Feb 14, 2023 - Economy

Chinese companies gain momentum in U.S. electric vehicle supply chain

Illustration of China's flag with lightning bolts replacing the four small stars.

Illustration: Shoshana Gordon/Axios

Chinese manufacturers and tech companies are playing an increasing role as the U.S. supply chain for electric vehicles and batteries grows to satisfy demand.

Why it matters: More supply chain investments mean more EVs, which advocates say are critical to making transportation sustainable.

  • But domestic manufacturing proponents and some Republican lawmakers have expressed wariness about Chinese companies seizing too much control of a vital and growing market.

State of play: Chinese companies are expanding their presence in several areas of the U.S. EV space:

  • Ford on Monday announced it's building a $3.5 billion plant in Michigan that will build batteries using technology from China's Contemporary Amperex Technology Co., Limited (CATL).
  • Foxconn, which makes the iPhone in China for Apple, is now building electric pickups in Ohio after forming a joint venture last year with Lordstown Motors.
  • China EV maker BYD is considering building a battery plant in the U.S., Bloomberg reported.

The intrigue: Virginia Gov. Glenn Youngkin, a Republican, last month withdrew his state's bid for Ford’s venture with CATL, describing the planned project as a "Trojan horse" for the Communist Party of China, Axios' Joann Muller writes.

  • Michigan Gov. Gretchen Whitmer, a Democrat, applauded the "generational investment by an American icon [that] will uplift local families, small businesses, and the entire community and help our state continue leading the future of mobility and electrification."

Be smart: For vehicles to qualify for EV tax credits under the Inflation Reduction Act (IRA), they need to be assembled with components made in the U.S. — a stiff standard that many vehicles can't currently meet.

  • Because Ford will own 100% of the new Michigan factory, it hopes to take advantage of lucrative tax credits.
  • "As IRA implementation continues, scrutiny of Chinese involvement in facilities receiving subsidies will only increase, driven by a mix of sincere and cynical China concerns from both parties," Evercore ISI analyst Tobin Marcus writes.

What we're watching: Whether a Chinese automaker goes beyond manufacturing in the U.S., becoming the first to sell vehicles here.

  • Chinese automotive executives have been claiming for years that they'll bring their cars to the U.S., but it hasn't happened yet.
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