The United States wants to lessen its reliance on China when it comes to electric vehicle (EV) production. A proposed $7,500 tax credit set to kick in come 2024 is held by most to be the key to increasing EV sales stateside. Yet, US law dictates the credit cannot be used to purchase cars with battery components that come from a “foreign entity of concern.” The interpretation of that phrase will likely dictate the future of the US EV rollout. 

At the heart of this struggle are Ford and General Motors (GM). While there are other EV manufacturers to be certain, Ford has caught the eye of lawmakers and members of Congress with its proposed plans for a $3.5 billion battery factory. The Michigan plant would be one-of-a-kind, but it would also depend heavily on the Chinese firm Contemporary Amperex Technology Co. Ltd (CATL). Ford is interested in CATL’s technology to make lithium-iron-phosphate batteries. At an industrial scale, these batteries are cheaper than the alternatives and would greatly reduce production costs. Yet, an agreement like this would likely run against the “foreign entity of concern” clause. 

Meanwhile, crosstown rival GM does not have any planned partnerships with Chinese battery firms and is making this position known. Should Ford be able to move ahead and offer EVs with the $7,500 tax credit, the automaker would gain a relevant technological and cost advantage over GM. Understandably, GM is calling for a strict adherence to the “foreign entity of concern” rule while Ford is positioning its deal with CATL as a licensing agreement and not a joint venture. This means the subsidiary that operates the Michigan plant would be owned by Ford and they would then pay CATL royalties for the use of their technology. 

China is a prominent player in the lithium-ion battery supply chain. Last year roughly 65% of all graphite mined in the world (key raw material for batteries) was from China. In terms of chemical refining and production, all spherical graphite and nearly all manganese refining occur in China, and the Asian giant controls 70% of battery-cell production. Ford defends its position by citing that a deal with CATL could bring substantial advanced technology knowledge to the US and that cutting the US off completely to Chinese partnerships could set the domestic battery market back for decades. 

On the other end, should Ford be allowed to move forward as planned, some in Congress fear this will simply push GM and others to form similar partnerships with other Chinese firms thus further integrating the two nations. Both Democrats and Republicans have enough folks on both sides of the aisle that agree on ridding the US of excess Chinese reliance. But without the $7,500 tax credit bridging the gap between a new EV and a new gas-powered car, a gas-powered option will likely win out for most consumers.