America is targeting China again. By “declaring war” on the Chinese EV market, America may be putting the industry at risk, leaving car enthusiasts worried that the EV industry may disappear completely. 134 Chinese companies have been blacklisted according to Section 1260H, including CATL, the largest EV battery manufacturer in the world. Thus, the future of EVs remains bleak as all supply chains may collapse, and in the process, the prices of EV batteries could increase drastically. Gone is former President Biden’s administration’s goal of electrification. This economic trade action is being viewed by global analysts as a declaration of economic warfare.
On the chopping block: Chinese EV battery manufacturer CATL
Knowns as global leader in lithium-ion production, Contemporary Amperex Technology Co. Limited (CATL) has made quite a name for itself globally. Since CATL has been included on the U.S. Department of Defense’s Section 1260H blacklist, it seems like CATL will be on the chopping block in America and this company may face severe backlash. The 1260H blacklist is updated yearly and features the names of companies that allegedly have relations with the Chinese military.
Having listed CATL on the 1260H blacklist could lead to a serious problem for the EV industry who makes use of CATL’s batteries. Due to CATL’s dominance in the EV market and scale of production, CATL’s batteries are irreplaceable for many EV automakers and may lead to production being stalled. The result of blacklisting CATL would also be an increase in the prices of EVs. Thus far, American automakers’ contracts with CATL face the threat of being terminated.
Blacklist hits the auto sector the hardest
Tension is rising, as CATL is known to supply batteries to industry giants like Tesla, Ford, and BMW. The move towards blacklisting key companies is a way to tighten economic control by breaking ties with companies that have alleged links to China’s military.
Also on the U.S. blacklist with CATL are Tencent and CXMT. Tencent is China’s tech titan, and CXMT is a chipmaking company. As with many companies listed on the U.S. blacklist, the Defense Department has not provided any compelling evidence to show the relevance of CATL to any military activities. America seems set on undermining China’s tech strengths.
Nevertheless, the implications will have a ripple effect. Already massive Chinese firms like Tencent and CATL are looking at routes to take legal action via international forums. The Chinese government has labelled the U.S. blacklist as a politically motivated agenda that is based on the intention of causing economic destruction.
From all this, the automotive sector will be hit the hardest at a time when electrification is at its peak. Approximately half of all the lithium-ion batteries used come from China and manufacturer CATL in particular. The EV market is now unstable and America’s plans for 50% of newer vehicles to be electric by 2030 may not see light of day.
The tech war waged against China
Although this is not a literal cold war, it is a way to declare economic warfare. Chinese media and international observers have mentioned that since the EV industry is at the forefront of climate policy and industrial competitiveness, the EV industry is being targeted for this emerging fight.
In retaliation, Chinese state-owned enterprises are laying down the foundation for the restriction of exports of raw materials that America needs, like rare earth elements, lithium, and cobalt.
The dilemma posed for the American automotive industry
A new chapter is being written in the ongoing U.S. and China tech war, however, the decision of the U.S. to blacklist CATL as well as major Chinese tech companies could result in collateral damage, especially for the EV industry that is currently taking the world by storm. Supply chains are threatened and as such the future of the EV industry faces a threat too.
