Gov. Glenn Youngkin says he withdrew Virginia’s bid for a Ford electric vehicle battery plant that might have employed 2,500 people in Pittsylvania County because of concerns that Ford is partnering with a Chinese company that he calls a “Trojan Horse” for the Chinese Communist Party.
Had Ford actually located in Pittsylvania – and there’s dispute over whether the company had actually chosen the site or not – it would have been the biggest jobs announcement of Youngkin’s governorship. It also would have brought a lot of jobs to a part of the state that very much needs them, so we can probably surmise that this step wasn’t taken lightly, although there are those who dispute that, as well.
Under the arrangement, Ford would have operated the plant but a Chinese company – Contemporary Amperex Technology Co., or CATL for short – would have owned the technology. We’ll get into CATL’s relationship with the Communist Party later but for now here’s the question I haven’t seen explored yet: Does it really matter if the Chinese Communists were involved in the deal?
House Minority Leader Don Scott, D-Portsmouth, apparently doesn’t think so. “We cannot refuse to do business with any company simply because they have ties to China,” he said last week. On the other hand, this is an easy shot for a Democratic leader to take against a Republican governor – that the governor is turning away jobs for a Republican-voting part of the state.
Scott’s not the only one saying this, though. Reason, a publication of the libertarian Reason Foundation think tank, called Youngkin’s move “anti-China paranoia.” Assistant editor Joe Lancaster wrote: “Even if CATL did share its technology with the Chinese government, it’s not clear how that constitutes a national security risk to the United States. After all, battery cells made by private companies are not state secrets. And plenty of other automakers already manufacture electric cars, meaning that China can’t have a monopoly on battery technology. Besides, if Americans are able to buy cars that don’t have to use gasoline, what does it matter who manufactured them? More than anything, Youngkin’s decision feels like good old-fashioned economic protectionism, favoring domestic companies over foreign firms no matter the impact on the end consumer.”
Now we come to the heart of the matter: The concern here is not that the Chinese Reds will know how the battery in your Ford F-150 Lightning pickup truck works, but that Ford is helping increase Chinese dominance in a new technological sector. From that point of view, the communist angle is a catchy headline but perhaps irrelevant to the larger battle over who will be the world’s economic powerhouse of the 21st century: us or them.
Let’s walk through what I’ve been able to find out about CATL.
The company is the biggest maker of electric vehicle batteries in the world. Bloomberg reports it accounts for 37% of the sales in the world, nearly three times more than the next-biggest competitor.
“CATL has emerged as one of the biggest winners of the electric car boom, along with Tesla,” reports The New York Times, which profiled the company in December, two days after The Daily Caller first reported that Youngkin was nixing Virginia’s bid.
It’s not just that CATL is big; it also controls many of the raw materials that go into electric vehicle batteries, particularly lithium. Just last week the government of Bolivia announced it had awarded a contract to CATL to develop what may turn out to be the world’s largest supply of lithium (75% of the world’s lithium deposits are said to be in a “lithium triangle” that spans Argentina, Bolivia and Brazil).
“The battery giant stands as a crucial link in a green-technology supply chain increasingly dominated by China,” The New York Times wrote. “Chinese companies, particularly CATL, have secured vast supplies of the raw materials that go inside the batteries. That dominance has stirred fears in Washington that Detroit could someday be rendered obsolete, and that Beijing could control American driving in the 21st century the way that oil-producing nations sometimes could in the 20th.”
China was never able to compete with the rest of the world with combustion engines but now the technology has changed, The New York Times wrote, and China has a definite advantage with electric vehicle batteries. Indeed, the website E-Vehicle Info reports that six of the 10 biggest EV battery makers are in China; the other four are elsewhere in Asia. This is a field where the United States simply isn’t competitive – yet American carmakers, driven partly by government mandates on emissions and partly by market demand, are rapidly shifting to electric vehicles. For years, we were dependent on foreign sources of petroleum to power our gas-burning cars; now it looks as if we’ll be dependent on foreign sources to power our electric-powered cars. Pick your poison: the Saudis or the Chinese.
China’s dominance of the EV battery market is no accident. China has identified technology in general – and electric vehicle batteries in particular – as a strategic industry and taken steps to make sure it’s a global leader. The New York Times found no evidence that CATL has direct ties to the Communist Party but the communist government has certainly worked closely with the company to ensure its rise. Government-connected banks have loaned the company money; Chinese law has restricted imports of non-Chinese batteries, essentially requiring companies to buy Chinese-made batteries if they want to do business in the world’s most populous market. A fifth of the company’s net income comes from government subsidies, The New York Times reported. This is how a directed economy works; this is what American companies are often up against in the global marketplace.
Now we come to corporate economics. Around the world, automakers have signed partnerships with CATL – BMW, Mercedes, Daimler Truck, among others. And now, apparently, Ford. If you’re an automaker, the economics make sense: Why spend the money to invest in inventing your own battery technology when you can essentially buy it off the shelf from CATL? And if you’re CATL, the deal with Ford makes sense in another way: Here’s a way to get into the large North American market.
Politically, though, all this comes against a backdrop of rising American concerns that the Chinese are cornering the market in certain technology sectors. If you’re the libertarians at Reason, the Chinese connection shouldn’t matter: What should matter is the ultimate cost to consumers, and if the Chinese can do this cheaper, more power to them. “Fearmongering over the country’s industrial influence is ultimately antithetical to an ethos of free trade,” Reason writes. Others don’t see it that way. Last year, Congress passed, and President Joe Biden signed, the CHIPS and Science Act, designed to boost domestic production of microchips and increase tech research and development in general. U.S. Sens. Mark Warner and Tim Kaine, both D-Virginia, voted for the measure; Warner was one of the key authors. All four Republican members in the state’s House delegation at the time voted against it, with Morgan Griffith, R-Salem, saying the bill was too loaded with other spending that he objected to.
Those votes aside, the CHIPS and Science Act did have enough Republican support that it’s generally been described as bipartisan. So why hasn’t there been the same concern about electric vehicle batteries as there has been with microchips? I suspect for two reasons: The rise of electric vehicles has come about fairly quickly, and there’s still some pushback in some conservative circles against the very idea of electric vehicles (even though all the EV owners I know are Republicans and it’s often Republican states that are benefitting from automakers setting up factories related to EV production).
It’s easy to see why Youngkin might be concerned about this deal. That’s not to say he’s right to nix a deal that would have brought 2,500 jobs to Pittsylvania County – I’ll leave that to others to debate – just that it’s easy to understand how he saw the politics (particularly if he’s planning to run for president and doesn’t want to look “weak on China.”). Keep this in mind, though: While Youngkin has made a political point, he doesn’t necessarily change anything. His move alone won’t lessen American dependence on Chinese technology. Ford is looking at other sites – Michigan and perhaps elsewhere. Maybe another big-employee prospect will land at the Southern Virginia Mega Site and this will all be forgotten; right now, a lot of people in Danville and Pittsylvania are pretty steamed with the governor they voted for. I’ve heard from some of them and “steamed” might be a mild word but it’s the only one fit for print.
For what it’s worth, Youngkin’s not the only one willing to send away jobs because of the Chinese connection. Last week, a Republican member of the Michigan state legislature said his state shouldn’t be pursuing these jobs either – and keep in mind that Michigan has felt very burned about auto jobs going to other states so a state lawmaker there speaking out against the Ford plant is perhaps unprecedented. “Michigan taxpayers should not fund the Chinese Communist Party’s efforts to expand its destructive influence in the United States,” said state Rep. Andrew Beeler. “We must not use the people’s money to give our global adversary a foothold in Michigan.” (The reference to tax money is to the incentives that states typically offer to land big employers.)
Will any of that matter? A Virginia governor and a Michigan state legislator objecting to Ford’s deal with CATL won’t change anything, except maybe where the plant and its 2,500 jobs wind up – certainly not Virginia and maybe not Michigan, either. So what would? Countering China’s dominance in certain technology sectors isn’t something that state governments are equipped for; only the federal government can, and perhaps even that power is debatable. Here’s one small idea, though: Youngkin wants a small nuclear reactor in Southwest Virginia and has proposed $5 million in state funding to research the technology. If he’s really serious about Chinese dominance of the EV battery sector, perhaps he should propose funding into state research for how to develop our own technology. He could even propose that research take place in Danville.