CATL allegedly restructures for IRA eligibility

CATL has reportedly restructured the shareholdings of two top executives to avoid a “Foreign Entity of Concern” (FEOC) designation under the Inflation Reduction Act (IRA) in the United States. 

CATL provided an official reason for its change in shareholdings. The Chinese battery supplier stated that the restructuring would help it adapt to changes in its internal and external environments, improve its decision-making power, and promote sustainability in the company.

CruGroup hinted that CATL’s restructuring could be more about qualifying for the IRA’s tax incentives in the United States. 

Before the restructuring, CATL was in danger of receiving a FEOC designation. In December 2023, the Biden administration released a Notice of Proposed Rulemaking (NPR) explaining FEOC requirements.

“To strengthen the security of America’s supply chains, beginning in 2024, an eligible clean vehicle may not contain any battery components that are manufactured or assembled by a FEOC, and, beginning in 2025, an eligible clean vehicle may not contain any critical minerals that were extracted, processed, or recycled by a FEOC,” said the NPR.

The People’s Republic of China (PRC) is considered an FOEC. CATL is based in China, and one of its top executives, Robin Zeng Yuqun, is closely linked to the Chinese government. Zeng held over 25% of CATL shares before the restructuring and is a member of the Chinese People’s Political Consultative Conference (CPPCC), an advisory body to the Chinese government. 

CATL’s restructuring appears to be a way for the company to distance itself from the Chinese government and comply with IRA requirements. CATL must loosen ties with the PRC to qualify for the IRA’s tax incentive. The Chinese company has battery supply deals with one of the top automakers in the United States who want to ramp up electric vehicle production. 

Ford and CATL teamed up to build a $3.5 billion battery production facility in Michigan. The collaboration raised concerns with the United States Congress.

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CATL allegedly restructures for IRA eligibility
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