In Defense of Youngkin’s No to CATL

“For the most part, I have been supportive of the manner in which Governor Youngkin has performed during his first year in office, but this is a head-scratcher: Ford plant halted by Youngkin would have created 2,500 jobs in Southside.” – Bill Bolling, Lieutenant Governor of Virginia (2006-2014)

LG Bolling and I have had differing opinions of Glenn Youngkin during his first year in office. Somehow, he (and others) have decided to criticize Governor Fleece on the one issue where it’s unwarranted. Say what you want about Youngkin’s motives; rejecting CATL-Ford was the right thing to do – especially as our tax dollars were involved.

From the Virginia Mercury:

Gov. Glenn Youngkin’s administration halted efforts to site a Ford battery plant in Virginia late last year over concerns about Chinese Communist Party influence.

Speaking to reporters after the annual State of the Commonwealth address Wednesday, Youngkin said his administration “felt that the right thing to do was to not recruit Ford as a front for China to America.”

A spokesperson for his office said the governor’s comments were linked to the possibility of Ford Motor Company building a battery manufacturing plant in Virginia that would be operated by Contemporary Amperex Technology Co., or CATL, a Chinese company that is the largest producer of electric vehicle batteries in the world and under the Ford agreement would retain ownership of the technology used in building the battery cells.

Bloomberg reported this December that Ford was eyeing Virginia as a competitor to Michigan, the auto giant’s home state.

Less than a week later, right-wing news outlet The Daily Caller published a story citing an anonymous source who claimed Youngkin had directed the Virginia Economic Development Partnership to remove Virginia from the running for the project.

Two things should jump out at the reader here. First is that CATL would “retain ownership of the technology used in building the battery cells.” This is actually counter to what car companies in the democratic world are doing, Ford included.

From Wired (emphasis added):

The global shortage of semiconductors has made car firms hyper-aware of supply chain bottlenecks. That’s pushing them to strike deals with CATL’s competitors or to try to build out their own battery plants—a trend that is worrying Zeng’s investors. CATL’s stock dropped 7 percent after competitor BYD said it would supply batteries to Tesla “very soon.” General Motors, another CATL client, is planning a new US battery plant in partnership with South Korea’s LG Energy Solution. Toyota is planning to open its own battery plant in North Carolina, and Ford is building twin battery plants in Kentucky.

Moreover, relying on CATL means relying on the CCP itself for maintaining economic stability. The history on that is … well.

But it might not be the global car industry that ends Zeng’s rise—but China itself. His ascent coincides with an uneasy time for Chinese billionaires, with last year’s tech crackdown wiping billions off some of the country’s most profitable companies.

In 2015, businesses controlled by a state-owned aerospace company and a district government cofounded CALB, a state-operated firm which also specializes in lithium-ion battery production. Such a move could pit CATL against the Chinese state itself.

Reminder: when any “private” firm is pitted “against the Chinese state itself,” the “Chinese state” always wins. So either CATL becomes the CCP’s close partner or it gets waxed by the regime. Neither scenario is a net benefit for America or for Virginia.

Secondly, we must remember that we’re not talking about a pure market decision by Ford and CATL. This was merely the latest in a long line of taxpayer-funded beauty pageants where localities use de facto subsidy promises to win over projects. According to Bloomberg, even the federal government may get in the game via the Inflation Reduction Act. That would mean this project would also earn Europe’s ire (CNBC).

Meanwhile, the CCP has benefited from a near-monopoly on the rare-earth minerals needed for battery cells for quite some time. Firms like CATL (and CALB) enable it to leverage that near-monopoly to expand its market power in other areas (like battery creation). One might shrug at this and say, “it is what it is” – except for a major rare-earth metal find in Sweden (NPR).

Sweden has announced an unusual discovery – a deposit of rare earth elements. Those minerals can be used in a number of daily items, from phones to TVs and computers to batteries. And the specific metals found in Sweden are important to making electric vehicles and wind turbines.

Summing up, Youngkin put the kibosh on Virginia taxpayer funding for a potential project that, (1) relies on a Chinese firm about to be strong-armed by the CCP, (2) would get federal subsidies that infuriate our allies, and (3) artificially extends the CCP rare-earth monopoly power just as it’s being challenged by a soon-to-be NATO member.

It really shouldn’t come down to just me to defend him on this. Tax dollars for a firm under CCP pressure in a project that will make our allies suffer in multiple ways is a bad idea no matter who opposes it.

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