‘Alarmed' lawmaker questions Ford CEO Jim Farley on deal with China's CATL

WASHINGTON — U.S. Rep. Jason Smith, R-Mo., is seeking more information from Ford Motor Co. about the automaker's deal with China's Contemporary Amperex Technology Co. Ltd. to use its technology at a planned $3.5 billion battery plant in Michigan.

In a letter sent Monday to Ford CEO Jim Farley, Smith raised concerns over whether the arrangement leans on a "loophole" in the electric vehicle tax credit's battery component sourcing requirements and goes against the law's intent of U.S. energy security and reducing dependence on foreign adversaries such as China for battery materials and manufacturing.

"This arrangement appears to leverage a loophole in the [Inflation Reduction Act] rules regarding battery components manufactured or assembled by a 'foreign entity of concern,' " wrote Smith, who chairs the House Ways and Means Committee. "I am alarmed about how Ford has structured this project in the context of the IRA's clean vehicle credits and am concerned that other automakers may seek to use loopholes in the IRA to avoid guardrails meant to protect American enterprise and workers."

Smith is seeking answers on Ford's licensing agreement with CATL, including whether it expects EVs with batteries produced at the plant will qualify for a tax credit under Section 30D and whether Ford plans to claim tax credits under Section 45X, which applies to the production of certain battery components and materials.

In a statement to Automotive News, Ford said many of the assertions about the Michigan battery plant are "incorrect."

"Ford has been extremely clear that any tax dollars will go only to our wholly owned subsidiary, not to CATL or any other entity," said Melissa Miller, a spokesperson for the automaker. "We'll pay CATL to license its battery cell technology — like we would any other contractor, no matter where in the world we built this plant."

Provisions in the Inflation Reduction Act make it more attractive for Ford to invest in the U.S. "rather than making these batteries elsewhere ... or buying and importing them exclusively, like our competitors do," she said, noting Ford had considered locations in several countries.

"Adding this type of battery to our lineup will help make EVs more affordable to more customers," Miller said.

Smith also sent separate letters to 10 other automakers — Audi, BMW, General Motors, Hyundai, Nissan, Rivian, Stellantis, Tesla, Volkswagen and Volvo Car — to inquire whether they too are using loopholes in the Inflation Reduction Act to circumvent protections for American workers. He is seeking responses by May 1.

As of Tuesday, new EVs must meet increasingly stringent battery component and critical mineral requirements to qualify for a full or partial credit under Section 30D.

Starting in 2024, vehicles are ineligible if they contain any battery components that are manufactured by a "foreign entity of concern," which could include companies controlled by China. That exclusion starts in 2025 for critical minerals.

Treasury still needs to release guidance on how strictly it will enforce the provision.

Smith's request comes after Sen. Marco Rubio, R-Fla., in March introduced a bill that would block tax credits for EV batteries produced using Chinese technology. That would include a domestic corporation that relies on technology via a licensing agreement with a foreign entity of concern — a jab at Ford's deal with CATL.

Ford said in response to Rubio that "making those batteries here at home is much better than continuing to rely exclusively on foreign imports, like other auto companies do. A wholly owned Ford subsidiary alone will build, own and operate this plant. No other entity will get U.S. tax dollars for this project."

While provisions in the Inflation Reduction Act such as the EV tax credits aim to foster a domestic supply chain and bring jobs to the U.S., China still dominates the processing and refining of key battery minerals.

"The current EV battery supply chain landscape appears to pose very real challenges for automakers to meet the critical mineral and battery requirements" in the EV tax credit, Smith said. "But that does not justify drafting regulations that are contrary to congressional intent and could permit loopholes that benefit foreign entities of concern."

Reuters contributed to this report.