General Motors Co. is in talks to buy electric vehicle batteries that would use technology from China’s Contemporary Amperex Technology Co. and be assembled at a new factory slated to be built in the U.S., according to people familiar with the matter.
The factory would be financed and operated by TDK Corp., a Japanese company that makes components for consumer electronics, said the people, who asked not to be identified discussing private information. The plant is expected to be located in the southern U.S. and could create more than 1,000 jobs, the people said.
Negotiations are ongoing and the deal could fall apart or change depending on the outcome of the U.S. presidential election in November, the people added.
The discussions highlight how U.S. automakers are dealing with faltering demand for electric vehicles and pressure from Washington policymakers to build a domestic supply chain for plug-in vehicles to reduce the industry’s reliance on China.
Under the terms of the deal, TDK would license technology from CATL — the world’s largest maker of electric-vehicle batteries — to manufacture lithium-iron phosphate cells, the people said, similar to CATL’s existing partnerships with Ford Motor Co. and Tesla Inc. GM doesn’t plan to take an equity stake in the venture, one person said.
Such a technology licensing deal could help avoid scrutiny from U.S. lawmakers and the Biden administration, who are wary of collaborating with China on key strategic technologies, including EV batteries. Last month, for example, Florida Sen. Marco Rubio and Michigan Rep. John Moolenaar, both Republicans, called on the Pentagon to put CATL on a shortlist of companies allegedly working with China’s military.
“Our EV strategy is focused on designing products that continue to reduce costs, improve performance and localize production. Battery technology is a key enabler of this strategy,” GM said in a statement. The company declined to comment on “speculation.”
Representatives for TDK and CATL declined to comment.
Under the terms of the supply agreement, GM and other automakers could buy LFP cells from TDK’s plant at a fixed price over the life of a long-term contract, the people said.
Such a structure would shield automakers from the wild swings in battery prices they have faced in recent years. It would also spare them from investing billions of dollars upfront at a time when EV demand is slowing and the pace of adoption in the U.S. looks more uncertain.
The approach could also serve as a hedge against political uncertainty. Former President Donald Trump has promised to rescind unspent funding for the Inflation Reduction Act — President Joe Biden’s signature climate bill — if he wins reelection. That could hurt demand for electric and hybrid vehicles just as automakers are gearing up to sell more of them.
Because automakers would buy the batteries rather than manufacture them, TDK would bear the cost of any financial penalties if the cells used components that didn’t comply with the IRA, which seeks to exclude China from the U.S. electric vehicle supply chain, the people said.
The approach represents a more cost-effective path for traditional automakers, which have been bleeding money trying to build batteries and EVs at scale. At the same time, it would present a new challenge for the UAW, which conducted a rancorous six-week strike last fall to secure jobs for its members at future joint-venture battery plants.
The Biden administration has earmarked billions of dollars to support additional battery production in the U.S., in part to help shore up unionized electric vehicle jobs, a key plank of its domestic agenda.
For TDK, the move would expand its reach into electric vehicle batteries in addition to its core consumer electronics business. In 2022, TDK and CATL won regulatory approval to pursue battery joint ventures together.
The two companies have a long history. Robin Zeng, CATL’s billionaire chairman, worked on lithium-ion batteries for consumer electronics at Amperex Technology Co., or ATL, a TDK subsidiary he helped found. In 2011, Zeng started CATL as a bet on the direction of the Chinese government’s policy to promote EVs.