What happens when a Chinese battery factory comes to town

Ultimately, local residents may feel disconnected from these batteries, and from the green energy transformation they enable, because Hungarians are not the intended consumers. Most of the lithium batteries produced in Hungary are destined for car markets in Western Europe, where consumers are wealthier and are already sold out of the need to transition to clean energy. “The average Hungarian has the money to buy a 10-year-old used car from Germany, usually diesel or gas,” says Bartok. “They don’t have the money to buy electric cars.”

Slow order

It is worth noting that all international deals announced by Chinese battery manufacturers were unsuccessful. Of the 68 factory investments we found, at least five were temporarily halted or officially cancelled, in some cases even after construction had already begun. This is partly because consumer adoption of EVs in these markets has proven to be a much more gradual process than in China.

Chinese battery makers have planned aggressive global expansions at a time when governments were offering generous subsidies for factory projects and tax breaks to consumers who bought electric cars, and they are now having to recalibrate as that enthusiasm wanes. In the United States, the inflation control law, passed under Joe Biden, incentivized Chinese and American companies to build factories, but then the electric vehicle subsidies provided for in the legislation were eliminated under President Donald Trump. Even Europe, which previously set a goal of stopping the production of gas cars entirely by 2035, is now thinking again.

“Naturally, battery manufacturers will be less motivated to make big investments if they are not sure about the direction of policy,” says Alexander Braun, a senior analyst who studies industrial policy at the Mercator Institute for China Studies.

What if the world doesn’t want electric vehicles? Some battery companies are already deploying a backup plan: focusing on energy storage. Ford, which is building a massive battery factory in Michigan using CATL’s manufacturing technology, Announced in December It will shift from making electric car batteries to producing batteries for energy storage. Envision AESC, another major Chinese battery company whose U.S. expansion plans have been on pause for much of the past year, also recently announced that its existing factory in Tennessee would switch from making electric vehicle batteries to battery storage.

While some parts of the traditional auto industry may be lobbying against EVs, everyone seems happy to have more batteries in grids and homes that can prevent blackouts and even allow consumers to sell electricity back into the grid. (Well, at least barely everyone. The National Utility Corporation of Pakistan and the Chinese banks that lend it money are not too happy about the rise of Chinese battery storage Another expertly discussed piece in our collection.)

The good news, at least, is that energy storage technology is rarely politicized. In the United States, Democratic California and Republican Texas have become strong adopters of grid-scale battery storage, so Chinese ambitions to build more factories will likely not be in vain.

Reverse technology transfer

For partner companies and governments working with Chinese battery makers to bring factories to their countries, the goal has always been clear: exchange market access and subsidies in exchange for the promise that these companies will eventually train local workers to produce the latest batteries themselves.

The irony here should not be lost on anyone who cares about the global auto industry. Over the past three decades, American, European, Japanese and Korean automakers have been happy to share their technological know-how to gain access to the Chinese car market. But this relationship has been reversed today.