Ultimately, local residents may feel disconnected from these batteries and the green energy transition they enable, as Hungarians are not the target consumers. Most lithium batteries produced in Hungary are intended for car markets in Western Europe, where consumers are wealthier and are already convinced of the need to switch to pristine energy. “The average Hungarian has money to buy a 10-year-old used car from Germany, usually powered by diesel or gas. They don’t have money to buy electric vehicles,” says Bartók.
Snail-paced demand
It is worth remembering that not all international agreements announced by Chinese battery manufacturers have been effective. Of the 68 factory investments we found, at least five were suspended or officially canceled, in some cases even after construction had begun. This is partly because consumer adoption of electric vehicles in these markets has proven to be a much more gradual process than in China.
Chinese battery makers were planning aggressive global expansion at a time when governments were providing generous subsidies for factory projects and tax breaks to consumers who bought electric cars, and now, with their enthusiasm waning, they must recalibrate. In the United States, the Inflation Control Act passed under Joe Biden encouraged both Chinese and US companies to build factories, but then electric vehicle subsidies set out in the law were canceled during Donald Trump’s presidency. Even Europe, which previously set itself the goal of completely stopping the production of gas cars by 2035, now has doubts.
“Clearly, battery makers would be less incentivized to make large investments if they weren’t sure what the policy direction was,” says Alexander Brown, a senior industrial policy analyst at the Mercator Institute for China Studies.
What if the world doesn’t want electric vehicles? Some battery companies are already implementing a contingency plan: switch to energy storage. Ford, which is building a massive battery plant in Michigan using CATL manufacturing technology, announced in December that it will switch from the production of electric vehicle batteries to the production of batteries for energy storage. Envision AESC, another gigantic Chinese battery company whose U.S. expansion plans were on hold for much of last year, also recently announced that its existing factory in Tennessee would stop producing electric vehicle batteries in favor of rechargeable batteries.
While some parts of the time-honored car industry may lobby against electric vehicles, everyone seems cheerful to have more batteries on the grid and in homes, which could prevent blackouts and even allow consumers to sell power back to the grid. (Well, at least almost all. Pakistan’s national utility operator and the Chinese banks that lend it money are not so cheerful with China’s battery growth, as the next piece of our package expertly discusses).
The good news is at least that energy storage technology has rarely been politicized. In the United States, both deeply Democratic California and Republican Texas have aggressively adopted grid-level battery storage, so China’s ambitions to build more factories are unlikely to be entirely wasted.
Reverse technology transfer
For partner companies and governments working with Chinese battery makers to relocate factories to their countries, the goal has always been clear: trade market access and subsidies for the promise that these companies will eventually train local workers to produce cutting-edge batteries themselves.
This irony should not be lost on anyone who pays attention to the global automotive industry. Over the past three decades, American, European, Japanese and Korean automakers have eagerly exchanged their technological know-how to gain access to the Chinese auto market. However, today this relationship has been reversed.