China is secretly buying up stock, or whole companies, that produce Lithium and Cobalt. They are using their economic muscle to corner the market, to blackmail car companies, into manufacturing their electric cars in China, or go out of business.

China is winning 'arms race' for electric cars

As demand for the vehicles surges, Chinese companies have been doing deals around the world to secure supplies of lithium, a silvery-white metal mined from rocks in Australia and brine pools in South America. China is the top market for electric and hybrid cars, accounting for roughly half of global sales, and the government is pushing the development of the industry within its borders.

From article, (The Chinese government has been quietly instructing state-owned enterprises to hunt down lithium resources outside China, according to Francois Perrin, a portfolio manager at investment firm East Capital. He predicts that over the next few years, China will wield increasing influence over the supply of lithium and other metals used in electric batteries.

Beijing has a track record of directing Chinese companies to do its bidding, such as squeezing South Korea's tourism industry earlier this year over a dispute with Seoul over a U.S. missile defense system.

It also has history of using crucial natural resources under its control as diplomatic weapons: it was widely accused of restricting exports in 2010 of a group of minerals that are vital for many high-tech devices.

Western companies haven't so far shown much interest in the kinds of investments for electric cars made by their Chinese counterparts, according to experts.

"They're late to the party," Moores said.

Like China, the U.S. and Europe have few lithium resources of their own and rely on supplies shipped from elsewhere. Tesla (TSLA) and other electric car makers could end up scrambling for a limited supply of crucial resources where China is the biggest player.

 The growing global appetite for lithium is already driving up its price. It's gained 40% since the start of the year to trade around $14,000 per ton, according to Benchmark Mineral Intelligence.

"This is an incredible bull market like lithium's never seen," Moores said.

A lot of the demand comes from China's large and growing battery manufacturing industry.

Tesla's huge Gigafactory in the Nevada desert gets a lot of headlines, but China produces about two-thirds of the global supply of batteries for electric vehicles, according to Benchmark Mineral Intelligence. And the firm estimates that China is building about half of the 20 or more battery mega-factories currently in the works.

With the biggest market for electric vehicles and the biggest battery supply, China is making itself an inescapable destination for global automakers. They have been lining up recently to announce plans to make their electric cars in the country.

And it's not just lithium that China's locking down.

Cobalt, another metal used to make electric vehicle batteries, is even scarcer. Almost two-thirds of supply is mined in the Democratic Republic of Congo, a war-torn country in central Africa.

Last year, China bought a majority stake in Congo's biggest cobalt mine for more than $2.5 billion, helping secure long-term supply of the metal. Since that deal, the price of cobalt has more than doubled.

"The cobalt supply situation is a serious concern," Perrin said.)

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