EV batteries are the next point of tension between China and the US
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It’s the perfect moment to talk about EV batteries and China: yesterday, I published a story unpacking the country’s two decades of investment into becoming a world leader in the EV industry. It’s about how the Chinese government, companies, and consumers—as well as Tesla—all came together to turn electric vehicles from a research challenge into a common reality. You can read all about it here.
Among the many factors at play, China’s control of refined materials for battery cells and its advanced battery-making technologies are particularly important. So important that Western automakers who want to transition out of gas cars won’t be able to do it without turning to Chinese-made batteries. That’s why Ford has been planning for a long time to build a battery plant with Chinese battery giant CATL, the world’s largest manufacturer of lithium batteries.
Last week, Ford announced the plant was moving forward in Michigan, but it wasn’t without controversy, and politics may still derail the deal—proving that China’s advantage in battery tech will only become more relevant in our daily lives going forward.
But why does Ford feel it’s necessary to work with CATL to make EV batteries in the first place? The simple answer is that Chinese companies have managed to make good-quality batteries in large quantities and at a low cost. It will be commercially unviable to avoid using Chinese batteries, and it will take a long time for domestic battery companies to rival the size and efficiency of CATL.
As my colleague Casey Crownhart explained last week, Ford’s new plant will focus on making LFP batteries, which use iron rather than the cobalt and nickel used in the other main type of lithium battery, known as NMC. Compared with NMC batteries, which are widely used to make EVs in the US and Europe, LFP batteries cost less, have a longer life cycle, and are safer when it comes to the possibility of catching fire.
But just a few years ago, LFP batteries were considered an obsolete technology that would never rival NMC batteries in energy density. It was Chinese companies, particularly CATL, that changed this consensus through advanced research. “That’s purely down to the innovation within Chinese cell makers,” Max Reid, senior research analyst in EV and battery supply chain services at the global research firm Wood Mackenzie, tells me. “And that has brought Chinese EV battery [companies] to the front line, the tier-one companies.”
As a result, “China is leading by quite a distance in terms of cell production capacity, and essentially leading nearly all of LFP production, which is now a very promising technology,” Reid says.
Even if we are talking about those batteries based on cobalt and nickel, China still has a stronghold on the industry because the majority of the world’s refinery capacity for these materials is inside China. The fact that it produces a lot of these upstream materials means that not only can China reasonably control the costs of battery production, but it can potentially hold it hostage against any other country that relies on these materials for its transition into EVs. That latter scenario has long been considered one of China’s most important tools if it wants to fight back against ongoing US attempts to choke development of its semiconductor industry.
But even before that happens, we are already seeing battery technology become increasingly politicized in both the United States and China.
To bring the Michigan plant to fruition, Ford has been careful from the beginning. The deal it struck with CATL ensured that the Chinese company would not get any stake in the plant or ability to control it. Instead, Ford is merely licensing CATL’s technology to make batteries for itself. This also helps Ford’s production qualify for subsidies in Biden’s ambitious industrial policy plan, the Inflation Reduction Act.
But that doesn’t seem to be enough when China has become one of the most divisive issues in US politics. In January, the governor of Virginia, whose state had been considered as a site for the Ford battery plant, pulled out of the running, calling it a “front for the Chinese Communist Party.” After Ford and CATL settled on building it in Michigan, Senator Marco Rubio, known for his hawkish stance on China, wrote publicly to ask the federal government, particularly the Committee on Foreign Investment in the United States, to review the deal.
Rubio’s request likely has no grounds because CFIUS is designed to block certain business deals that involve ownership stakes, real estate transactions, or handover of technologies, says Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics, a think tank in Washington, DC. “I have yet to see any indication that the CATL-Ford deal involves CATL making an equity investment in an existing US business or having CATL purchase any land, so I struggle to see how CFIUS would have any jurisdiction over this deal,” he says.
But Rubio won’t be the last powerful person to bring politics into the business of battery tech. On Thursday, Bloomberg reported that China itself is going to review the deal on a national security basis, concerned that CATL would be oversharing core technologies and costing China its advantage on EV batteries.
My conversations with several EV experts suggest there’s one sure take-away from the news of the CATL-Ford deal: though batteries have been shielded from geopolitical frictions for a long time, the increase in attention on the energy transition around the world is catapulting it into the spotlight, and China’s dominance in EVs makes it an inevitable player in the field. The unstable US-China relationship surely is not going to help, either. Soon enough, batteries (and the materials to make them) will become the new semiconductors.
Do you think the politicization of battery tech is inevitable? Let me know your thoughts at [email protected].
Catch up with China
1. TikTok reported 125 million monthly active users in the EU in the past six months. It also plans to add two more data centers in the region to store user data locally. (Reuters $)
2. China used its “unreliable entity list” for the first time ever to sanction Lockheed Martin and Raytheon over selling arms to Taiwan. The move is suspected to be a response to the American blacklisting of six Chinese entities over the “spy balloon” drama in January. (CNN)
3. While the official casualty count from China’s latest wave of covid infections is 83,150, estimates from epidemiology experts are much higher, ranging from 970,000 to 1.6 million. (New York Times $)
4. Now is not a good time for Chinese metaverse believers. Both ByteDance and Tencent reported layoffs last week in their virtual-reality-related teams. (Yicai Global)
5. Ride-hailing app DiDi’s comeback in China shows the delicate balance between the government’s goals of containing Big Tech and fostering economic growth. (Wired $)
6. ASML, the Dutch lithography machine company, accused a former China-based employee of stealing confidential information in the last couple of months. (Bloomberg $)
7. Bao Fan, a Chinese billionaire banker who brokered some of the largest acquisitions in the Chinese tech industry, has gone missing with no explanation. (BBC)
Lost in translation
Building a charging infrastructure that can serve the rapidly increasing number of EVs in China has become a tricky issue. As Chinese publication Time Weekly reported, during the Lunar New Year period, Chinese EV owners on road trips had to wait at highway service stations for hours before they could charge their cars. The same happened last summer when an extreme heat wave disabled the grid in some parts of China.
Currently, for each public charging post in China, there are more than 12 EV owners who can’t charge at home in their densely populated urban neighborhoods. The lack of public infrastructure has inspired some owners to rent out their private charging posts, since these posts are not being used 90% of the time. The profits from renting them out, which can reach over 2,000 RMB ($290) every year, help pay off the costs of installing them. But so far, most owners of private charging posts have yet to realize that sharing is a possibility: it’s estimated that only 2.1% are shared with other EV owners.
One more thing
With Ford announcing its battery manufacturing plan with CATL, Quartz reporter Mary Hui noticed a fascinating historical parallel. In 2023, this deal is helping the Chinese battery giant finally break into the US market, while US-China relations are rocked by scandals surrounding a Chinese spy balloon. Back in 2001, a deal between Ford and a Chinese automaker helped the US auto giant break into the Chinese market, while the relationship between the two countries was … interrupted by scandal surrounding a US spy plane. Coincidence? I think not.
