Deglobalization may be the megatrend of this decade, but it unfolds differently depending on the sector, technology, relative cost, and which country has the most leverage and most friends.
In the US-China context, the United States appears to have more leverage over China in winning the semiconductor manufacturing race, by onshoring TSMC, forming pacts like the “Chip 4” alliance, and applying sanctions to keep China from obtaining choke point technologies, like lithography equipments, to advance its own progress. In 5G, China may be more ahead, but the US at least has alternatives from European companies, without needing to rely on more geopolitically precarious options, like Taiwan.
However, when it comes to electric vehicles (EV) adoption in general, and lithium-ion battery making in particular, the US appears to be woefully behind, so much so that American carmakers actually need Chinese technology just to get things started. This vulnerability was made apparent by Ford building its new $3.5 billion battery plant with technology from CATL, who leads the world’s lithium-ion battery production and has almost as much market share as its next four competitors combined. This vulnerability was exacerbated by Ford’s recent suspension of production of its popular F-150 EV pickup truck, due to a fire from batteries supplied by its current partner, SK On of South Korea.
Before we dive into why Ford desperately needs CATL, let’s first look at why SK On has been an insufficient battery supplier so far, even though it is a much safer partner geopolitically speaking.
SK Group, a South Korean chaebol (or family-controlled conglomerate), is a relative newcomer to the EV battery making scene with an outsized ambition to become the world’s largest EV battery supplier by 2030. SK On, its dedicated battery subsidiary, didn’t even exist three years ago, but is now the world’s fifth largest by market share, according to SNE Research.
This turbo-charged growth has been made possible due to SK’s aggressive expansion in the US and tight partnership with Ford in particular. It first built a battery plant in Georgia (mostly to supply Hyundai), then poured $7 billion into constructing gigafactories in Tennessee and Kentucky for Ford. Because of this “pro-America” investment strategy, which will total $52 billion by 2030 across battery making, semiconductor (SK makes a lot of memory chips too), and EV charging systems, SK Group Chairman, Chey Tae-won, was warmly received by the Biden White House and Members of Congress last July.
The problem is SK On bet on the wrong battery chemistry.
A quick primer on the technical tradeoff between different lithium-ion battery chemistries: there are, broadly speaking, two types of batteries for EVs. One type is the lithium-iron-phosphate type, or LFP. The other category includes two subtypes: nickel-cobalt-aluminum (NCA) and nickel-cobalt-manganese (NCM), where nickel and cobalt are the key ingredients. The tradeoff between LFP and NCA/NCM is that LFP has lower energy density than NCA/NCM, but better thermal stability. In more plain language: EVs with LFP batteries have less power, charge faster, but cannot go as far as EVs with NCA/NCM batteries before needing to recharge, while NCA/NCM can go farther per charge but heats up faster (so more likely to cause fire) than LFP. Cobalt is also expensive, so NCA/NCM EVs tend to be pricier than LFP ones.
We know that the battery type SK On has been producing for Ford’s EV F-150 truck is of the NCM variety. So even though its co-CEO, Jee Dong-seob, boasted last year that “I can tell you that you will never see a fire break out in our batteries,” chemistry is still chemistry and its first fire accident is only a matter of time. That time happens to be this month.
To be fair to SK On, choosing NCM was not necessarily the wrong choice when it started three years ago; in fact, it was the popular option at the time, and developing NCA/NCM batteries was what initially propelled CATL to global dominance. And to be fair to Ford, choosing NCM was the right instinct for its EV pickup, because it must produce a truck of comparable power and muscle to its traditional combustion engine option to make it an attractive offering.
Unfortunately, the timing was wrong, as the entire EV market began shifting to LFP, for both cost and safety reasons. To meet this shifting demand, SK On is pivoting hard towards LFP, but even if it meets its own publicly-announced deadline, the first SK On LFP battery won’t appear until 2025. In the meantime, it has no choice but to source LFP batteries from China (probably CATL) to meet its American customers’ demand.
Ford is leaving “$2 billion of profit on the table”, according to its CEO James Farley, due to execution and supply chain issues. Without a reliable battery partner, things will only get worse. Despite the awkward geopolitical implications, Ford, an American national champion, has no choice but to work with CATL, a Chinese national champion – opting for economic pragmatism instead of geopolitical purism.
Not A Trojan Horse
Ford’s “marriage” with CATL was not without its domestic critiques, motivated less by real national security concerns and more by political opportunism. Glenn Youngkin, the Governor of Virginia, proactively took his state out of consideration as the location to build the Ford-CATL battery plant, because he did not want a “Trojan Horse” sent by the Chinese Community Party in his state.
Youngkin is nakedly posturing for a possible presidential bid in 2024 and did not want to miss the “anti-China gravy train”, which I wrote about before. And he is willing to burnish his anti-CCP credentials by grossly misusing a highschool-level Greek mythology reference.
A Trojan Horse is when the sender of the horse wants to infiltrate its recipient for nefarious, destructive reasons. The analogy falls flat on its face, when the recipient is inviting the horse and desperately needs this horse to qualify for some subsidy money.
American EV makers like Ford need the “CATL horse” one way or another, because there is no viable domestic option, while more geopolitically friendly options, like SK On, are not yet up to the task. Even though Youngkin forbade this horse from coming to Virginia, it just ended up in a different part of the United States – Michigan.
In terms of pure unit economics, making EV batteries in the US makes no sense. By SK On’s own admission, LFP batteries made in China cost 20% less than NCM batteries, while those produced in Europe cost 15% less. In the words of its EVP and head of battery division, Jason Lee, “If you produce in the United States, there is no benefit.”
However, if the $7,500 EV tax credit from the Inflation Reduction Act (IRA) is added to the mix, then it could make economic sense. That’s why SK continues to deploy its own technology in factories in the US, in order to help its American customers meet the IRA’s requirements. That’s why the new Michigan-based battery plant is Ford owned, even though underneath the hood, it is all CATL technology. The definition of “Made in America” has been stretched so thin that as long as some of the making happens somewhere in America, it is good enough.
There is no shame in using subsidies to boost demand for new technologies or products. In the context of EV adoption, it is a tried and true strategy, so the IRA’s subsidies are long overdue. EVs have been heavily subsidized in Europe and China, both of which unsurprisingly lead the US in domestic EV penetration many miles (or kilometers).
Even though China is leading the world in EV adoption right now, its subsidies will be phased out soon, which is causing concerns in its EV market. Battery makers like CATL, who benefited enormously from its government’s subsidies to juice domestic demand, must look elsewhere to keep growing its business. America, as its own subsidies kick in, is evidently an eager customer.
As Noah Smith’s incisive critique (though he calls it a “rant”) pointed out, the US is becoming a “Build-Nothing Country.” When we do build something, like an EV battery plant, it is only motivated by subsidy requirements. And to meet those requirements, we now rely on the technologies of a “strategic competitor”, which is benefiting from their own country’s subsidies. It is an awkward reality worth pondering about for everyone who wants to drive a Ford F-150 EV pickup, which I plan to do someday because the truck actually sounds pretty damn cool!
Despite the seeming inevitability of deglobalization, we still live in a strangely, wonderfully Interconnected world.
在中美竞争中，美国似乎在半导体行业略占优势，通过对台积电的牵制，组建像 Chip 4这种联盟，以及加深制裁以阻止中国获取像光刻设备这种核心技术来推动自己的发展。在5G方面，中国可能更领先，但美国至少有来自欧洲大厂的替代品，而不需要依赖像台湾这种在地缘政治上极不稳定的选择。
SK集团是韩国的财阀之一，而在制造电动车电池这个领域相对是个“新人”。但他野心勃勃，高调号称要在2030年前成为世界上最大的电动车电池供应商。SK On是旗下专注电池的子公司，三年前还不存在，但根据SNE Research分析所的数据，现在以占有全世界第五大市场份额。
这种飞速增长背后的主要原因之一是SK在美国的积极扩张，特别是与福特的紧密合作。它首先在Georgia州建了一个电池厂（主要是为现代汽车提供电池），然后投资70亿美元在田纳西州和肯塔基州为福特建造电池工厂。由于这种 "亲美" 的投资战略；到2030年时，总投资额将达到520亿美元，涉及电池制造、半导体（SK也生产大量的存储芯片）和电动车充电系统，SK集团主席崔泰源去年7月受到了拜登白宫和国会议员的热情接待。
行业内都知道，SK On为福特F-150卡车生产的电池类型是NCM型的。因此，尽管其CEO去年吹嘘说 "我可以告诉你，你永远不会看到我们的电池起火"，但化学本质是不会变的，发生火灾事故只是时间上问题，而这个时间恰好是本月。
倒霉的事，时机不对，整个电动车市场迅速开始转向LFP，无论是出于成本还是安全原因。为了满足这种转变的需求，SK On也正在努力转向LFP，但即使它履行达到自己官宣的目标，第一款SK On LFP电池也要等到2025年才会出现。在此期间，它别无选择，只能从中国（很可能直接从宁德时代）采购LFP电池，以满足美国客户的需求。
据福特CEO James Farley，由于制造执行和供应链问题，福特正在白白丢失20亿美元的利润。如果没有一个长期可靠的电池合作伙伴，情况只会变得更糟。尽管地缘政治关系让合作有些尴尬，作为美国“国家队”品牌的福特别无选择，只能与中国“国家队”的宁德时代携手。福特最终选择了务实主义，而抛弃了地缘政治的纯粹主义。
福特与宁德时代的 "联姻" 在美国国内收到了重批。批评声音的动机与其说是出于真正的国家安全考虑，不如说是出于政治“投机”主义。其中最“吵”的声音之一时弗吉尼亚州州长 Glenn Youngkin。 他主动退出，不让自己的州参与作为福特-宁德时代电池厂招标地点选择之一，因为他不希望中国共产党派出的 "特洛伊木马" （也就是宁德时代）出现在他的州。
Youngkin赤裸裸地为自己2024年总统竞选做准备，不想错过这个难得的 "反华" 热点，而宁愿用一个连有基本高中水平的希腊神话知识都能看出问题的比喻，来巩固自己的“反华”资历。
像福特这样的美国电动车制造商或多或少需要宁德时代这匹 “木马"，因为没有靠谱的本国选择，而像SK On这种国外伙伴，目前还不能胜任。尽管Youngkin禁止这匹“马”步入弗吉尼亚州，它只会走入美国另一个地方 – 密歇根州。
就纯粹的经济成本而言，在美国生产电池是不合理的。SK On公司自己承认，在中国生产的LFP电池的成本比NCM电池低20%，同在欧洲生产的成本低15%。用其执行副总裁和电池部门负责人Jason Lee的话说，"如果在美国生产，没有任何好处。"
正如经济学家Noah Smith的精辟批评所指出的，美国正在成为一个 "什么都不造的国家"。当美国真造一些东西时，比如电动车电池厂，只是出于要补贴的动机。而为了满足国家补贴要求，美国则要依赖于一个 "战略竞争对手" 的技术，而这个竞争对手之所以强大，是从他们自己国家的补贴中受益。对于每一个想开福特F-150电动皮卡的人来说，这是一个值得深思的尴尬现实。
尽管 “脱全球化”的趋势似乎不可避免，但我们仍然生活在一个奇妙的，“互联的” 世界中。