Semiconductors have recently been a focal area in the United States’ attempts to slow China’s technological growth. Washington is now focusing on yet another hot tech field in which China is making significant strides: batteries for electric cars.
Earlier this month, the Treasury and Energy Departments proposed regulations that would prevent electric vehicle customers from obtaining tax credits if their vehicles included battery parts from China and other nations deemed “hostile” to the United States. Consumers will get up to $7,500 in subsidies for purchasing EVs built in the United States using mostly domestic resources under President Joe Biden’s hallmark climate measure, which was adopted last year.
Last Monday, China’s Ministry of Commerce retaliated, claiming that the US laws “discriminate against Chinese companies and violate WTO rules.” Excluding Chinese suppliers from US tax breaks is a “typical non-market-oriented policy and practice,” according to the government. 
The measures, which seek to minimize the United States’ reliance on China’s supply chains in a new age of decoupling, would most certainly stymie Biden’s attempts to push EV sales as part of the president’s objective to cut greenhouse gas emissions in half by 2030.
The United States’ objective of preventing China from dominating a sector that is expanding quickly thanks to countries’ switch to electric cars is also in jeopardy. According to SNE Research, CATL and BYD, two of China’s top battery manufacturers, accounted for around 53% of the world’s EV battery consumption in the first ten months of this year.
China has the largest EV market in the world, according to research firm Counterpoint, with a 58% share as of Q3 this year.
South Korean conglomerates such as LG, Samsung, and SK On provide competitive alternatives to China’s inexpensive and sophisticated batteries and are poised to gain from deteriorating US-China ties. However, the increased geopolitical issues are causing concern among Korean businesses.
Despite the fact that Ford and Hyundai have both hired SK On to develop battery plans in the United States, Chey Tae-won, the CEO of SK Group, recently criticized the country for maintaining high battery prices. The Korean chaebol’s battery arm is now compelled to hunt abroad for non-Chinese components. China controls a large portion of the worldwide supply chain for EV batteries, from rare metal mining to refining and cell manufacture.
To retain their cost-competitiveness, Chinese battery manufacturers have been begging to establish plants in the United States that will continue to qualify their consumers for the EV tax credit. Industry titans like Gotion, BYD, and CATL have established strategic plans to manufacture in the United States, yet their path is not without challenges. Ford, for example, has temporarily halted plans to construct a $3.5 billion EV battery facility in Michigan with CATL while US lawmakers review the transaction.
