GM looks to Japan’s TDK to make U.S. batteries with China tech

General Motors is in discussions to buy electric vehicle batteries that would use technology from China’s Contemporary Amperex Technology Co. and be assembled at a new plant slated to be built in the U.S., according to people familiar with the matter.

The factory would be funded 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 U.S. South and might create more than 1,000 jobs, the people said.  

Talks 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 underscore how U.S. automakers are contending with faltering EV demand and a push by Washington policymakers to build a domestic plug-in supply chain to reduce the industry’s reliance on China. 

Under the terms of the deal, TDK would license technology from CATL — the world’s biggest maker of EV batteries — to make lithium iron phosphate cells, the people said, similar to existing CATL 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 arrangement might help avoid scrutiny by U.S. lawmakers and the Biden administration, who are wary of collaboration with China on key strategic technologies including EV batteries. Last month, for example, Florida Senator Marco Rubio and Michigan Representative John Moolenaar, both Republicans, asked the Pentagon to put CATL on a restricted list of firms allegedly working with China’s military.

“Our EV strategy is focused on designing products that continue to lower cost, improve performance and localize production. Battery technology is a key enabler of that 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 contract, GM and other automakers could buy LFP cells from the TDK plant at a fixed price over the life of a long-term contract, the people said.

That structure would shield carmakers from the wild swings in battery prices they’ve faced in recent years. It would also spare them from investing billions of dollars up-front 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 pledged to rescind unspent funding for the Inflation Reduction Act — President Joe Biden’s signature climate law — should he win reelection. That could cripple demand for electric and hybrid vehicles just as automakers are gearing up to sell more of them.

Because carmakers would buy the batteries instead of build them, TDK would bear the cost of any financial penalties if the cells use components that don’t comply with the IRA, which seeks to carve China out of the US EV supply chain, the people said. 

The approach represents a more cost efficient path for incumbent automakers, which have been hemorrhaging money trying to build batteries and EVs at scale. At the same time, it would present a fresh challenge for the UAW, which conducted a rancorous six-week strike last fall to guarantee jobs for its members at future joint-venture battery plants. 

The Biden administration has allocated billions of dollars to support additional battery production in the U.S., in part to help bolster unionized EV jobs, key planks of its domestic agenda.

For TDK, the move would expand its reach into electric vehicle batteries, beyond its core consumer electronics business. In 2022, TDK and CATL won regulatory approval to pursue battery joint ventures together. 

The two firms have a long history. Robin Zeng, the billionaire chairman of CATL, worked on lithium-ion batteries for consumer electronics at Amperex Technology Co., or ATL, a subsidiary of TDK that he helped found. In 2011, Zeng started CATL as a gamble on the direction of Chinese government policy to promote EVs.