IPS Publication Release and Discussion on ‘Trade Wars in Electric Vehicle Supply Chains: A Win for Sri Lanka’s Graphite Industry?’

12 March 2024

The Institute of Policy Studies of Sri Lanka (IPS) hosted a publication launch and discussion event for its latest publication titled “Trade Wars in Electric Vehicle Supply Chains: A Win for Sri Lanka’s Graphite Industry?”. This insightful analysis, authored by IPS researchers, Dr Asanka Wijesinghe, Malisha Weerasinghe and Chaya Dissanayake examines the repercussions of global trade disputes on the electric vehicle (EV) supply chains, focusing particularly on the strategic position of Sri Lanka’s graphite industry.

Presenting the study findings, IPS Research Fellow Dr Asanka Wijesinghe delved into the intricacies of the United States’ Inflation Reduction Act (IRA) and its implications for the global graphite market, crucial for EV battery production. He highlighted that the IRA proposes up to USD 7,500 in consumer tax credits per electric vehicle. A critical condition for availing of these credits is that the critical raw materials (CRMs) and battery components must not be sourced from entities considered as Foreign Entities of Concern (FEOCs), directly challenging China’s dominant position in the battery-grade graphite sector.

Despite China’s stronghold, countries like Madagascar, Mozambique, and notably Sri Lanka, with its high-purity battery-grade graphite, emerge as potential beneficiaries to fill the gap left in the U.S. market. The study suggests that even if the U.S. were to receive full graphite supplies from its Free Trade Agreement (FTA) partners, it would only meet 17% of its demand for producing 1 million EVs. This gap presents Sri Lanka with a unique opportunity to significantly increase its graphite exports to the U.S., with potential further increases if the EU implements similar policies.

The event underscored the strategic importance of mining and processing enhancements in Sri Lanka, suggesting that value addition and technological advancements through foreign direct investments could amplify its standing in the global supply chain. A crucial point raised was the potential for Sri Lanka’s graphite to qualify for U.S. tax credits, either through direct processing within the U.S. or by establishing an FTA between the two nations. Even a limited mineral trade agreement could suffice for this purpose.

Following the presentation, Prof Anura Wijayapala from the University of Moratuwa and former Chairman of the Ceylon Electricity Board (CEB), Mr Amila Jayasinghe, CEO of Bogala Graphite Pvt Ltd and Mr Akila de Soyza, Deputy Director of the Export Development Board (EDB), offered valuable insights from perspectives of academia, industry and government, respectively. Despite the opportunities, the study and these experts highlighted several challenges, particularly the competition posed by other low-cost graphite producers. To remain competitive, Sri Lanka is urged to enhance its cost efficiency and initiate proactive discussions among miners, investors, and other industry stakeholders. The insightful Q&A session touched on the broader implications of US-China geopolitical tensions, environmental and sustainability concerns related to graphite mining, and the need for supportive government policies to nurture the industry.

The event brought together a diverse group of stakeholders from academia, think tanks, government, and the industry to deliberate on these findings and discuss strategic directions for Sri Lanka’s graphite industry in the evolving global landscape.Top of Form

Get your copy of ” Trade Wars in Electric Vehicle Supply Chains: A Win for Sri Lanka’s Graphite Industry?” here.