How has the current war affected the electric car sector? | technology

The electric car industry is no longer just a race between companies towards green energy or sustainability. Rather, it has turned into a complex geopolitical, economic and technological battlefield, where wars, conflicts between countries and disruptions in vital waterways have not only disrupted the supply chains of car companies, but have forced industry giants to make a radical decision, which is to abandon the global import model in exchange for self-manufacturing.

Historically, China controlled more than 75% of the global production of lithium-ion batteries, and with the increasing military tensions that threatened shipping routes in the Pacific and Indian Oceans, and the Suez Canal being affected by regional disputes, Western companies found themselves in a “technological hostage” dilemma.

According to a report issued by the British company BNEF in the first quarter of this year, the cost of shipping battery components increased by 140% as a result of changing ship routes away from conflict areas.

This reality has prompted companies such as Volkswagen and General Motors to accelerate their “vertical integration” strategy. The goal is no longer to buy batteries, but rather to manufacture them, and therefore companies invested in building what are known as “giant factories” within their continental borders.

According to data from the International Energy Agency (IEA), the percentage of cells manufactured internally by the car companies themselves rose from 15% in 2023 to approximately 45% by this year.

The battle of chips and semiconductors

Military crises have proven that the electronic chip industry is one of the most important areas affected by it, because it interferes in many industries, the largest of which is the electric car industry, as the current war has led to a severe shortage of rare gases such as neon and metals required for the manufacture of chips, many of which were sourced from burning conflict zones.

In response, companies such as Tesla, BYD, and Nio stopped waiting for traditional suppliers. Instead of purchasing ready-made chips, these companies moved to in-house design of the chips.

The strategic advantage in this was that self-manufacturing of chips allows the company to programmatically modify the “vehicle architecture” to be compatible with locally available components, which gives it tremendous flexibility if a certain type of imported connectors breaks.

Strategic Computing reports also indicate that companies that have their own chip design have been able to maintain 30% higher production rates compared to competitors who rely on total imports.

Software… digital sovereignty as a defensive shield

In light of the current war, “software code” has become more important than metal, and the prevailing trend now is software-defined vehicles. Companies that used to import operating systems and software from external technology companies have now begun to build huge data centers and develop their own systems.

Relying on cloud software hosted in other countries poses a security risk in times of conflict, and according to a report from the American company McKinsey on automotive security, investing in “software sovereignty” has become a top priority to avoid cross-border cyber attacks that may target fleets of electric cars during international crises.

Raw material recycling

With the difficulty of importing raw materials such as lithium, cobalt, and manganese from areas affected by wars, the concept of “urban mining” emerged, as automobile companies began building huge facilities attached to their factories to recycle old batteries, extract raw materials from them, and reuse them immediately in new production lines.

According to a study from the American “Stanford University”, modern recycling techniques allow the recovery of up to 98% of the precious metals inside the battery, and this transformation means that the company no longer needs to import raw material from abroad, but rather relies on the closed cycle for its previous products.

Future expectations

Experts say that “self-industrialization” is not just a temporary reaction to war, but rather a restructuring of the concept of industrial capitalism. The initial cost of this transformation is very high, and requires billions of dollars in capital investments, but it creates companies that are “immune” against shocks.

According to analysts at the American company Goldman Sachs, the consequences of this transformation include price stability to begin with, because in the long term, electric car prices will become less susceptible to fluctuations in global shipping.

There will also be an inseparable overlap between the automobile sector, the mining sector, and the software sector, in addition to regional competition, and the emergence of major industrial poles such as the European pole, the Chinese pole, and the American pole, competing in self-efficiency instead of global integration.

Therefore, according to observers, it seems that the current war has put a final nail in the coffin of the absolute industrial globalization of the automobile sector. The companies that will survive and prosper in the coming years will be the ones that not only own the best factories, but also possess the scientific material and technological sovereignty from mining to software.