The Electric: With U.S. Rules in Place, a Non-Chinese Battery Supply Chain Takes Shape

Last week, the Biden administration released near-final rules governing how companies and consumers can tap hundreds of billions of dollars in U.S. tax credits meant to spur the rise of a mine-to-factory electric vehicle battery industry. But companies including Ford and Tesla have rushed ahead of the rules, in the process helping to reveal what a U.S.-focused industry might look like. 

So far, Ford’s and Tesla’s bets appear to be paying off. In February, Ford struck an alliance with China’s Contemporary Amperex Technology Ltd. to make EV batteries in Michigan, gambling rightly that the White House would not challenge the deal despite the involvement of a Chinese company. In recent days, Tesla has told the administration that it is seeking a similar arrangement with CATL, perhaps for a factory in Texas, according to people familiar with the matter. Administration officials did not object to Tesla’s plans, according to the people, who said batteries produced by the plant, if it is built, would probably qualify for at least some U.S. tax credits. Tesla’s plans were first reported by Bloomberg.

By jumping ahead of the rules before they become final later this year, Ford and Tesla highlighted what should have been obvious to everyone by now—that it’s not possible to make batteries entirely without China and won’t be for a long time. The automakers are effectively proposing a large if low-profile role by Chinese companies. The outcome of their vision, and actions by the Biden administration, will be a sprawling battery manufacturing industry, anchored in the U.S. and stretching to Europe, Japan and South Korea and possibly Indonesia and Argentina, designed to break China’s chokehold over the industry.