How China Built a Battery Empire (And Why No One Can Catch Up)

Tesla's AI Division Under Pressure to Achieve Autonomous Vehicles by 2026 Tesla May Integrate Apple CarPlay Amid Growing Competition and Limited Model Variety Waymo Expands Robotaxi Services to Freeways in Major U.S. Cities How China Built a Battery Empire (And Why No One Can Catch Up) #China, #BatteryEmpire, #Tesla, #AutonomousVehicles, #Waymo, #Robotaxi, #AppleCarPlay

Episode Transcript

(00:00):
Welcome to Innovation Pulse, your quick no-nonsense update on the latest in clean tech and EVs.

(00:10):
First, we will cover the latest news. Tesla is set for a pivotal 2026 with RoboTaxi plans
amid challenges, and WeMo expands freeway rides, enhancing its autonomous leadership.
After this, we'll dive deep into China's dominance in the global electric vehicle
battery industry and explore what it means for the future. Stay tuned.

(00:36):
Let's now turn our attention to the stakes involved. Tesla's journey to autonomous
vehicles is intensifying. Ashok Elliswamy, Tesla's AI software VP, recently told the
autopilot and Optimus teams to prepare for their toughest year in 2026. This year is
crucial for Tesla to fulfill its decade-long promise of scalable, commercial, autonomous

(01:01):
tech. CEO Elon Musk has linked Tesla's future to ambitious projects, a RoboTaxi fleet and
the Optimus humanoid robot. He aims to launch autonomous taxis in 8 to 10 cities by year
end. Analyst Dan Ives values Tesla's AI potential at over $1 trillion, viewing it as a tech

(01:23):
disruptor, not just a car maker. However, challenges remain with increased pressure on the teams
and dismantling of Tesla's Dojo supercomputer team. Success in 2026 will determine whether
Tesla can transform its aspirations into reality and solidify its valuation as a leading AI
company. Apple CarPlay, a popular feature that lets

(01:49):
users project their phones onto car infotainment screens, might soon be available in Tesla's
electric vehicles. Despite its popularity, Tesla hasn't adopted CarPlay, with CEO Elon
Musk focusing on making Tesla's infotainment system fun by adding features like games and
unique sound effects. Instead of CarPlay, Tesla offers streaming services like Spotify,

(02:14):
Tidal and Apple Music. However, with Tesla's sales declining and competition increasing,
the company might reconsider. Sources suggest CarPlay could be integrated into Tesla's
in the coming months unless plans change internally. Tesla isn't alone in its initial
reluctance. Other automakers like Lucid and Rivian have also hesitated to incorporate CarPlay,

(02:38):
with concerns over user experience. Meanwhile, General Motors has removed CarPlay from its new EVs
and may extend this to other models. Waymo is expanding its autonomous vehicle services
to include freeway rides for RoboTaxi customers in Los Angeles, Phoenix and the San Francisco Bay

(03:00):
area. This marks a significant advancement as freeway driving presents unique challenges due
to higher speeds. Waymo's decision follows extensive testing and a strong safety record,
including over 100 million miles without a human driver. Unlike other companies, Waymo's RoboTaxi
operate without human specialists on board. The company is also planning to extend services to

(03:26):
new cities, including cold weather locations like Denver and Detroit, and is introducing
new vehicle models. Although safety concerns remain, Waymo maintains that its technology
is as reliable as human drivers. The company ensures its vehicles adhere to speed limits,
aiming to mitigate any potential increase in congestion. Despite competition,

(03:51):
Waymo is a leader in the fully autonomous ride-hailing sector.
And now, pivot our discussion towards the main clean tech topic.
Alright everyone, welcome back to Innovation Pulse. Today we're going to explore something

(04:11):
absolutely fascinating. How China went from basically nothing to completely dominating
the global electric vehicle battery industry in just two decades. We're talking about a country
that had only two EV battery manufacturers back in 2005, and now produces more than three quarters
of the world's lithium ion cells. It's an incredible industrial transformation story

(04:33):
that touches on everything from Olympic buses to geopolitical strategy.
Thanks for that intro, Donna. Yeah, this is such a compelling story, and I'm excited to dig into
it with you. So, hit me with your first question. Where do you want to start?
Let's go back to the beginning. What was the spark that got China into the EV battery game in the

(04:54):
first place? The Beijing Olympics in 2008 was really the catalyst. China wanted to host what
they called a green and high-tech games, so they deployed about 50 electric buses powered by lithium
ion batteries to transport athletes and officials. It was their first real foray into creating a
lithium ion battery industry for electric vehicles. The interesting thing is that this

(05:20):
campaign was set in motion immediately after Beijing won the Olympic bid in 2001, so they
were planning this for seven years. It laid all the groundwork for what would eventually become
their dominance in this sector. That's a great origin story. So what did the Chinese battery
industry actually look like before the Olympics push? It was practically non-existent. In late

(05:41):
2003, researchers at the Beijing New Materials Development Centre were tasked with analysing
China's lithium battery industry as part of Olympic preparations. What they found was striking.
The industry was very small. With only two EV battery producers, companies called Meng Guli
and Wang Xiang. In 2005, they hosted China's first conference for the lithium battery industry,

(06:08):
and even though all companies in the sector came, there were only about 200 people total.
To put that in perspective, CATL, which is now the world's largest EV battery maker,
was just a department inside a Japanese-owned company making batteries for gadgets.
BYD, now the second largest, had just entered the auto industry after making money from phone

(06:33):
batteries. Wow, 200 people. That's basically a small wedding. Fast forward to today, and what
does China control now? The transformation is staggering. Today, China produces more than three
quarters of all lithium ion batteries worldwide and is home to six out of the ten largest battery
makers on the planet. They dominate production at nearly every stage of the battery supply chain,

(06:59):
and they have about 85% of global battery production capacity compared to North America's 5%
and Europe's 7%. It's really become the king of an industry that's absolutely indispensable for
the world's 2050 net zero goals. So what made this meteoric rise possible? It couldn't have
just been Olympic buses. No, it was a combination of really deliberate factors. Two of the biggest

(07:24):
were a huge domestic market that was essentially walled off and preserved for local firms and
coordinated government support across the entire supply chain. On top of that, you had consumer
subsidies making EVs affordable, a state-sponsored rollout of charging networks so people could
actually use them, and eventually a policy that mandated automakers produce EVs.

(07:49):
But policy alone doesn't explain it. Chinese companies also proved incredibly adept at large
scale production and controlling costs, which are both absolutely key to battery manufacturing.
You mentioned this wasn't entirely homegrown technology. Where did lithium batteries actually
come from? The story of lithium batteries actually began beyond China's shores about 50 years ago

(08:14):
with three chemists, British-American Stanley Whittingham, American John Goodknow, and Japanese
Akira Yoshino. Their separate research, which earned them a joint Nobel Prize in 2019, built on
each other's work and led to the first commercially viable lithium ion battery in 1985, which Yoshino

(08:36):
built for Tokyo-based Asahi Kasei. Then in 1991, Sony worked with Asahi Kasei to bring the world's
first lithium ion batteries to market, and by 1996, Nissan teamed up with Sony to launch the world's
first lithium battery-powered car. So Japan was the pioneer here. How dominant were they initially?

(08:59):
Japan was absolutely number one for about a decade. At the turn of the century, Japanese firms accounted
for a staggering 93% of global market share, with electronics company Sanyo leading the charge.
South Korea was keenly trying to compete, and it wasn't until 2011 that South Korean Samsung

(09:19):
SDI actually overtook Japanese Panasonic to top the chart. So when China was doing its research
in the early 2000s, Japan had a massive lead and had established the entire foundation of this
technology. China clearly had some catching up to do. What was their long-term strategy?
Even before the Olympics, China was planning for the long game. In 2006, their cabinet launched a

(09:45):
science and technology scheme covering the next 15 years, and it included low emission and new
energy vehicles, or Aeneas as they call them, as one of 62 priority areas. They specifically
listed rechargeable power battery as a key technology for this area. Their goal was crystal clear.

(10:07):
Upgrade the vast manufacturing industry by 2020, so it would stop relying on cheap labor and start
winning with technological advantages. They wanted to move up the value chain.
And then 2009 was a pivotal year, right? What happened then?
2009 was huge. With the successful run of the Olympic e-buses under their belt,

(10:30):
China made a major move to adjust and revitalize its auto industry. For years,
Beijing had tried but failed to be a global contender in conventional cars with internal
combustion engines. But Chinese policymakers decided that EVs could be an opportunity for
the Chinese auto industry to leapfrog the West, because it was like a blank field where everybody

(10:54):
was starting from scratch. They launched a national plan that guided regional governments to build
supply chains and charging networks, supported domestic companies in R&D for EV technologies,
including batteries, and began the large-scale rollout of new energy buses with their 10 cities
and 1,000 vehicles program. Interesting that they were inspired to do this.

(11:19):
Did the US play any role in shaping China's thinking? Absolutely. China's determination
to promote EVs was partly inspired by watching what happened in the US. The US had waves of interest
in battery-powered vehicles, first during the 1970s oil crisis and again in the 1990s after
federal regulations to tackle air pollution. California launched a zero-emission vehicle

(11:44):
program as early as 1990 to improve air quality, which led to a Zev mandate that essentially
forced car companies like General Motors to invest in EVs. The Chinese government realized that EVs
were a stepping stone to what was later described as the fourth industrial revolution, an era driven

(12:07):
by digital technologies, and China wanted a place in it. But the US didn't capitalize on their early
start. What went wrong? The California EV push didn't lead to establishing a US lithium-ion battery
industry, partly because car and oil companies lobbied California to water down the Zev mandate.

(12:27):
They pushed for more support for fuel cells powered by hydrogen and hybrid cars, whose batteries used
non-lithium chemistries. Then in the 2000s the George W. Bush administration funded EV research
and development, and US startups made major progress on both batteries and cars. But then came the

(12:49):
2008 financial crisis and that first wave of US startups ran into massive financial difficulty.
The window basically closed on investing in clean energy, and all the people who had invested in it
got burned. That timing must have created an opportunity for China. How did they respond
to the financial crisis? While the US was struggling, China saw an opportunity. The Obama

(13:14):
administration launched new funding in 2009, but it was too late to save that first wave of renewable
companies from collapsing or selling their technologies. Many were actually bought by Chinese firms,
including Battery Company A123, a rising star with advanced lithium-ion battery technology
developed at MIT. Wang Xiang acquired it in 2013. Meanwhile, China launched an enormous 4 trillion

(13:41):
yuan stimulus plan, that's about $649 billion at the time, to counter the global financial crisis,
and part of it went toward energy saving and emissions reduction projects. This really ignited
the country's interest in renewable technologies, including Nevis.
So we're getting into the critical growth period. What happened between 2012 and 2020?

(14:05):
Those years were absolutely critical, as the government doubled down on putting EVs on the road.
They set an industrial roadmap with targets for the number of EVs to deploy, but more importantly,
it set technical requirements for EV and battery manufacturers to qualify for state support,
essentially pushing them to grow. In 2013, they made EV purchase subsidies available to

(14:30):
individual consumers, not just the public sector, which opened the floodgate to private car ownership.
The scale was enormous. In 2014 alone, China's central and regional government spent nearly
10 billion yuan on subsidies, and over eight years they'd hand out 200 billion yuan in total

(14:52):
tax rebates for new energy vehicles. Those are massive numbers. Did it work?
The investment yielded almost instant results. Both the number of any of these produced and sold
grew more than threefold in 2014 and 2015. The market share snowballed from just 1.3% in 2015

(15:13):
to 41% in 2024. That's incredible growth. But actually, an even bigger boost for the battery
industry was still coming. In 2015, China introduced a key rule that essentially walled off its huge
domestic market for Chinese battery firms. EV makers were mandated to use batteries from selected

(15:36):
suppliers if their cars were to qualify for consumer subsidies, and all 57 companies on the
government white list turned out to be Chinese. That's a pretty bold protectionist move. How did
that play out? It was brilliantly designed from a strategic standpoint. They created very specific
technical specifications that narrowly defined eligibility so that only Chinese battery companies

(16:02):
would qualify. Some South Korean companies had already started building factories in China,
only to find out they were completely shut out of the market. Chinese EV makers that had been using
foreign suppliers had to make last-minute switches to manufacturers like KTL and a few other domestic
firms that complied with the policy. That rule lasted four years and the sudden influx of new

(16:28):
customers propelled CATL, which had split from ATL in 2011 to become the world's largest EV battery
producer by 2017. They've held that title ever since. The timing of that policy seems crucial.
What else was happening to support the industry? The policy drive continued with the Made in China

(16:50):
2025 strategy, which aimed at helping the country grab the global vantage point for manufacturing
through technological innovation, with any Vs listed as a key area. Then in 2017,
riding on this momentum, they introduced a dual credit system for automakers.
It was partly based on California's Zevi program, but with a clever twist, it essentially demanded

(17:15):
that all automakers in China produce EVs to balance off the conventional cars they made
through a complex formula. The design pushed automakers to make more EVs to avoid unnecessary
cash spending. So this created a captive market for Chinese batteries? Exactly. As one analyst put it,
as an automaker, on one hand you had to produce EVs in China or face a financial penalty.

(17:41):
On the other hand, the EVs you were forced to produce wouldn't sell without Chinese batteries
because of that whitelist policy. So every automaker, Chinese, Korean, Japanese, American,
German, had to use Chinese batteries. This ballooning and protected market allowed companies like KATL

(18:02):
to work with advanced Western car makers on joint innovation,
which quickly brought up their skills and capabilities.
It sounds like the government-industry relationship was different from the West. How so?
The way China's EV and battery industries grew was fundamentally different.
The key was close partnership between government and industry. The government's massive investment

(18:26):
came with a clear goal, to build a strong EV manufacturing industry, and that goal was delivered
via fierce competition within the industry to decide which companies or technologies would
survive and thrive. It's like running rounds and rounds of industrial-wide horse races to pick the
fastest. This method is much more effective than the conventional model in Europe, North America,

(18:50):
and Japan, where industrial growth is often driven by a few major companies or consortiums.
This also means China can bring a technology from the lab to mass production very quickly.
Beyond government support, what other factors set Chinese battery makers apart?
There are three key elements, supply chain, know-how and manufacturing.

(19:15):
Top Chinese battery makers like KATL and BYD run on a vertically integrated business model,
meaning they often own their suppliers fully or partly. This helps control costs and ensures
security and reliability of their supply chains. Their capability at managing large-scale

(19:36):
manufacturing matters enormously too. Modern EV battery packs string hundreds of small cells
together, and one weak cell would drag down the whole chain, cutting range and raising safety risks.
Every cell must be almost identical, which demands massive, highly automated plants with

(19:57):
strict process control and real-time testing and smart sorting.
KATL seems to be the standout success story. What's their secret?
KATL grabbed nearly 40% of the global EV battery market in 2024, more than double second-place BYD.
According to journalists who've investigated the firm, the secret to CATL's success

(20:20):
is that it can use less money to make better batteries while maintaining huge manufacturing
capacity. But constant innovation is another factor helping Chinese battery makers stay ahead.
For example, BYD's signature Blade Battery, a lithium-iron phosphate battery,
launched in 2020, was partly designed because it was cheaper to make, since it didn't use

(20:45):
cobalt a mineral China had to import. But BYD significantly improved the performance of previous
LFP batteries, making them more powerful, safer and smaller. It became so popular,
it actually altered the prevailing type of lithium-iron battery in China.

(21:06):
What about the human capital side? Do they have the talent to sustain this?
That's actually crucial to their success. Behind this rapid tech revolution is a large pool of
Chinese battery engineers who came through a targeted education and vocational training system
offered by colleges, universities and battery companies.

(21:27):
Chinese companies have a generation of incredibly skilled technical researchers,
and these aren't just PhDs working upstream in labs or floor workers in factories.
They're what you'd call practicing engineers who know the production processes thoroughly,
understand what the market wants, and can use their knowledge to improve existing technology

(21:49):
quickly to win consumers. That's what you need to make batteries cost-effective to produce.
KITL employs more than 20,000 technical engineers, while BYD's battery arm has over 10,000 of them.
So China dominates now, but can they maintain this lead? What do the experts think?
There's a consensus among researchers that it will be extremely difficult for other countries

(22:11):
to challenge China's dominance over the current generation of battery technologies.
Some aspects that led to China's leadership, like the existence of industrial clusters and
vertical integration of supply chains, will be really difficult to replicate.
The fact that Chinese companies have already achieved scale in manufacturing batteries

(22:33):
and are expanding production overseas is another huge hurdle for prospective competitors.
As one researcher put it, Chinese batteries are cheaper, high-performing and available.
China's production scale makes it really difficult for others to catch up,
not with the technology itself, but with the commercial success of that technology.

(22:55):
But surely there must be some opening for competition. What about next generation technologies?
That's actually where the door isn't completely shut for other countries.
What China is really good at is taking existing technologies and making them better and cheaper,
but the country's weakness is in cutting-edge research.

(23:15):
If other countries can get ahead with next-generation battery technologies,
like solid-state batteries, there may still be chances to compete.
Traditional lithium-ion batteries use a liquid electrolyte to transfer ions between the electrodes,
but solid-state batteries use a solid electrolyte. What's unique about them is they may not need

(23:37):
the existing supply chain meant for liquid-based cells, potentially opening space for non-Chinese
contenders. Who's working on solid-state batteries now, and what are the challenges?
Companies like China's CATL and BYD, South Korea's Samsung SDI, and the US's QuantumScape are all

(23:58):
developing solid-state batteries. But for the US, which heavily relies on China for lithium-ion
batteries right now, scaling up manufacturing to a competitive level is expected to be very
challenging. The obstacles include lagging know-how, uncertain demand, and high energy costs.

(24:19):
Growing your own battery industry doesn't automatically mean competing with China either.
Some experts argue it's only possible in the near term by working with Chinese companies,
because they're at the forefront of the technology. If you don't have that manufacturing
expertise, you won't be able to scale up any breakthrough technology. That's a sobering

(24:41):
assessment. So what's the bottom line? Will anyone ever catch up to China? It's a tough question.
The expansion of manufacturing know-how is what will ultimately enable any catch-up,
but that's no easy feat given China's 20-year lead in building a battery manufacturing ecosystem.
Some analysts are pretty stark in their assessment. They say there will never be a time they can

(25:05):
envision another country catching up with China in terms of battery manufacturing.
They're just so much further ahead. It really comes down to whether someone can leapfrog them
with entirely new technology, or whether countries are willing to collaborate with Chinese firms to
build up their own capabilities over time. Either way, China's dominance in this critical

(25:27):
technology isn't going away anytime soon, and that has huge implications for the global transition
to clean energy. Yaakov, this has been absolutely fascinating. The story of how China built this
industry from almost nothing to global dominance in just two decades is really remarkable. Thanks
for walking us through it. My pleasure, Donna. It's one of the most interesting industrial

(25:51):
transformation stories of our time, and it's still unfolding. And to our listeners, if you're
thinking about the future of electric vehicles, clean energy, or global supply chains, this is
the story you need to understand. China didn't just participate in the battery revolution.
They effectively own it. Thanks for tuning in to Innovation Pulse, and we'll catch you next time.