Tesla’s Chinese Battery Supplier CATL Faces US Security Concerns

Tesla‘s primary battery supplier in China, Contemporary Amperex Technology Co. Limited (CATL), has been flagged by U.S. lawmakers over alleged ties to the Chinese military, raising concerns about potential security threats. The designation, announced this week, places CATL on a list of Chinese companies with military connections, though no immediate restrictions have been imposed.

According to Citi estimates, CATL’s electric vehicle (EV) and energy storage systems (ESS) accounted for 4% and 35% of the U.S. market in 2023, respectively. The company’s inclusion on the list could deter U.S. firms from engaging in business with CATL, despite its critical role in the global EV supply chain.

CATL joins other prominent Chinese companies, such as Tencent Holdings, that have been similarly flagged. While the designation does not impose direct sanctions, it underscores growing U.S. scrutiny of Chinese firms amid escalating geopolitical tensions.

For Tesla, the impact of CATL’s designation appears limited. CATL primarily supplies batteries to Tesla’s Gigafactory Shanghai, which produces vehicles for export to markets like Europe and Canada. Tesla has not imported vehicles from China to the U.S. in recent years. However, reports suggest that Tesla and CATL have discussed a potential licensing agreement for battery technology in Nevada, where Tesla is expanding its battery production facilities.

CATL’s influence extends beyond Tesla. The company has partnered with Ford to establish a battery production plant in Marshall Township, Michigan, and is reportedly in talks with other automakers to license its technology. These developments highlight CATL’s growing footprint in the global EV market, even as it faces increased scrutiny from U.S. regulators.

As of now, the U.S. government has not imposed restrictions on CATL or other companies on the list. However, the designation could complicate future collaborations between CATL and U.S. firms, particularly in the rapidly evolving EV and energy storage sectors.