GM battery partner tied to China gets cold shoulder in Washington
Microvast caught in political jostling about U.S. EV goals
If you follow Washington machinations, you may know a small battery company has been caught up in some big political battles lately.
Microvast was one of 20 companies selected by the Energy Department in November to receive a slice of $2.8 billion in grant money made available by the bipartisan infrastructure bill. Because it has a substantial China business, Microvast has been singled out by members of Congress as posing intellectual property risks making the General Motors partner unworthy of federal funding.
There’s an element of political theater here. Republicans are hoping to make a meal out of any faults in President Joe Biden’s vast government outlays ahead of the 2024 election cycle. Democratic Senator Joe Manchin also has been blasting the Biden administration for watering down sections of the Inflation Reduction Act that were hawkish on China to appease the auto industry and achieve its EV goals.
The conflicts highlight some unsavory policy choices Washington now faces: How can the U.S. go electric after ceding battery manufacturing and technology to China for the past decade? Is it realistic to decouple from a geopolitical foe that dominates large swaths of the EV supply chain?
Microvast makes for an ideal whipping boy for politicians whose lack of longterm planning and internecine squabbles have played a role in the U.S. falling behind in the global battery race. It was founded in Texas in 2006 by Yang Wu, a Chinese-born American citizen and entrepreneur who previously built businesses in oil services and water treatment.
Like many U.S. companies trying to find a market for lithium-ion batteries in the 2000s, Microvast went east, where the Chinese government had made switching to battery power a national priority. More than half its revenue came from China in the first nine months of last year, and it has a substantial R&D facility in Huzhou,
a city roughly 150 miles west of Shanghai.
It went public in a 2021 reverse merger that bolstered its business making battery components including cathodes, anodes and separators, as well as packs and cells for commercial vehicles and stationary storage. The DOE picked it to receive a $200 million grant to help fund a factory with GM to make polyaramid separators that improve battery range and shelf life while reducing fire risk. The money hasn’t yet been disbursed and DOE is still doing diligence, Bloomberg reported last week.
A former DOE official told me this is standard operating procedure: The agency vets a company before it awards a grant, then negotiates how to release funds to make sure the company’s plan to execute on its application is sound.
When Manchin and Wyoming Republican John Barasso grilled DOE Deputy Secretary David Turk about Microvast in a Feb. 2 senate hearing, Turk said the department was going through the grant process with “eyes wide open” about China risks and had consulted with U.S. intelligence officials as part of its vetting process.
I spoke with Microvast Chief Operating Officer Shane Smith this week to get his take on what’s been happening. As a former U.S. Navy officer with a passing resemblance to actor Robert Redford, Smith makes for a figure straight out of central casting to combat the foreign influence concerns Microvast faces.
Here’s an excerpt of our conversation, edited for length and clarity.
•••
You went to Washington in January to plead your case. How’d that go?
I hadn’t had too many invitations. For whatever reason, there’s a reluctance to engage the people that work for Microvast.
The control of Microvast seems to be mysterious. The way the mystery can be removed is meet people like myself. I’m the COO, I control and manage 80% of the company’s resources. I can tell you a lot about the company, if you’re interested, rather than trying to find some obscure detail that’s taken out of context.
•••
Are you surprised by the level of scrutiny?
Not at all. All 20 companies are going through the same process. When we initially submitted our application, we knew this would be part of the process.
Your critics in Congress say having substantial operations in China puts your IP at risk. The federal government doesn’t want to fund tech that just ends up in the hands of the Chinese.
Microvast compartmentalizes know-how and trade secrets in the U.S. There are no IT connections between Microvast’s U.S. operations and its China-based subsidiaries.
Microvast has committed to the DOE and is investing over $300 million of its own funds to manufacture the separator in the U.S. and will not commercialize this separator in China.
The other knock against you is that your principle auditor is in China - the implication being that U.S. investors won’t have full access to your financials.
Deloitte has been auditing Microvast for 10 years, but the principal auditor is in China, still Deloitte. There’s a lot made of that. Like, we use some unknown auditor, that our books can’t be seen by an American investor or any government official. And that’s just not the case.
Once our cell manufacturing plant starts operating in Clarksville, Tennessee, this year, that will give us a largeenough asset to move the principal auditor from China to the U.S.
The other thing we get is, ‘Wow, they do a lot of revenue in China and Asia.’ Like that’s a bad thing. Where you get your revenue doesn’t mean that region controls your company.
We’re going to have more revenue in the U.S. and Europe than anywhere in Asia going forward, just on the contracts we’ve signed. This fact that we have some revenue in Asia is simply a snapshot in time that’s rapidly changing toward the west.
•••
Does that mean you won’t do business in China in the future?
We’ll leverage the best opportunities in each region. Frankly, our business being a wholly owned foreign entity in China is not promising. It’s very difficult to win business being a foreign company. Ask Samsung, ask LG, ask Panasonic. Those are some of the largest battery companies in the world - they don’t have much revenue in China.