Hobson’s Choice and EVs

Wikipedia defines Hobson’s choice as a free choice in which only one thing is actually offered.  The term is often used to describe an illusion that multiple choices are available.

The New York Times recently published an article titled “Can the World Make Batteries For Electric Cars Without China.”  The article goes on to suggest that making batteries for electric cars may be one of the defining competitions of our age and that China has a decades long lead in such key areas as mining and processing raw materials, training engineers and building huge factories.  China is the dominant world player in the refining of crucial battery raw material with a 60% or greater market share for refining manganese, cobalt, graphite, lithium and nickel.  

It should also be noted that Chinese producers benefit from less stringent environmental controls and lower labor costs. Refining is very pollutive and requires large amounts of electricity, which, in China, translates into an increasing use of coal.

Investors are going to have to sort out some potentially inconsistent political objectives and mandates.  Many jurisdictions are moving to go all in on EVs while regulators and legislators are seeking to reduce the nation’s trade with China, while encouraging domestic manufacturing.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA