Ford's China battery ties face US scrutiny after $3.5B CATL deal

The Trump administration escalated its national-security review of Ford Motor's Chinese partnerships Tuesday, with Transportation Secretary Sean Duffy pressing Chief Executive Jim Farley over the automaker's ties to battery maker CATL and automakers Geely and BYD.

"Ford's dealings with Chinese battery maker CATL and Chinese automakers Geely and BYD raised profound concern," Duffy wrote in a letter to Farley, according to Reuters.

The letter targets the centerpiece of Ford's electric-vehicle battery strategy: a roughly $3.5 billion plant in Michigan that licenses CATL's lithium-iron-phosphate technology, alongside the automaker's long-running Changan Ford joint venture in China. The scrutiny follows the 2024 US decision to raise tariffs on Chinese-built EVs to 100 percent, a step that has already reshaped how American automakers source batteries and components.

The pressure threatens to force Ford to unwind or restructure partnerships it has framed as essential to competing on EV cost, and it raises the question of whether other US automakers with Chinese battery or software ties face similar demands. Ford, which trades on the New York Stock Exchange under the ticker F, has not yet disclosed how it will respond.

Ford's BlueOval Battery Park Michigan project, announced in early 2023, was designed to produce LFP cells using technology licensed from CATL, the world's largest EV battery maker. The arrangement let Ford tap Chinese manufacturing know-how without a direct equity stake, a structure the automaker argued kept it competitive on price against Tesla and Chinese rivals. Duffy's letter now calls that structure into question on national-security grounds, echoing a broader Washington push to limit Chinese influence across critical supply chains.

The letter also names Geely and BYD, two of China's largest automakers, an indication that the administration is scrutinizing more than battery chemistry. Ford has explored technology-sharing arrangements with Chinese automakers as it seeks lower-cost platforms for its global lineup, though the scope of those dealings has not been fully detailed.

The move fits a pattern that predates the current administration. In May 2024, Washington raised tariffs on Chinese-built EVs to 100 percent and on lithium-ion batteries to 25 percent, effectively barring the cheapest Chinese EVs from the US market. That escalation, which reduced bilateral auto trade and pushed American automakers to localize battery production, set the stage for the current scrutiny of technology-licensing deals that fall outside traditional tariff walls.

The last time Washington used comparable national-security language against an automaker's China ties, affected companies moved quickly to restructure supply chains, a process that typically takes years and carries billions in transition costs. For Ford, the stakes include not just its Michigan battery plant but its access to the Chinese market through Changan Ford, a venture that has been a source of both sales and losses.

Ford faces a choice between defending its partnerships and preemptively restructuring them to satisfy the administration. A forced divestiture or renegotiation of the CATL license would likely delay Ford's LFP battery rollout and raise its EV costs, undercutting the very economics the deal was meant to secure. If the scrutiny widens to other US automakers with Chinese battery suppliers, the sector could face a coordinated compliance burden that raises costs across the board.

The administration has not set a public deadline for Ford's response, and the automaker has not said whether it will contest the letter or begin unwinding the arrangements. Investors will watch for any sign that the pressure extends beyond Ford to peers such as General Motors, which also sources battery components from Chinese suppliers, as a gauge of how far the crackdown reaches.

This article is for informational purposes only and does not constitute investment advice.