- Key Tesla supplier CATL said it may take legal action over a decision to call it a “Chinese military company.”
- The world’s largest battery company was added to the Pentagon blacklist alongside gaming firm Tencent.
- It is unlikely to impact CATL much but could lay the ground for more sanctions under Donald Trump.
A key Tesla supplier has slammed the US government’s decision to designate it a “Chinese military company” as tensions between the two countries continue to rise.
The Department of Defence added battery giant CATL, the world’s largest producer of EV batteries, to its list of “Chinese military companies” operating in the United States on Monday.
Video game titan Tencent was also added to the list, which tracks companies the US military believes work with its Chinese counterpart.
Shares in the two companies dropped on Tuesday following the news. Both CATL and Tencent denied they had any association with the Chinese military and said they were prepared to contest the decision with legal action if necessary.
“CATL has never engaged in any military-related business or activities, so this designation by the Department of Defense is a mistake,” a statement from the company said.
CATL is by far the biggest player in the global battery industry, which is dominated by China. The Ningde-based company controls around 37% of the world’s battery market, compared to the 17% held by runner-up and fellow Chinese firm BYD.
As a result, CATL is a crucial supplier for numerous Chinese and Western EV manufacturers.
Ford is licensing technology from CATL for batteries built in its $2 billion factory in Michigan, while Tesla is CATL’s biggest customer, according to figures tallied by Bloomberg.
The battery manufacturer is also working with Elon Musk to build fast-charging EV batteries, CATL’s CEO confirmed last year.
The Pentagon designation does not directly affect CATL and Tencent’s ability to do business in the US, but it serves as a warning for US businesses working with the two companies that their association with CATL and Tencent may bar them from future defense contracts.
It could also lay the groundwork for tougher sanctions to follow under the Trump administration. Companies have managed to reverse the designation before, however, with Apple rival Xiaomi being removed from the list in 2021 after taking legal action.
The move is the latest in a series of regulatory measures targeting Chinese industry passed by the Biden administration, which has also slapped 100% tariffs on Chinese electric vehicles and banned Chinese software from cars sold in the US.
President-elect Donald Trump has also vowed to slap crippling tariffs on goods imported from China, floating a 60% tariff on all Chinese goods during his election campaign.
Tencent did not respond to a request for comment, sent outside of normal working hours.
