The Pentagon’s addition of China’s CATL to a list of firms it says work with the country’s military has put Tesla in a tight spot, challenging how Elon Musk balances his role as Trump administration advisor with his ties to China. As the world’s largest battery maker, CATL supplies lithium iron phosphate batteries to Tesla for its Shanghai factory, but lawmakers have expressed concerns about some of its projects, arguing they represent potential security threats.
The US Department of Defense designated CATL and other Chinese companies, including tech giant Tencent Holdings, as linked to China’s military. While the designation does not involve restrictions on CATL’s business, it can be a blow to the company’s reputation and serves as a warning to US entities about the risks of doing business with them.
Tesla and CATL are working on an agreement to license CATL technology for battery production in Nevada, which is expected to launch in 2025. However, some analysts believe that being potentially excluded from military contracts may give companies considering partnering with CATL pause.
Despite this, Tesla is likely to continue its partnerships with CATL due to the importance of its relationships with the Chinese government. Upending those ties “could potentially be worse than any political ramifications in the US,” said Seth Goldstein, a Morningstar analyst.
Source: https://www.reuters.com/business/autos-transportation/how-washingtons-tag-chinas-catl-could-affect-tesla-2025-01-07