Business

Opinion: Ford’s deal with Chinese EV battery maker is a big blow to US taxpayers


Virginia Governor Glenn Youngkin recently made national headlines when he turned down a Ford Motor
F,
+1.52%

factory in one Fight part of the state, thanks to Ford’s partnership with Contemporary Amperex Technology Co.
300750,
+0.90%

(CATL), a Chinese electric vehicle battery manufacturer. Youngkin said the proposed factory is a “front for the Chinese Communist Party”.

A month later, Michigan Governor Gretchen Whitmer celebrated her state’s landing of the plant, saying, “It’s thrilling, it’s thrilling.”

Who’s right?

The United States always welcomes foreign direct investment (FDI). The United States is the largest global destination for FDI by nearly 5 trillion dollars. FDI is a positive economy, creating 5.3 million jobs, increasing wages and increasing productivity. It also – in general – boosted US manufacturing.

But in the case of Ford and CATL, such benefits are unlikely. The joint venture appears to have been established to allow Ford to obtain the tax incentives provided in the Inflation Reduction Act without receiving FDI or even any technology profits.

Read: Ford invests $3.5 billion in Michigan battery plant with Chinese partner technology

Instead, China is deftly manipulating America’s system of healthy competition into a game that pits two countries with different political party leadership against each other, with important consequences. U.S. policymakers, regardless of party, need to think beyond the traditional model that new factories consistently create well-paying jobs in their counties.

China Inc. follow a different economic model: “socialism with Chinese characteristics”. This arrangement does not benefit the host country, as we have seen many times with China’s Belt and Road Initiative, leaving developing countries in debt piled up for many years. year. sub-infrastructure project. China’s behavior towards these projects has also proven to be not only not affect economic development but also spread corruption throughout the community.

With Ford, China is trying to break into the US market for cars and electric vehicle batteries, and it will do so with hard-earned American taxpayer money. Everyone sit up and take note: China is not our friend, as if that wasn’t evident from the new spy balloon that flew over the United States.

Congress and the Biden administration have established tax incentives as a way to build up domestic battery supplies, specifically to diversify away from China’s overwhelming control of the technology. Recent Department of Energy officials witness before the Senate, saying their goal is to create a battery and energy supply chain that is different from non-Chinese suppliers.

However, Ford and CATL are clearly trying to evade the intent of the law and ultimately force US taxpayers to support CATL. Meanwhile, Ford will get cheaper batteries at the expense of helping China gain market share in the US auto market.

Although the Chinese have experience in the battery value chain, CATL will not transfer battery technology to Ford in the United States, as is rarely the case with Ford. China and technology transfer. Furthermore, they will bring in their own workers (if the US offers visas, which the US should not), as is typical with all Belt and Road projects.

Supporters of the deal believe that CATL will transfer technology to the US, but it seems clear it will not share its secrets: Beijing has announced it will review the deal “with a class of supervisors.” additional monitoring at the national level” to make sure no Chinese technology is transferred to Ford. This is especially ironic since an essential element the Chinese emphasize in any joint venture in China is technology transfer.

Bottom line: although the Michigan plant will be technically owned by Ford, all manufacturing, processes, and other components will be run by CATL. In other words, it would be a Chinese CATL factory in every way, except that Ford would legally own it so CATL could reap the federal tax benefits.

It would be a bad idea to splash US tax dollars on the world’s largest battery company. (The CATL command about 34% of the global EV battery marketwith the Chinese government subsidize equal to 20% of net income. Its market share is more than double that of its closest competitor, South Korea’s LG Energy Solution
373220,
+2.56%
.
) Adding insult to injury, US tax dollars will also make the US battery supply chain more dependent on China.

What is the alternative solution? Instead of CATL, Ford should partner with companies from allied countries like Japan’s Panasonic
6752,
-0.25%
,
which already manufactures batteries for Tesla
TSLA,
+5.46%

United States; Korean LG battery company for GM
GM,
+0.33%

; and SK
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+0.06%

because hyundai. Still strange, Ford had a deal with SK factories in Kentucky, so why turn to the competition?

China often steal US intellectual property, which accounts for 87% of all annual IP theft, equates to almost 3% of US GDP. US International Trade Commission estimates China’s IP theft costs 2% to 5% loss of American jobs.

See: Freeing the US economy from China will create an American industrial renaissance and millions of high-paying jobs

We all support trade and free trade when it’s fair. But the United States must not subsidize China’s state-owned enterprises because China is looking to kill our domestic EV battery industry, as it did with solar energy — another technology developed by China. invented in the United States — where China currently has an 85% market share of modules, 80% of polysilicon, 85% of cells and 97% of wafers, according to IEA.

We encourage the US Treasury Department, in its upcoming IRA tax regulations, to prevent these types of structured transactions. Meanwhile, Ford and Whitmer should reconsider this project, it will harm the US economy and national security.

dabbar is CEO of Bohr Quantum and former US undersecretary of energy for science. Nordquist is Senior Advisor at Center for Strategic and International Studies and former US executive director of the World Bank. Both serve on ClearPath’s advisory board.

Than: Ford is taking a Tesla-like approach to EV batteries

Also read: Inside Germany’s industrial-scale effort to weed out Putin and Russian natural gas

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