US Commerce Secretary Gina Raimondo has turned her attention to the nation’s electric-vehicle sector, which means tackling the perceived threat from China. To achieve the twin goals of developing the local industry while protecting national interests, she need only refer to Beijing’s own strategy.
EVs and autonomous cars are “collecting a huge amount of information about the driver, the location of the vehicle, the surroundings of the vehicle,” Raimondo told a gathering of the Atlantic Council on Jan. 31. “Do we want all that data going to Beijing?”
This may be an excuse to close the door to Chinese cars, but that doesn’t mean her concerns are unwarranted. Modern vehicles have dozens of sensors collecting vast amounts of information. This can include video of anywhere a car travels, such as near sensitive military installations, as well as images of national security personnel. The data accumulated by a fleet of vehicles makes the capacity of a few wayward Chinese balloons look minuscule.
Yet China’s EV and battery technologies are highly advanced, outpacing the US in many aspects. If Raimondo and others in the Biden administration
want to boost the nation’s new-energy vehicle sector, they’ll need to tap into that competence while being mindful of security concerns.
Beijing has already shown them how.
Over the past two decades, China has been eager to get Western technology companies to set up locally, but was unwilling to give unfettered access. The goal was technology transfer — learn from the world’s best, copy it, then apply those skills. China managed to do this, the US-China Economic and Security Review Commission found, including through foreign direct investment, venture capital, licensing and outright theft.
Yet joint ventures are among the most effective. A study by the National Bureau of Economic Research found that JVs with foreign partners produced some of China’s biggest technological advancements, not just for the local partner but for others in the same industry.
Early deals involving Volkswagen AG and General Motors Co saw those companies bring their advanced design skills, which helped lay the foundations of China’s modern car industry. More noteworthy, the bureau found, was a 2003 venture between global telecommunications leader 3Com and Huawei Technologies Co., which went on to become a major force in the industry.
Now Washington has a chance to turn the tables with a mix of carrots and sticks.
While BYD Co. has said it has no plans to enter the US car market, the company has already delivered more than 100 electric trucks to Anheuser-Busch InBev SA in the US and is a major supplier of the batteries that go into EVs across the globe. Contemporary Amperex Technology Co, better known as CATL, is the other big name in Chinese new-energy vehicles. It doesn’t do cars, but is one of the world’s leading developer of batteries counting Tesla Inc. among its clients.
For now, the US needs China, while that country’s major suppliers can probably do without America. But if these companies want to continue growing in the long term, they’ll need to tap into the world’s second-largest car market. Importantly, there’s no reason why the US needs to remain dependent. China has a 65 percent share of refined lithium, nickel and cobalt — key ingredients in EVs — but has almost no presence in output or reserves of their raw materials. Over time, other nations can pop up to process and supply such minerals.
What China does have, though, is technological know-how. And that’s why Raimondo ought to negotiate a quid pro quo instead of putting up hard barriers. If battery companies like BYD and CATL want to sell into the US, they can be made to do so only through joint ventures. And if Chinese-owned car brands like NIO, XPeng, Volvo and Polestar expect access to America’s roads, they too could be compelled to find a local partner.
Ford Motor Co. is already on the case, but could be tripped up by American politics. A year ago, the car giant announced a deal with CATL to license the Chinese partner’s battery technology, but fully own and produce them for its vehicles. This looked like the perfect solution: Create American jobs, transfer intellectual property to the US and protect national security by limiting Chinese ownership and access. But spooked by Beijing’s decision in July to limit exports of gallium and germanium, key minerals used in chips and EVs, US lawmakers called for an investigation into the arrangement and CATL’s alleged links to forced labor in Xinjiang.
Human rights abuses are a serious issue, and curbs on the supply of key materials are a concern, but conflating the two risks hurting US interests. For one, it’s easy to legislate against the use of conflict minerals because Congress already did so under section 1502 of the 2010 Dodd-Frank Act. Secondly, China doesn’t control output of raw gallium and germanium, which are largely byproducts from refining other minerals.
In other words, the US needn’t fear being cut off from irreplaceable resources, yet does have the power to compel China into sharing technology. All it needs to do is copy Beijing’s playbook.
Tim Culpan is a Bloomberg Opinion columnist. Views do not represent the stand of this publication.
Credit: Bloomberg
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