Features
9 Oct 23

De-risking EV supply chain: Japan talks to Canada and Australia

Japan is turning its attention to Canada and Australia in its search of critical materials essential for electric vehicle (EV) batteries, driven by U.S. policies promoting China-free supply chains. Japanese automakers and battery companies are facing fierce competition for these resources, with South Korean competitors already establishing a presence in Canada and Australia and resource-rich nations like Indonesia and Chile restricting mineral exports.

Canada

Japan's commitment to diversify its EV supply chain is evident in the recent visit of Yasutoshi Nishimura, Japan's Minister of Economy, Trade and Industry, to Canada. During this visit, a memorandum of cooperation was signed to facilitate the development of battery material sources, such as nickel and lithium, through government subsidies for Japanese companies looking to enter Canada.

This visit was significant not only because it marked the first time in nearly a decade that a Japanese trade minister visited Canada but also because it involved meetings with three Canadian ministers, including Francois-Philippe Champagne, Minister of Innovation, Science, and Industry.

Executives from Panasonic Energy, a critical supplier to Tesla, and Prime Planet Energy & Solutions, a battery subsidiary of Toyota Motor, accompanied Nishimura, announcing plans to collaborate with Canadian companies to secure a potential supply of nickel and graphite, both vital battery materials.

Australia

Japan is also seeking collaboration with Australia, a neighboring Pacific nation. Representatives from both countries met in June and agreed to further discussions regarding the development of a supply chain for essential minerals that does not rely on China. Canada and Australia are seen as ideal partners due to their shared concerns about China's dominance in the industry.

Chinese influence in the EV market

China currently controls a significant portion of the world's refining capacity for EV materials, with a stronghold on processing. While lithium ore and lithium brine are primarily found in Australia and Chile, respectively, 65% of global processing, including refining, is conducted in China. China also accounts for 74% of cobalt processing and 17% of nickel processing.

Western governments are increasingly uneasy about China's dominance in this area. The U.S. Inflation Reduction Act offers tax credits for EV buyers, but these credits require a significant portion of the battery's critical minerals to come from domestic or free trade agreement countries. Canada has also taken steps to exclude Chinese state-owned companies from its lithium supply chain, creating opportunities for Japan.

Japan’s challenges

Japan faces an additional challenge as countries with rich reserves of nickel or lithium, such as Indonesia and Chile, restrict the export of unprocessed essential minerals. This narrowing of potential partner countries leaves Japan with limited options.

Japan also faces competition from South Korea, which boasts the largest battery industry outside of China. South Korea has been quicker to establish a presence in Canada and Australia's mineral industries.

Japanese companies are often criticized for their cautious approach to mining projects, preferring long-term supply contracts over direct investment. This approach limits their ability to secure materials in larger quantities or negotiate favorable terms. Japanese companies are also perceived as slower in striking investment deals compared to their South Korean counterparts.

(Data source: Nikkei Asia)

(Picture Credit: Shutterstock 2141882581)

Authored by: Yves Helven