is the end of export of rare earth metals ...., page-2

April 22, 2008
Is The End Of The Export Of Rare earth Metals From China To Be brought About By The Insistence Of The Chinese Government That Auto Makers Improve Fuel Efficiency? Yes.
Analysis of: Beijing Pressures Automakers to Improve Efficiency | www.nytimes.com
This analysis is solely the work of the author. It has not been edited or endorsed by GLG.
Analysis By:
Jack Lifton
Chief Executive Officer , Jack Lifton, LLC

Implications: The Chinese government's demand that auto makers produce electric and internal combustion-electric (hybrid) vehicles for the Chinese domestic market has created a conflict in the global demand for minor metals. All car makers need minor metals that are critical to the production of the power train of their vehicles, All non-Chinese car makers prefer to keep their best technology close to home, for competitive advantage, Most of the critical minor metals for car production are solely sourced from China, China has systematically reduced the export of such metals and allocated them for products made in China, When the demand for such metals in China equals the supply from China it will no longer be possible to make products critically dependent on such metals outside of China, If no commercial lithium ion battery system is in production within the next five years it will no longer be possible to produce a nickel metal hydride battery outside of China.

Analysis: Toyota will not acquiesce to the Chinese demand that it manufacture all of the components for its hybrids in China to continue to be eligible to obtain the rare earth metals critically necessary for manufacturing the nickel metal hydride batteries its hybrids currently require.

Honda intends to introduce a hybrid car next year (2009) to compete directly with Toyota's best selling Prius.

Honda will utilize only the nickel metal hydride battery for its new car, and it may manufacture not only that battery but many more of the car's power train components in China so as to have access to Chinese rare earth metals critical for the manufacturing of such batteries.

Because of Toyota's position on only producing hybrid vehicles in Japan the Prius sells in China for twice as much as it does in the USA. This price has essentially eliminated the Prius from the domestic Chinese market.

GM, Daimler, and the Chinese company, BYD, have all committed to producing hybrids in China within a year as well as electric cars, powered either by batteries or fuel cells, shortly thereafter.

Honda may well benefit from Toyota's (not unreasonable) resistance to opening its technology to Chinese competitors. Honda could produce not only nickel metal battery powered hybrids, but also nickel metal battery powered all electric cars, and fuel cell powered cars in China very soon.

GM is planning to ship large hybrid SUVs made in the USA to China right away to join the Chinese made hybrid Buicks it already makes in China for the Chinese market. I predict that the large hybrid SUVs shipped to China this year by GM will have nickel metal hydride battery packs, and that those batteries will be made and fitted into the cars in China.

If no non-Chinese production of rare earth metals is underway by 2013, and if the lithium ion battery systems fails to become a commercially viable option in mass production, then by or before 2014 there will be no hybrid vehicles mass produced outside of China due to the lack of supply, outside of China, of rare earth metals.