Negotiations are underway at General Motors regarding batteries it will use for its EVs. The Detroit-based automaker is exploring a major strategic opportunity: the use of electric vehicle batteries based on technology from China's Contemporary Amperex Technology Co (CATL), the world's largest producer of EV batteries.
But instead of manufacturing those batteries in China, General Motors plans to have them produced in the U.S., thereby reducing geopolitical risks while strengthening local production capacity.
A Japanese factory on American soil?
According to unnamed sources, GM could obtain these batteries from a plant operated by Japanese firm TDK Corp. That plant would be located in the southern U.S. and would create potentially over 1,000 new jobs, boosting local economies.
According to Bloomberg, TDK could license CATL technology to produce phosphate-iron-lithium (LFP) battery cells. While Ford has invested $3.5 billion in a battery plant in Michigan using the same technology, GM is planning a different approach, avoiding any direct equity participation.
That strategy would enable GM to avoid running afoul of U.S. lawmakers concerned about foreign investment in critical technology sectors.
An advantageous contractual agreement for GM
By entering into a supply contract, GM could secure access to LFP cells at a fixed price over the duration of a long-term agreement. This approach would protect the company against high up-front costs and volatile battery prices. It would also offer a degree of stability in the face of potential political upheavals, such as changes in the law on reducing inflation, which could influence future investment in the sector.
The impact of upcoming elections
Although the details of the project have not yet been confirmed, the finalization of this plan could depend on the outcome of the November presidential election. GM hasn’t commented officially, but it reiterated recently that its electric-vehicle strategy is focused on reducing costs, improving performance and localizing production. According to the company, battery technology is a key element in achieving those objectives.
Historical links between CATL and TDK
Interestingly, CATL, founded by Robin Zeng Yuqun in 2011, has strong links with TDK. Before setting up CATL, Zeng founded Amperex Technology Limited (ATL) in 1999, a company that was acquired by TDK in 2005. He then worked as an executive at TDK, connecting his early career with the Japanese company's technological advances in the battery sector.