【Chinese EV Suppliers Plan Side Doors Into U.S. Market】


SINGAPORE—Chinese battery companies critical to electric vehicles are pursuing deals with U.S. free-trade partners South Korea and Morocco, seeking to tap growing demand in America and bypass rules aimed at shutting them out of the market.


Chinese businesses that supply raw materials to make EV batteries have announced at least nine joint ventures and investments worth more than $4.5 billion in South Korea this year, according to a Wall Street Journal review of stock exchange filings.


At least four Chinese firms said they plan to build plants in Morocco producing battery-related products. Morocco sits on over 70% of the world’s known phosphate reserve, a raw material key to EV batteries.


By working out of the two countries, the Chinese suppliers hope to supply car and battery makers eligible for incentives doled out by the $430 billion Inflation Reduction Act, which rewards businesses that source materials domestically or from free-trade partners.


Over the next two years, the new law shuts out battery content and critical materials from so-called “foreign entities of concern,” a provision industry experts say is targeted at minimizing China’s involvement in America’s EV supply chain.


Analysts say Chinese suppliers hope such joint ventures will allow customers to continue sourcing from them and still access incentives, which offsets more than one-tenth the cost of an average EV.


“The Chinese don’t have much choice,” said Johan Bracht, a McKinsey analyst.

“中國企業沒有太多選擇,”麥肯錫分析師Johan Bracht說。

An executive at Shenzhen, China-based GEM said its partnership with a South Korean firm would help the raw material refiner meet IRA conditions and help the firm tap demand for EVs globally.


“We won’t give up on the U.S. market,” said Pan Hua, deputy general manager at GEM. “The U.S. can’t completely shut out Chinese suppliers from its market either, as much of the upstream supply chain is concentrated in China.”


GEM said in March that it would collectively invest up to $900 million with South Korean companies SK On and EcoPro Materials to build a precursor plant in South Korea by the end of 2024.

格林美3月份表示,將與韓國公司SK On和EcoPro Materials共同投資不超過9億美元,最遲2024年年底在韓國建設一家前驅體工廠。

SK On, an EV battery maker whose partners include Ford and Hyundai, has two factories in the U.S. and plans to build four more.

SK On在美國有兩家工廠,并計劃再建四家。該公司是一家電動汽車動力電池制造商,合作伙伴包括福特汽車和現代汽車。

South Korea EV suppliers benefit from partnering with Chinese firms to access key materials and expertise in processing, industry experts say.


Other Chinese suppliers mention in public statements their Korean joint ventures would help them expand internationally, with several listing the U.S. and Europe as target markets.


Chinese battery companies have long eyed expansion in the U.S., the world’s second-largest auto market behind China, and the money offered by the IRA accelerated their timeline of doing business there. At the same time, intense competition and overcapacity challenges in China are also driving firms to seek opportunities overseas.


Analysts say one wild card is that U.S. authorities haven’t defined what constitutes a “foreign entity of concern” in the IRA. The U.S. hasn’t defined what level of Chinese involvement and at what stage of the supply chain is acceptable for auto and battery producers to qualify for tax credits, they say.


This uncertainty means there is a risk that such joint ventures could ultimately be barred from receiving incentives, said Chris Berry, founder of energy metals consulting firm House Mountain Partners. “How involved China can be with different parts of the supply chain is an open question,” Berry said.

能源金屬咨詢公司House Mountain Partners的創始人Chris Berry說,這種不確定性意味著這類合資企業最終有可能被禁止享受政府的激勵措施?!爸袊茉诙啻蟪潭壬蠀⑴c供應鏈的各個環節,這個問題尚無定論,”Berry說。

China’s role as indirect beneficiary of the IRA has come under scrutiny by American politicians.


Ford last month put on hold a $3.5 billion plant making EV batteries with Chinese battery giant Contemporary Amperex Technology Co., or CATL, in Michigan. The move followed months of pressure from key lawmakers in Washington about its Chinese partner.


Ford said it was pausing work there until the company was confident about operating the plant competitively.

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China’s supply chain chokehold


Chinese companies are the world’s biggest producers of the four key components needed in EV battery production—cathodes, anodes, electrolytes and separators, according to industry analyst SNE Research.

據產業分析公司SNE Research,就電動汽車電池生產所需的四個關鍵部件——陰極、陽極、電解質和隔膜而言,中國公司是世界上最大的的生產商。

The country has a chokehold over much of the capacity needed to refine metals such as lithium, cobalt and manganese to make them suitable for battery production, said Lukasz Bednarski, a research analyst at S&P Global.

標普全球的研究分析師Lukasz Bednarski說,中國掌握著精煉鋰、鈷和錳等金屬所需的大部分產能;這些金屬精煉后可用于電池生產。

As a result, it is difficult for the U.S. and Europe to build an independent EV battery supply chain without China’s help, at least in the near term, Bednarski added.


Three of the largest battery materials suppliers in China—GEM, Huayou Cobalt and CNGR Advanced Materials—have been the most active signing such cross-border deals, citing growing global investment restrictions against China as reasons for cooperation.


Many of the newly formed Chinese partnerships with South Korean and Moroccan firms produce precursors, a mix of metals required for making cathodes, a key component of batteries. Batteries are the most expensive component of an EV, accounting for about 40% of the cost of the car.


Zhejiang, China-based Huayou Cobalt has formed partnerships with the battery subsidiary of South Korean business titans Posco Holdings and LG Chem to build plants in South Korea this year, while Guizhou-based CNGR joined with Posco and its subsidiary to invest $1.13 billion to build two factories in the nation.

總部位于中國浙江的華友鈷業已與Posco Holdings和LG化學這兩家韓國商業巨頭的電池子公司建立了合作關系,今年在韓國建廠,而總部位于貴州的中偉股份與Posco及其子公司聯手,投資11.3億美元在韓國建設兩家工廠。

In Morocco, LG Chem last month said it would join with Huayou Cobalt and its parent company to build lithium refining and cathode materials plants, joining CNGR and Chinese lithium producer Sichuan Yahua Industrial, which have partnerships there to produce materials for EV batteries.


Huayou Cobalt, Sichuan Yahua, LG Chem and Posco didn’t respond to requests for comment. CNGR reiterated a public statement that the deal will help the company’s global expansion.

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Chinese and South Korean companies are bracing for the possibility that these joint ventures wouldn’t be deemed as IRA-compliant.


Posco Future M, the Posco subsidiary with Chinese partnerships, has said the company will modify their joint venture agreements to reduce the stake of Chinese partners, should their partnership fall short of IRA requirements. The company said it is also sourcing raw material from countries such as Indonesia, the Philippines and Australia to move away from the influence of China.

與中方建立了合作關系的Posco子公司Posco Future M表示,如果與中方的合作不符合《通脹削減法案》的要求,公司將修改合資協議,減少中方合作伙伴的股權。該公司稱,它還在從印尼、菲律賓和澳大利亞等國采購原材料,以擺脫中國的影響。

CNGR said in a stock exchange statement that the firm and its partner may sell shares in the venture, in the event of a major change of laws and policies. GEM’s Pan said the company is preparing for unfavorable rule changes by avoiding majority ownership in any joint venture in South Korea.


“When we develop production bases, we will bring in overseas partners to lower our risk,” he said. “Still, if anyone plans to completely disentangle itself from the China supply chain now, it’s just not possible.”


Buying into a Chinese automaker sounds like a great answer to the challenge of making cheaper electric vehicles. If only it were easier to pick winners.


Chrysler owner Stellantis said Thursday that it was spending the equivalent of about $1.6 billion to buy a roughly 20% stake in Zhejiang Leapmotor Technology. It will get two board seats and become Leapmotor’s exclusive export partner via a Europe-based joint venture in which Stellantis will own 51%.

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The deal will draw comparisons with Volkswagen’s $700 million investment in Xpeng, another Chinese EV maker, in July. Both can be interpreted as admissions that Western car manufacturers need Chinese EV technology, just as Chinese ones once needed Western gasoline-engine tech.


But whereas Volkswagen and Xpeng are cooperating on developing VW-badged vehicles for the Chinese market, Stellantis and Leapmotor are teaming up to sell Leapmotor models outside of China. VW is worried about its falling share of the Chinese market, which it led until earlier this year. Stellantis, which had all but left China after falling out with a previous JV partner, is worried about its market share elsewhere.


Chinese companies can produce EVs 30% more cheaply than Western ones, according to Stellantis’s research. As the Chinese players start to export more aggressively, that cost difference will become an existential problem for global players such as Stellantis, Toyota and Volkswagen. “I am putting in my portfolio a Chinese carmaker that can compete against the Chinese competitors,” said Chief Executive Carlos Tavares on a call with analysts.


With the exception of Volvo-owner Geely, Chinese automakers don’t have ambitions in the U.S., given the tensions between Washington and Beijing. In Europe, too, they might find roadblocks: European Commission President Ursula von der Leyen in September launched an antisubsidy inquiry into low-cost Chinese EVs, following much lobbying by Tavares himself. But Stellantis, which also owns cheaper brands such as Fiat, will still face competition in the emerging markets that it calls its “third engine.” Fiat is the market leader in Brazil and Turkey as well as its native Italy.


Tavares said another advantage of the deal was to get a better real-time measure of China’s cost competitiveness, which he called “a powerful tool.” The implication is that Stellantis can use a better understanding of Leapmotor’s EV cost structure to target the areas where it lags behind.


It seems a natural evolution for the company, which was formed through a series of big deals and has made huge margin gains by benchmarking acquired businesses against each other. The old Chrysler business, which makes RAM pickup trucks and Jeep sport-utility vehicles, is now Detroit’s most profitable automaker.


The big risk is that Leapmotor isn’t actually the next BYD, as Stellantis appears to hope. In the first nine months of the year, the Hong Kong-listed company wasn’t even one of China’s top 10 EV brands, according to data collated by Bernstein, though it is growing fast. The Chinese EV market has been tough this year, not least because of Tesla’s price cuts, and many expect a shakeout. Leapmotor is expected to burn through $760 million this year, which is presumably one reason it is happy to take Stellantis’s money.


Market leader BYD aside, guessing which Chinese EV startups will come out on top seems a high-risk game. It is a measure of the challenge facing global automakers that Stellantis feels the need to play it.