In-Depth Analysis of the Suspension of CATL and Ford's Cooperation Project: Strategic Dilemmas and Prospects of Technology Export Models

Now, based on the collected information, I will prepare a detailed analysis report for you.

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The cooperation project between CATL and Ford Motor began on February 14, 2023 (U.S. Valentine’s Day), when the two parties announced the construction of a lithium iron phosphate (LFP) battery plant in Marshall, Michigan. The total investment of the project reaches $3.5 billion, with 100% of the funding and full ownership of the plant provided by Ford Motor, while CATL is responsible for providing battery patent technology licensing, as well as construction and operation service support [1][2].

This cooperation model, known as “LRS” (Licence Royalty Service), has the following core features:

• Capital Structure Separation
  : Ford bears all capital expenditures, and CATL does not hold equity in the project
• Technology Export-Oriented
  : CATL is responsible for building battery production lines, establishing supply chains, commissioning equipment, and managing manufacturing processes
• Revenue Model
  : CATL generates income through one-time equipment sales fees and patent licensing fees collected based on battery production volume
• Employment Commitment
  : The project originally planned to create 2,500 manufacturing jobs with an annual production capacity of 35GWh [3][4]

Ford’s choice of CATL’s lithium iron phosphate (LFP) technology is mainly based on the following considerations:

: LFP batteries use lithium, iron, and phosphate as main raw materials, and their cost is significantly lower than that of ternary lithium batteries. According to Ford’s estimates, adopting the LFP solution can bring 10%-15% material cost reduction space [5].

: LFP batteries reduce reliance on scarce metals such as nickel and cobalt, helping to lower supply chain risks and improve battery supply stability [6].

: Ford plans to achieve the target of an 8% adjusted EBIT margin for its electric vehicle business unit in 2026 by introducing low-cost batteries, while launching more competitively priced electric vehicles into the market [7].

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On September 25, 2023, Ford Motor announced the suspension of construction work on the Marshall, Michigan battery plant, with the reasons for suspension including:

• Labor Negotiation Pressure
  : The strike by the United Auto Workers (UAW) continued to escalate, with the salary and benefits of battery plant workers and union representation becoming core points of contention
• Concerns Over Operating Costs
  : Ford stated that it needs to confirm that the project can operate in a “competitive” manner
• Policy Uncertainty
  : The foreign entity restriction clauses in the U.S. Inflation Reduction Act (IRA) pose potential risks [8]

UAW President Shawn Fain criticized Ford’s move at the time as a “shameful, blatant layoff threat”, stating that the union only demanded reasonable transition guarantees during the shift to electric vehicles [9].

After a two-month suspension, Ford announced the restart of the project in November 2023, but with major adjustments:

Indicator	Original Plan	Adjusted Plan
Annual Capacity	35GWh	20GWh (↓43%)
Number of Vehicles Supplyable	400,000 units	Approximately 230,000 units
Employee Scale	2,500 people	1,700 people

Ford attributed this to

, combined with the impact of rising interest rates suppressing consumer demand [10]. In addition, the new labor agreement reached with the UAW also pushed up labor costs.

As of early 2026, the project has the following characteristics:

• Construction Still in Progress
  : The main building of the plant has basically been completed, and it is still expected to be put into operation in 2026
• Increased Policy Risks
  : On January 6, 2026, the U.S. Department of Defense added CATL to the “Chinese Military Companies List”
• Seeking Tax Incentives
  : Ford is pushing the U.S. Treasury Department to approve the tax credit eligibility under the IRA for batteries produced by the plant
• Strategic Value Trade-Off
  : Despite the expanding losses of Ford’s overall electric vehicle business (a loss of $1.3 billion in Q3 2025), it still chose to retain the project [11]

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The Inflation Reduction Act (IRA), passed by the U.S. Congress in August 2022, established the “Foreign Entity of Concern (FEOC)” rule, which constitutes the first barrier for Chinese battery companies to enter the U.S. market:

• Prohibits tax credits for battery components manufactured or assembled by “Foreign Entities of Concern”
• All companies registered in China or in which the Chinese government holds 25% or more of the shares may be designated as FEOCs
• Key battery minerals and components must gradually meet local procurement ratio requirements [12]

In July 2025, U.S. President Donald Trump signed the “One Big Beautiful Bill Act (OBBB)”, creating a more severe containment situation for China’s lithium battery industry:

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• The existing new energy vehicle purchase tax credits ($7,500 for new vehicles, $4,000 for used vehicles) will be terminated early on September 30, 2025
• Gradually eliminate the Advanced Manufacturing Production Credit (AMPC) for battery manufacturers under the IRA [13]

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• If the amount of a technology licensing agreement signed between an enterprise and an FEOC exceeds $1 million, the project will lose its tax credit eligibility
• “Chinese-funded background” is comprehensively defined from multiple dimensions including equity structure, supply chain, technology licensing, and capital flow [14]

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• Starting in 2026, the use of key minerals, components, technology licensing, or equipment provided by restricted entities will make projects ineligible for tax credits
• For projects using components from China, the proportion of non-Chinese components must reach at least 60%, and will be gradually increased to 85% by 2030
• For participation in projects through subsidiaries or joint ventures, if the shareholding exceeds 25% after equity penetration, the entity will still be designated as an FEOC [15]

On January 6, 2026, the U.S. Department of Defense added 134 Chinese companies including CATL and Tencent to the “Section 1260H List” (Chinese Military Companies List), which is the latest blow to the technology export model:

• Legal Basis
  : Based on Section 1260H of the FY2021 National Defense Authorization Act
• Core Allegation
  : Designating these enterprises as having “direct or indirect” cooperative relationships with the Chinese military
• Subsequent Impacts
  : Starting from June 2026, the U.S. Department of Defense will prohibit direct procurement of goods or services from listed enterprises; starting from June 2027, indirect procurement will also be prohibited
• CATL’s Response
  : Stated that this designation is “wrong” and emphasized that it “has not engaged in any military-related activities” [16][17]

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The LRS cooperation model between CATL and Ford is essentially a “third path” found in the gap of China-U.S. policy games:

• Avoiding Direct Factory Establishment Restrictions
  : Using technology licensing instead of direct investment to avoid triggering foreign entity reviews
• Meeting U.S. Manufacturing Requirements
  : The plant is fully owned by Ford, so products can be regarded as “Made in America”
• Maintaining Technology Control
  : CATL does not need to transfer core technology and patent ownership
• Reducing Capital Risks
  : No need to bear large-scale fixed asset investments [18]

The newly added “licensing agreement amount limit” clause in the “One Big Beautiful Bill Act” directly targets the technology licensing cooperation model. The $1 million threshold means that any cooperation involving substantive technology transfer may trigger the risk of losing tax credit eligibility [19].

U.S. members of Congress have continued to question the Ford-CATL cooperation:

• Republican Senator Marco Rubio (current U.S. Secretary of State) once led efforts to block the project, stating that the technology licensing model is a “channel for Chinese companies to obtain U.S. taxpayer subsidies”
• Mike Gallagher, Chairman of the House Select Committee on the Chinese Communist Party, stated that Ford “needs to cancel this deal permanently”
• Virginia Governor Glenn Youngkin once rejected Ford’s plan to build a similar battery plant in the state [20]

Even if technology licensing itself does not directly trigger sanctions, the strict supply chain restrictions in the “One Big Beautiful Bill Act” still constitute a substantial barrier:

• The supply of battery materials, equipment, and components must meet the proportion requirements of non-Chinese components
• Technical support from engineers dispatched by CATL may be designated as “participation by restricted entities”
• In the long term, technology iteration and process optimization will be affected by information isolation [21]

The difficulties faced by the Ford-CATL project have triggered widespread strategic adjustments in the industry:

Enterprise	Response Measures	Impact Assessment
Envision AESC	Suspended the construction of a battery plant in South Carolina (investment of $1.6 billion)	The main plant structure has been completed, but key equipment is difficult to deliver
Gotion High-Tech	Terminated cooperation with the state government for the battery material plant in Michigan	The proposed $2.4 billion project has been suspended
LG Energy Solution	Terminated the $6.5 billion battery supply agreement with Ford	Shifted to energy storage business
EVE Energy	Reassessed North American investment plans	Maintained a cautious attitude
Hithium Energy	Its top U.S. customer Powin filed for bankruptcy	Impacted its U.S. business [22]

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:

• The Ford-CATL project has received initial recognition from the U.S. Treasury Department and is expected to continue advancing
• The existing technology licensing agreement was signed before the “One Big Beautiful Bill Act” and may be exempted
• Ford’s official statement: The project “fully complies with all legal requirements” and is “confident” in obtaining tax credits

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• Reputational risks and potential legal consequences brought by the designation on the Section 1260H List
• Uncertainties in UAW labor relations persist
• Macroeconomic environment of slower growth in U.S. electric vehicle market demand [23]

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In December 2025, Ford announced the expansion of cooperation with CATL to build an energy storage battery plant in Kentucky. This move indicates that:

• The tax credit reduction in the energy storage field is relatively small (it will only be gradually eliminated by 2033)
• The demand for LFP technology in energy storage batteries is more rigid (Chinese-made energy storage batteries account for more than 90% of the U.S. market)
• The energy storage business can be decoupled from the direct impact of fluctuations in electric vehicle sales [24]

CATL’s production capacity layout in Europe:

• German plant: Achieved break-even in 2024
• Hungary Phase I plant: Put into operation in June 2025
• Hungary Phase II / Spanish plant: Planned to be put into operation in 2026
• Total European production capacity will exceed 100GWh in 2026

European production capacity can serve as a “transit hub” for exports to the U.S., using U.S.-Europe free trade agreements to avoid some restrictions [25].

• Morocco: Enterprises such as Gotion High-Tech have built plants, leveraging the conditions of the U.S.-Morocco Free Trade Agreement
• Mexico: A potential plant location previously surveyed by CATL
• Using offshore company structures to avoid equity penetration reviews (but with high compliance risks) [26]

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Under a stricter policy environment, the LRS model may evolve into:

• Only providing basic patent licensing, without involving process guidance and on-site support
• Generating one-time income through equipment sales to reduce reliance on continuous technical services
• Establishing a more isolated information security architecture to reduce the risk of data leakage

South Korean battery companies may be more impacted by the “One Big Beautiful Bill Act”:

• LG Energy Solution estimates: After losing subsidies, North American battery costs will be 35% higher than those in China
• Samsung SDI and SK On also face profit pressure from subsidy reductions
• As cost disadvantages intensify, the attractiveness of Chinese technology may instead increase [27]

The ultimate goal of U.S. automakers such as Ford is to cultivate local battery capabilities, but the technology obtained from CATL is not the most advanced level. Cultivating a U.S. local battery industry chain still takes a long time, and dependence on external technology cannot be completely eliminated during this period [28].

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:

• The designation on the Section 1260H List caused short-term stock price fluctuations (a 6% drop was once seen in the Shenzhen market)
• The scalability of the technology licensing revenue model is suppressed by policies
• The strategic space for business expansion in the U.S. has narrowed

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• Brand reputation has been damaged, affecting cooperation negotiations with other international automakers
• The plan for a Hong Kong IPO may face valuation pressure
• Accelerated strategic tilt towards markets such as Europe and Southeast Asia

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• Continuing to advance the project requires bearing political pressure and potential legal risks
• Abandoning the project means that the cost control target for electric vehicles will be difficult to achieve
• Against the background of the overall contraction of the U.S. electric vehicle market, the fault tolerance space for battery strategy is limited

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• Capacity reduction has led to an increase in unit costs
• Uncertainty about tax credit eligibility affects the project’s economic calculation
• Cooperation with CATL remains its most cost-competitive battery supply solution

Risk Type	Risk Level	Risk Description
Policy Risk	High	U.S. technology restrictions against China continue to escalate
Trade Risk	High	Tariff barriers and supply chain reviews
Compliance Risk	Medium	Equity penetration and foreign entity designation
Market Risk	Medium	Slower growth in U.S. electric vehicle demand
Technology Risk	Low	Technology leakage and data security disputes

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The technology licensing amount limit in the “One Big Beautiful Bill Act”, the designation on the Section 1260H List, and the sustained political pressure from the U.S. Congress together constitute a systemic containment of the LRS cooperation model. This innovative model, once highly anticipated as a “circuitous entry into the U.S.” path, is facing an unprecedented policy cold wave.

Considering that:

• Existing cooperation projects have obtained partial policy exemptions
• U.S. automakers such as Ford have rigid demand for low-cost batteries
• Completely cutting off technical cooperation will significantly delay the U.S. electrification process
• South Korean competitors have insufficient substitution capabilities

Therefore, the technology export model will not be completely terminated, but its scale and scope will shrink significantly.

CATL’s technology export model is shifting from a “U.S.-led” strategy to a dual-track strategy of “European transit + energy storage priority”. The release of European production capacity, the expansion of energy storage business, and the deepening of layout in third-party countries will become new growth engines in the medium to long term.

Scenario	Probability	Assumptions	Prospects for the Technology Export Model
Base Scenario	50%	China-U.S. relations remain unchanged, and the “One Big Beautiful Bill Act” is strictly implemented	Contracts but maintains, focusing on energy storage
Optimistic Scenario	25%	China-U.S. relations ease periodically, and technology restrictions are loosened	Restores some power battery cooperation
Pessimistic Scenario	25%	The U.S. further escalates restrictions and completely bans technology licensing	Completely shifts to non-sensitive fields

For investors focusing on CATL and China’s lithium battery industry, it is recommended to focus on the following:

1. Progress of European Business
   : Capacity ramp-up and profit improvement of German and Hungarian plants
2. Growth of Energy Storage Business
   : Demand resilience in the global energy storage market
3. Transformation of Technology Licensing Model
   : Extension from power batteries to scenarios such as energy storage and commercial mobility
4. Supply Chain Security Layout
   : Improvement of self-sufficiency rate of upstream key minerals and materials
5. Policy Hedging Capability
   : Geographical diversification of overseas production capacity

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[1] 36Kr - Licensing Battery Technology, CATL Enters the U.S. Through a Narrow Gap | 36Kr In-Depth (https://zhuanlan.zhihu.com/p/608865026)

[2] Caifu Hao - Global Containment of China’s Lithium Battery Industry | Exclusive (https://caifuhao.eastmoney.com/news/20260113095330551187520)

[3] EET China - CATL’s Technology Licensing: Helping the U.S. Build Cheaper Electric Vehicles (https://www.eet-china.com/mp/a303944.html)

[4] DoNews - Rumored that CATL is Negotiating Technology Licensing Cooperation with General Motors (https://www.donews.com/news/detail/1/4122198.html)

[5] Securities Times - Construction of the Battery Plant Cooperated by Ford and CATL Restarts (https://www.stcn.com/article/detail/1044569.html)

[6] Energy Connects - Why Ford Is Expanding a Partnership With Top Chinese Battery Maker (https://www.energyconnects.com/news/renewables/2025/december/why-ford-is-expanding-a-partnership-with-top-chinese-battery-maker/)

[7] Detroit News - Why Ford is expanding Its partnership with top Chinese battery maker (https://www.detroitnews.com/story/business/autos/ford/2025/12/23/why-ford-is-expanding-its-partnership-with-top-chinese-battery-maker/87894691007/)

[8] Voice of America (VOA) - Plagued by Labor Disputes, Ford Suspends Construction of Auto Battery Plant Cooperated with China’s CATL (https://www.voachinese.com/a/ford-pauses-work-on-chinese-battery-factory-in-michigan-20230926/7284079.html)

[9] Sina Finance - Multiple Battery Projects Delayed, Chinese-funded New Energy…