The Consequences of Coronavirus
Dear Shareholders & Friends,
The Coronavirus, or COVID-19 as it has come to be known, has already had a massive impact on global trade. Almost half of the seaborne container transports from China to Europe have been cancelled in recent weeks. Even with bulk goods such as coal or iron ore, almost nothing works anymore. The first car manufacturers and suppliers have had to shut down their factories in Europe because of a shortage of key inputs. Due to the long transport distances, the full impact of the production cuts in China will only become apparent in the coming weeks.
Just how much the car industry depends on suppliers, especially from China and South Korea, was made clear by the recent difficulties experienced by Audi and Mercedes. According to various media reports, neither group is ramping up production of their electric SUVs to the desired extent because of an alleged lack of battery cells.
It is with good reason that the big “Gigafactories” have so far been located in China and South Korea, exactly where electric cars are produced on a large scale. At Tesla, it has so far been the USA. It is also no coincidence that a similar development is now taking place in Europe, albeit with a time lag. While the large volume manufacturers increasingly want to produce more and more electric cars, suppliers such as CATL or LG Chem are now pulling up large battery factories in Europe as well.
Supply chain not secured
However, this is still a long way from ensuring security of supply because the value chain begins with battery raw materials such as cobalt and lithium. Both metals have so far been comparatively highly dependent on supplies from regions that are not necessarily politically stable. In the case of cobalt, a large part of global production comes from the Congo. In the case of lithium, the triangle of Argentina, Bolivia and Chile forms a focal point. Extensive lithium-bearing brine deposits are located there.