US to ban Pentagon battery purchases from China’s CATL, BYD

by Bloomberg Jan 22, 2024

US lawmakers have banned the Defense Department from buying batteries produced by China’s biggest manufacturers, furthering efforts in Washington to decouple the Pentagon’s supply chain from its geopolitical rival.

The rule implemented as part of the latest National Defense Authorization Act that passed on Dec. 22 will prevent procuring batteries from Contemporary Amperex Technology Co. Ltd., BYD Co. and four other Chinese companies beginning in October 2027.

The measure doesn’t extend to commercial purchases by companies such as Ford Motor Co., which is licensing technology from CATL to build electric-vehicle batteries in Michigan. Tesla Inc. also sources some of its battery cells from BYD, which became the new top-selling EV maker globally in the fourth quarter.

CATL’s licensing deal with Ford drew heightened attention last year from politicians amid rising concern about the role of Chinese companies in the manufacture of electric vehicles. Last month, Republican US Senators Ted Cruz and Marco Rubio sent a letter to Defense Secretary Lloyd Austin warning that the use of CATL batteries raises security risks.

The four other manufacturers whose batteries will be banned are Envision Energy Ltd., EVE Energy Co., Gotion High Tech Co. and Hithium Energy Storage Technology Co. Of the top 10 battery suppliers in the world, just three are non-Chinese companies. Recent data has shown CATL and BYD growing their global market shares.

The decision still requires Pentagon officials to more clearly define the reach of the new rule. It adds to previous provisions outlined by the NDAA that decoupled the Defense Department’s supply chain from China, including restrictions on use of Chinese semiconductors.

While the Defense Department bans apply strictly to defense procurement, industries and lawmakers closely follow the rules as a guide for what materials, products and companies to trust in their own course of business. The Pentagon didn’t immediately respond to a request for comment.