When it comes to making electric vehicles and their inputs, Chinese companies have been ahead of the curve. Now, the U.S. is spending big to catch up: through the federal and state governments, it’s offering tens of billions of dollars in incentives to bring EV production back to America. 

Ironically, one of the earliest takers is a Chinese company. This month, Gotion High Tech announced it would construct a major battery input factory in Michigan, having secured $715 million in state financial incentives. 

Gotion is a relatively minor player in China’s EV battery industry, but the Volkswagen-backed company has ambitious growth plans. By 2025, it plans to have one-third of its battery production capacity located outside of China. If Washington’s intention is to keep China out of its EV supply chain, Gotion doesn’t appear to have gotten the memo.

This week, The Wire looks at Gotion High-Tech, its rapid growth, and its overseas expansion strategy, including to the United States. 

CLASS OF ’92

Guoxuan High-Tech Power Energy Company was established in 2006 in the city of Hefei, in Anhui Province. It is a wholly owned subsidiary of Shenzhen-listed Gotion High-Tech Co., a conglomerate which also includes a real estate and entertainment business. 

Gotion was founded by Li Zhen, a native of Anhui who started his career in the Hefei municipal government. Li quit his government job in 1992, joining a wave of state employees-turned entrepreneurs who were inspired by Deng Xiaoping’s “Southern Tour” and later went on to found their own businesses. Other members of this “Class of ‘92” include Soho China’s Pan Shiyi and New Oriental’s Yu Minhong. Li’s company, known as the Hefei Economic and Technological Development Center, would later become the Gotion Group. 

Early on, the Anhui government championed Li’s battery venture, which was later included in China’s ‘863 Program,’ a national initiative dating back to the 1980s aimed at stimulating the development of advanced technologies within China.

Early orders for Gotion batteries came from commercial contracts, such as a 2009 deal to supply municipal buses in China. As China’s market for private EVs grew in the late 2010s, Gotion distinguished itself from competitors with its low price. Its batteries are installed in the ultra popular $4,500 Hongguang Mini, a bare bones EV aimed at first time buyers that was China’s hottest electric car last year. Other domestic customers include state-backed automakers SAIC, JAC and Chery. The company also has partnerships with Huawei and India’s Tata Group.

RAPID EXPANSION

Riding a tide of demand for EVs in China, Gotion has embarked on an ambitious growth plan over the last three years. Its installed battery capacity more than doubled from 2019 to 2021 from 3.2 gigawatt hours to 8GWh. At the start of this year, it ranked as China’s fourth largest battery maker by capacity, after CATL, BYD, and CALB.

By 2025, Gotion aims to have a total production capacity of 300GWh, a third of which will be located overseas. That’s an astronomical figure: for comparison, total production capacity across all EV battery makers globally in 2021 was about 290 GWh, according to Adamas Intelligence, a market research firm.

Key to Gotion’s expansion will be its ability to secure contracts to supply more than just domestic automakers. Improving the range of its LFP batteries will be a key first step: in July, a company executive announced plans to extend the range of its batteries by doubling their energy density by 2030. Such an improvement would bring its batteries at least on par with pricier but currently higher performing nickel-cobalt batteries made by competitors such as LG and CATL.

Gotion has found success securing partnerships and financing from Europe. German auto giant Volkswagen invested €1.1 billion in the company in 2020, becoming its largest shareholder. Their tie-up could make Gotion a key supplier for several battery ‘gigafactories’ that Volkswagen aims to build by 2030, with a total production capacity of 240 GWh. 

Gotion announced its own EV battery factory in the German city of Göttingen in June, the company’s first in Europe. It raised $685 million from a listing on the Swiss stock exchange as part of a new China-Switzerland stock connect initiative that went live in July. 

NEXT, NORTH AMERICA

After lagging behind China and Europe, the U.S. is suddenly flush with cash to invest in EVs. The Inflation Reduction Act includes a $7,500 federal EV tax credit for car buyers tied to the sourcing and production of battery components in North America. Additional funding left over from the 2021 Covid stimulus bill has been repurposed by state governments competing against one another to attract EV factories to their states. 

The result is that at least 51 EV suppliers have received at least $13.8 billion in economic development subsidies since 2018, according to a recent report by Good Jobs First, an advocacy group. So far this year, companies have announced $13 billion of investment into U.S. EV manufacturing and $24 billion in batteries, according to the White House.

Gotion is the first Chinese battery maker to announce plans to invest in the United States, since the new incentives were introduced. Its factory won’t build batteries themselves, but will produce cathode and anode material, crucial ingredients for battery assembly. China makes an overwhelming majority of cathodes (78 percent) and anodes (91 percent) found inside battery cells, according to Benchmark Mineral Intelligence.

Gotion’s Michigan plant may be just the start of its investments in U.S. battery manufacturing. Last December, the company disclosed a deal between its U.S. subsidiary and an unnamed U.S. automaker under which Gotion will supply 200 GWh of batteries between 2023 and 2028. 

Under the agreement, Gotion will initially export LFP batteries from China, but the two sides plan to eventually localize production in the U.S. Citing trade secrets, Gotion has declined to disclose the name of its customer, but the agreement describes it as a large, publicly-traded U.S. auto company with a high market capitalization and excellent credit. Several automotive trade publications have speculated that the customer may be Tesla. 

Gotion and Tesla did not respond to requests for comment.

These are some of Gotion’s largest investors: 

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