[Battery Inflection Point IRA] China Also Has Room to Enter US Market... Ultimately Competing with CATL

Changes in the detailed regulations of the U.S. Inflation Reduction Act (IRA) have created opportunities for Chinese battery companies to enter the U.S. market.

According to a white paper released by the U.S. Treasury Department at the end of last year, tax credits can be received if more than 50% of the minerals used in batteries (based on added value) are produced in the U.S. or countries that have free trade agreements (FTA) with the U.S. This marks a retreat from the U.S. strategy of designating China as a 'country of concern' and completely excluding it from the battery supply chain. Prioritizing the competitiveness of U.S. automakers and building a mobility manufacturing ecosystem took precedence over excluding Chinese battery companies.

China's CATL, the world's number one battery company, is expected to enter the U.S. market indirectly through collaborations with U.S. automakers Ford and Tesla.

Korean battery companies ultimately cannot avoid competition with CATL in the U.S. market. Tesla is reportedly pushing forward with plans to establish a battery factory in Texas in partnership with CATL. Bloomberg reported on the 30th (local time) that Tesla has discussed this plan with the White House and wishes to form a partnership similar to the contract between CATL and Ford.

Earlier in February, Ford announced it would establish an electric vehicle battery factory in Michigan in partnership with CATL. This marks CATL's first entry into the U.S. market. Ford stated, "We have been exploring the use of batteries based on CATL technology" and "have now set plans for local production in North America." Ford will receive related technology support from CATL and pay royalties. Ford will also hold 100% ownership of the joint venture.

By adopting this structure, they were able to avoid U.S. government regulations. The IRA includes provisions that subsidies are only given to electric vehicles made in North America. This means that using Chinese-made materials, equipment, and minerals disqualifies one from benefits, but there are no regulations concerning Chinese 'technology,' which they exploited. However, some in the U.S. political sphere have moved to block this. Senator Joe Manchin (Democrat), who led the enactment of the IRA, and Senator Marco Rubio (Republican) criticized that "CATL can receive IRA subsidies because of Ford." Senator Rubio introduced a bill in the Senate to prevent CATL from receiving U.S. government IRA subsidies.