Automakers are making changes in their strategies as they grapple with the increasingly complex rules of the Inflation Reduction Act (IRA), which subsidizes electric vehicles built in North America while excluding Chinese supply chains. Some automakers are looking to keep Chinese companies as partners even if they give up some of their IRA subsidies or stop local production in the United States altogether. This contrasts with the likes of Hyundai Motor and Kia Corp. committed to ramping up their North American production.
In the United States, Ford has partnered with China’s Huayu Cobalt in order to secure the supply of a key mineral for electric vehicle batteries from the Chinese company. The U.S. automaker has signed a joint venture agreement with Huayu Cobalt and Brazilian miner Vale to source nickel and cobalt, key raw materials for electric vehicle batteries from Indonesia.
The joint venture will produce 120,000 tons of mixed hydroxide precipitate (MHP) per year starting in 2026, supplying about 70 percent to Ford. According to Chinese media outlets, Huayu Cobalt will hold a 73 percent stake in the joint venture. Ford’s stake will be only 8.5 percent. The U.S. automaker can increase its stake in the future, but the cap is 17 percent.
Ford signed the agreement shortly after the U.S. government announced on Dec. 5 that it would designate joint ventures with more than 25 percent Chinese capital as foreign entities of concern (FEOCs) under the IRA, making them ineligible for subsidies.
“Ford has judged that even if setting up the joint venture with Huayu Cobalt means giving up subsidies, it is better to utilize a Chinese-dominated supply chain to produce EVs cheaply,” said one industry analyst. Ford’s idea is to lower the cost of battery production to lower EV prices to begin with. Ford also has a technology license agreement with China’s CATL to build a battery plant in the United States. It aims to produce cheaper lithium-iron phosphate (LFP) batteries in America.
Japan’s Nissan is considering abandoning U.S. production altogether. According to Automotive News in the United States, Nissan is considering not producing new models of its flagship electric car, the LEAF, in North America. The idea is that it might be better to do without IRA subsidies than to build a new supply chain and produce EVs in the United States where EV production costs much. Batteries for the Nissan LEAF are produced by AESC which received Chinese capital.