word that combines giant and enormous, so 0:17:36.920 --> 0:17:39.840 he means really big, really big changes happening around the world. 0:17:40.080 --> 0:17:42.600 So Andy, you remember of our battery team, it would 0:17:42.640 --> 0:17:45.520 be hard to not ask a quick question on BID's 0:17:45.720 --> 0:17:49.320 exciting new battery that has been making headlines. So what 0:17:49.480 --> 0:17:50.160 is the big deal? 0:17:50.440 --> 0:17:53.600 Great question, tom so, Bid, which is the world's largest 0:17:53.640 --> 0:17:57.160 seller of electric vehicles, last month announced a battery pack 0:17:57.200 --> 0:17:59.760 which in five minutes can add four hundred kilometers of 0:17:59.840 --> 0:18:02.600 very or two hundred and fifty miles. So this is 0:18:02.640 --> 0:18:07.119 bringing battery packs really close and similar to the experience 0:18:07.160 --> 0:18:11.040 of filling up an internal combustion engine tank with petrol 0:18:11.119 --> 0:18:11.680 or dieseled. 0:18:12.080 --> 0:18:16.160 So it has this impressive charging rate. How is that possible? 0:18:16.359 --> 0:18:19.679 Yeap. So typically when we talk about megawat charging, so 0:18:19.760 --> 0:18:22.560 mega what being a thousand killer charging that has been 0:18:22.560 --> 0:18:25.840 in the context of commercial vehicles, so vans and lorries 0:18:26.200 --> 0:18:28.480 semis if you're listening to this in the US, because 0:18:28.520 --> 0:18:31.320 the amount of power needed is very, very large, and 0:18:31.440 --> 0:18:34.320 the infrastructure likely is going to be more costly, and 0:18:34.320 --> 0:18:37.000 as a consequence, people are thinking about the bigger vehicles. 0:18:37.080 --> 0:18:39.399 This is the first time we've heard people talking about 0:18:39.440 --> 0:18:42.800 megawat charging, So a thousand killer Watch charging for passenger 0:18:42.840 --> 0:18:45.840 ev How is this possible? So we're still waiting for 0:18:45.880 --> 0:18:47.760 all of the details on this, but we know that 0:18:48.240 --> 0:18:51.120 they're talking about a dual gun technology, so this means 0:18:51.160 --> 0:18:54.560 maybe plugging two chargers into the same car. So this 0:18:54.600 --> 0:18:58.000 could potentially be a challenge if it's a busy charging 0:18:58.040 --> 0:19:01.000 station or something like this, but we can get that 0:19:01.080 --> 0:19:03.560 mega watch charging. The other thing to comment on here 0:19:03.640 --> 0:19:06.440 is the charging infrastructure is what we've been told so far, 0:19:06.680 --> 0:19:10.119 actually requires a battery in the charger. So in the 0:19:10.200 --> 0:19:12.240 charger when you go to your charging station, there needs 0:19:12.240 --> 0:19:14.200 to be a battery there because the amount of power 0:19:14.240 --> 0:19:16.479 required is too great to be pulling that straight from 0:19:16.480 --> 0:19:18.560 the grid into the car. So there's a battery and 0:19:18.600 --> 0:19:21.639 you're charging your car from a stationary battery at the 0:19:21.720 --> 0:19:24.040 charging station to sort of reduce some of the constraints 0:19:24.080 --> 0:19:25.280 that maybe the grid would bring. 0:19:25.400 --> 0:19:27.439 I mean, as a battery analyst, you must be loving this. 0:19:27.760 --> 0:19:30.840 It's a battery that requires demand for more batteries. 0:19:31.240 --> 0:19:34.880