The Biden administration is trying to develop the domestic battery industry by partnering with a Chinese carmaker. This US carmaker has teamed up with a Chinese miner.Ford has announced plans to invest in a $4.5bn battery materials plant in Indonesia alongside a Chinese mining group, the latest gamble by the US carmaker that drawing China into its supply chain for electric vehicles will not backfire in Washington.
America’s second largest carmaker has joined forces with China’s Huayou Cobalt, and Brazilian miner Vale to build the Pomalaa facility. This will provide the nickel required to produce 2mn electric cars per year.
Ford announced last month that it would license technology to China’s CATL (the world’s largest battery manufacturer) — a move that was criticised by some US lawmakers.
Ford’s decision is to strengthen ties with Chinese companies as President Joe Biden offers $369bn in green tax incentives and subsidies to help the US take the lead in global clean energy.
Consumers can get tax credits of up to $7500 under the Inflation Reduction Act for electric vehicles that do not use components or raw materials from “foreign entities of concern”, including China.
The US Treasury will clarify Friday the eligibility requirements for consumer tax credits for EVs. These are granted if a specified amount of raw materials or components are sourced from the US, or other free trade partners.
Ford’s gamble that it can sell EVs cheaper than its competitors is made by including China in its supply chain, despite the fact that it may have to forgo some or all tax credits due to the lower production cost achieved through Chinese partners. Ford and other carmakers lobbied for a generous interpretation by the US government of the IRA.
“This framework gives Ford direct access to source the nickel that we need — in one the lowest-cost industry ways,” Lisa Drake, vice president for EV industrialisation Ford Model e.
Ford’s approach has been criticized by some US lawmakers. Florida Republican Senator Marco Rubio introduced a bill earlier in the month that would prohibit the tax credit for EVs made using batteries manufactured at a Michigan facility that plans to licence Chinese technology.
The controversial import of nickel from Indonesia, the country with the largest nickel reserves, has been a problem for western carmakers. China controls the majority of Indonesia’s production and produces large amounts of carbon dioxide and mining waste, compared to other suppliers like Canada and Australia.
The IRA’s definition of “foreign entities of concern” is a key question. It will not cover Chinese-controlled production in third country like Indonesia. Many mining industry executives believe that mineral projects involving Chinese companies representing less than 50% of a joint venture will be accepted.
Ford and its partners in Pomalaa’s planned Pomalaa car plant signed a memorandum last July in which Ford would own a 17% stake, Huayou 53%, and Vale 30%, respectively. Although Vale confirmed that it would hold a 30% stake on Thursday, Ford and Huayou did not confirm the size.
The Indonesian government encourages more US and European investment in the nickel industry.
According to an Indonesian official, the Pomalaa plant shows that Indonesia has enough commodities to support EVs. This is why US companies are open to working with Chinese partners in order to obtain raw material.
George Fang, senior vice president of Huayou Cobalt called the Pomalaa project, “one of the flagships projects under the Belt and Road Initiative”, in reference to Beijing’s infrastructure investments throughout the developing world.