House Speaker Nancy Pelosi’s visit to Taiwan could threaten the buildup of the electric-vehicle supply chain in North America. Bloomberg reported Tuesday that a decision about the location of a new battery plant in Nort America from Contemporary Amperex Technology Co. (ticker: 300750.China), which is better known as CATL, would be delayed because of the trip. CATL didn’t respond to a request for comment.
The company is the world’s largest maker of EV batteries and the plant in North America would have been its first. Output for the plant has been tied to Ford Motor (F) and Tesla (TSLA). Ford, for instance, disclosed in late July that CATL would supply the auto maker with lithium iron phosphate, or LFP, batteries. LFP batteries are cheaper than batteries with more expensive metals such as cobalt. LFP batteries don’t pack as much energy, but still are a good option for auto makers looking to manage costs on EVs with lower per charge range. Ford Motor and Tesla didn’t respond request for comment from Barron’s.
Most batteries for EVs today are made in Asia, and most EV battery materials are processed in China. That makes some sense since China sells the most EVs. China has also made it easy to build manufacturing capacity in the country. (China accounted for roughly 30% of the world’s manufacturing output in 2021, according to the World Bank, up from about 20% in 2011 and about 10% in 2006.)
U.S. auto makers are trying to shift battery market share to the West. Ford and Tesla along, with other global auto makers including General Motors (GM), have announced billions in battery capacity and deals that help localize the supply chain. Most of the capacity is being built in partnership with existing battery makers including LG Chem (051910.Korea) and SK Innovation (096770.Korea). Existing battery makers including Panasonic (6752.Japan) are also building North American-based capacity on their own.
A lot of spending is scheduled from many parties besides CATL. And the reported delay in site selection could be just that — a delay. Still, a potential delay is a reminder that geopolitics are complicated.
CATL fell 3.8% on Wednesday in Shanghai. Ford shares dropped 1.2% on Tuesday, while Tesla gained 1.1%. The S&P 500 and Dow Jones Industrial Average dropped 0.7% and 1.2%, respectively, on Tuesday.
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