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US-China Tensions Extend to EV Battery Industry

US-China Tensions Extend to EV Battery Industry

China-US EV

The technology rivalry between the United States and China has expanded from semiconductors to another essential tech industry: electric vehicle (EV) batteries. Recently, the US Departments of Treasury and Energy introduced regulations limiting tax credits for EV purchasers whose vehicles use battery materials from China and other nations considered “hostile” to the US.

This move is in response to President Joe Biden’s climate law that grants tax credits to consumers who purchase domestically-produced EVs. As a result of these regulations, the demand for domestically-produced EV batteries is expected to surge, incentivizing American companies to invest in research and development within the industry.

This policy aims to reduce reliance on foreign sources for critical battery materials, simultaneously boosting the US economy and promoting the growth of a competitive, sustainable domestic EV battery market. Nonetheless, China’s Ministry of Commerce has condemned these regulations, asserting that they discriminate against Chinese firms and infringe upon World Trade Organization rules.

European Union’s response

In response to these accusations, the European Union has reiterated its commitment to ensuring a transparent and fair trade environment while emphasizing the need for addressing legitimate security concerns. Furthermore, the EU maintains that the regulations are in accordance with international trade laws and standards, intending to uphold a competitive global market that benefits all participating nations.

Potential impact on Biden’s goals

Such restrictions could potentially obstruct Biden’s objectives of increasing EV sales and decreasing greenhouse gas emissions, alongside impeding China’s dominance in the rapidly growing EV market. China currently possesses the largest portion of the global EV market, as two leading battery producers, CATL and BYD, contributed to approximately 53% of global EV battery consumption in the first ten months of this year. In order to accomplish his goals, Biden may need to address these market restrictions and foster cooperation with key stakeholders, including automakers, suppliers, and international partners. This could involve investing in research and development, creating incentives for EV adoption, and implementing policies that support a cleaner, more sustainable transportation sector.

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South Korean firms facing challenges

Although South Korean firms such as LG, Samsung, and SK On may benefit from the strained US-China relationship, they are confronted with their own geopolitical issues. In particular, the ongoing tensions between South Korea and Japan have led to trade disputes and export restrictions, which inevitably impact these firms’ supply chains and global market strategies. Additionally, North Korea’s unpredictable behavior and increasing nuclear threats in the region pose significant challenges to the stability and growth of South Korean businesses.

Chinese battery manufacturers’ strategic moves

In order to preserve their competitive advantage, Chinese battery manufacturers have plans to construct plants in the US to qualify their customers for EV tax credits. This strategic move will not only reduce import and transportation costs but also ensure a stable supply chain for their electric vehicle (EV) customers in the United States. By constructing these plants, Chinese battery manufacturers aim to meet the growing demand for EVs while maintaining their stronghold in this rapidly evolving industry.

Ford and CATL partnership

Nevertheless, they encounter obstacles like the scrutiny over Ford’s partnership with CATL to build a $3.5 billion EV battery facility in Michigan. Despite facing these challenges, Ford and CATL are determined to overcome the hurdles and establish a successful electric vehicle battery production facility. The establishment of this facility would not only provide economic benefits via job creation and securing a stable supply chain for EV batteries but also play a vital role in accelerating the global shift towards sustainable transportation.

Ongoing conflict and high stakes

At present, the ongoing conflict surrounding EV batteries exhibits no signs of resolution as both nations persist in battling over pivotal technology sectors. The stakes are high, as the global demand for electric vehicles continues to rise, making it crucial for countries to secure their positions within the growing market. Additionally, the need to transition towards greener and more sustainable energy sources amplifies the pressure on these nations to maintain control over their respective technological advancements in the EV battery domain.

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First Reported on: techcrunch.com

FAQs

What are the recent regulations introduced by the US Departments of Treasury and Energy?

The US Departments of Treasury and Energy introduced regulations that limit tax credits for electric vehicle (EV) purchasers whose vehicles use battery materials from China and other “hostile” nations. This is in response to President Joe Biden’s climate law that promotes the purchase of domestically-produced electric vehicles.

How has China reacted to these regulations?

China’s Ministry of Commerce has condemned the regulations, stating that they discriminate against Chinese firms and infringe upon World Trade Organization rules.

What is the European Union’s stance on these regulations?

The European Union supports the regulations and maintains that they are in accordance with international trade laws and standards. They aim to uphold a competitive global market that benefits all participating nations while addressing legitimate security concerns.

How might these restrictions impact Biden’s goals of increasing EV sales and reducing emissions?

The restrictions could potentially obstruct Biden’s objectives by impeding China’s dominance in the rapidly growing EV market, which may complicate efforts to increase EV adoption and reduce greenhouse gas emissions. Addressing market restrictions and fostering cooperation with key stakeholders could be necessary to support a cleaner, more sustainable transportation sector.

How are Chinese battery manufacturers planning to cope with these restrictions?

Chinese battery manufacturers plan to construct plants in the United States to qualify their customers for EV tax credits. This strategy aims to reduce import and transportation costs, ensuring stable supply chains for their EV customers in the US while maintaining their competitive advantage.

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What challenges does the Ford and CATL partnership face?

The Ford and CATL partnership faces scrutiny as they plan to build a $3.5 billion EV battery facility in Michigan. Despite these challenges, the companies are determined to establish a successful battery production facility that provides economic and environmental benefits.

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