CATL Quest For North American Factory Raises A Host Of Political Concerns

CATL is the largest battery cell manufacturer in the world, but it has no manufacturing presence in North America. You might think that would be a minor problem except the US currently is turning a cold shoulder to Chinese manufacturers as the federal government struggles to create local suppliers for things like battery cells, computer chips, and other goods and services needed by the manufacturing sector.

Currently, almost everything America needs to keep its economy humming comes from other countries, thanks to decades of hunting the cheapest possible labor costs as part of the grand neoliberal globalization push. The other part of the story is that the Chinese government expects every Chinese corporation to act as an instrument of national policy by funneling everything it discovers about technological advances while doing business abroad back to its political masters in Beijing. No wonder many are skittish about having a Chinese corporation operating in their backyard.

To be in a position to supply battery cells to US manufacturers like Tesla and Ford while avoiding unfavorable US policies, South China Morning Post CATL reports is considering building a new battery factory in Mexico near the border with the United States. That way it could do business in the US without being physically in the US, thanks to NAFTA. Mexico already has a large and growing auto industry for many of the same reasons.

SCMP reports that CATL is considering a $5 billion factory either in Ciudad Juarez or Saltillo, according to people familiar with the deliberations. Both are near the Texas border. Ciudad Juarez is attractive in part because it’s close to the San Jeronimo-Santa Teresa port of entry into the US state of New Mexico. That would provide a route around the border crossings of Texas, which is the home of Tesla’s new factory.

Texans can thank Texas governor Greg Abbott for that, after he went full Chris Christie and blocked virtually all trucks coming into Texas to score political points with his base of foaming at the mouth rabid reactionaries, a grandstanding move that may have cost the Texas economy as much as $4 billion. CATL wants no part of such shenanigans.

CATL is also considering splitting its investment across two locations — one in the US and one in Mexico, sources tell SCMP. A final decision hasn’t been made and the total size of the investment is fluid. Bloomberg reported in March that a new CATL factory could have an annual capacity of 80 gigawatt-hours worth of batteries.

CATL has been contemplating a battery plant in the US for years, but rising geopolitical tensions between the US and China have complicated the effort. It’s also under competitive pressure to come to a decision as rivals like LG Energy Solution, Samsung SDI, and Panasonic enter into contracts to build battery factories of their own in the US.

A CATL factory would be welcome in Mexico, which is anxious to cement its position as a major part of the auto industry’s supply chain, particularly as it relates to the manufacture of electric vehicles. CATL could also opt to manufacture battery cells in Mexico and then ship them to Kentucky to be assembled into battery packs.

In 2020, it purchased a former RR Donnelley & Sons printing plant in Glasgow, Kentucky, and formed a subsidiary in the state, documents show. In April 2021, it hired Charles Huang, a manufacturing executive, to be chief executive officer of the project. According to his LinkedIn page, Huang’s mandate is to “establish corporate structure and strategy for CATL manufacturing project in North America.” A spokesman for the Kentucky office of economic development declined a request for comment.

An indication of the headwinds that Chinese companies face when doing business in the United States, earlier this year, BYD was excluded from federal incentive programs because it was a Chinese company and despite the fact that it was manufacturing electric buses and trucks in America with unionized American workers and using mostly US-sourced parts.

Politics is a strange game and CATL is rightly concerned it could get its fingers burned if it decides to seek entry into US manufacturing, something it is reluctant to do when it is putting up $5 billion of its own money. A decision on where — or even if — to build a battery factory serving the North American market is expected shortly.


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