Albanese needs to stop pretending Australia can compete on manufacturing

Why does Australia get into silly, dead-end arguments about manufacturing? Especially about big shiny things or new technologies? We all know we’re not good at it, don’t have a big enough market, and just can’t compete with the likes of the United States, China, Japan, South Korea or much of Europe.

Cars, trucks, computers, fast trains, slow trains and ships are just some of the harebrained ideas put forward by politicians, unions and the urgers and coat-tuggers in business who can sense a government handout or free million in “research and development”.

On Wednesday it was the prime minister’s turn. Anthony Albanese waxed lyrical at the National Press Club about batteries, renewables and manufacturing.

“We need to not just dig it up. I want to make sure we use the lithium and nickel and other products we have to make batteries here,” Albanese told the assemblage of hacks, real estate agents, lobbyists and political lurk merchants.

“That’s part of the vision of protecting our national economy going forward. I think we should be making solar panels here. I think we should be making so many more things here in order to protect our national sovereignty.”

Albanese sought to assure Australians he was acting to shore up national security and that this was linked to economic security and the sovereignty of local manufacturing. He wanted to put public money into projects that could expand local manufacturing and recover from the loss of the big carmakers over the past decade.

But this is nonsense, the stuff of fairy tales and the likes of Rex Connor and Barnaby Joyce. We have heard for decades about building an export steel industry in the Pilbara where the iron ore and energy are, or in the east where the coking coal is found. 

It always sounds great until hard-nosed analysts ask why anybody would want to buy steel from Australia when it has to be shipped thousands of kilometres (and emit huge amounts of carbon along the way) to users in China, Japan, Taiwan, South Korea, Vietnam and India who would not buy it because they can use their own iron ore, or import Australian iron ore and sell us steel in return.

We have some experience in making steel and have the right mix of commodities to do so, but how can Australia make batteries here and ship them to China, Japan, the US, Europe and South Korea when those countries all have giant carmakers and electric vehicle makers?

Carmakers in those countries will not need Australian batteries; nor will they need Australian technology. They are doing the development and getting money from their governments, and are starting to cooperate with each other.

It doesn’t make sense to ship an Australian-made battery to China or Japan only to ship it back in the imported vehicle. Sure you could import the part-finished vehicle and install the local battery here but what would that do to warranties and sales? And how would you move it on and off the shop and to the dealer without having a battery installed?

One deal in the US last week shows you the futility of Albanese’s idea. Ford, the big US carmaker, has asked Chinese electric vehicle battery giant Contemporary Amperex Technology (CATL) to help build batteries in the US for some of Ford’s new range of EVs.

CATL will provide preparatory and operational services for Ford’s battery plant in Michigan as well as license its patented battery technology. This business model combines CATL-licensed technology with processing at Ford’s own plants, most likely lithium iron phosphate (LFP) plants. 

No matter how much money the Australian government offers (A$25 billion in the last budget), we just can’t compete with countries like the US when it comes to financing EVs and renewables.

US President Joe Biden’s Inflation Reduction Act is already reshaping the global renewables and EV sectors with its huge pot of money. The billions that the Eurozone, Japan and South Korea are trying to find to compete with the US will add further pressure on small wannabe players like Australia.

A handful of Australian companies have taken up US government aid under other assistance programs to produce new technology in America. Rare earths company Lynas is one with US loans; Graphite miner Syrah is another.

A smarter idea would be to finance chargers and EV battery recyclers. These companies are starting out, though the Brisbane-based charging maker Tritium has already bolted to the US where it will build 30,000 of its charging stations a year to be installed across that country and in Europe.