US and EU Act Simultaneously, Even CATL Affected, Chinese Auto Overseas Expansion Hobbled

Zhiliao Auto/Fed

September 2026, US Transportation Secretary Sean Duffy sent a letter to Ford Motor CEO Jim Farley, requesting Ford abandon its strategic partnership with Chinese companies. The letter directly targets Ford's use of CATL-licensed lithium iron phosphate battery technology at its Marshall plant in Michigan.

In past years, restrictions by Europe and US on China's auto industry focused mainly on complete vehicles. In October 2024, the EU added countervailing duties on EVs produced in China on top of 10% import tariffs, with comprehensive rates reaching up to 45.3%.

However, the US approach follows FEOC rules under the Inflation Reduction Act. Starting from 2026, over 60% of cell material costs must come from eligible companies to qualify for tax credits, rising to 75% by 2030.

These barriers previously only focused on "where the car comes from", now they also manage "where the technology comes from".

Ford employs about 1700 American workers at its Michigan plant, the plant is fully owned and operated by Ford, but solely because battery technology comes from CATL via licensing agreement, it was deemed "deeply concerning" by the US Department of Transportation.

EU countervailing duties also brought high costs for Chinese car makers. BYD was levied 17.0% countervailing duties, Geely 18.8%, SAIC Motor reached 35.3%. A Chinese EV priced at 38,000 euros, just tariff cost exceeds 10,000 euros.

But the price commitment mechanism agreed between China and EU in January 2026 provided a buffer channel. Chinese car makers can replace high countervailing duties by committing to minimum import prices and annual export quotas.

This practice of sacrificing some pricing freedom to exchange for qualification to stay in the European market is essentially a strategy of exchanging space for time, but indicators do not treat the root cause.

Take the cooperation between Ford and CATL for example. Ford stated this is not a joint venture, nor foreign manufacturing business, CATL only provides technology licensing and training services, Ford owns the plant and controls operations. But even so, the US government does not allow it.

Of course, from the US government perspective, this concern has its logic. After all, CATL was listed on the so-called "Chinese Military Enterprise List" by the US Department of Defense as early as 2025. Such policy environment, even just technology licensing, faces various uncertainties.

Despite such harsh environment, Chinese auto export data remains strong. First 8 months of 2026, passenger car cumulative exports 6.098 million units, YoY growth 75.7%, annual export volume expected to reach 11.5 to 12 million units.

But export volume is one thing, global capability is another.

Report by global consultancy AlixPartners shows Chinese car makers plan to layout production bases in at least 16 overseas countries. By 2030, overseas production expected to rise from about 1.2 million units in 2025 to 3.4 million. BYD has layouted factories in Thailand, Brazil, Hungary, etc., where Hungary factory expected to produce in 2026, annual capacity 150,000 units. SAIC Thailand factory local content rate has broken 80%.

Actually not only Chinese enterprises, this practice of localizing core supply chain links as much as possible is a general strategy for many multinational car makers to cope with policy risks.

To put it plainly, Chinese car makers doing this is forced by EU/US restrictions on Chinese auto supply chains. Tariffs are one aspect, various technology source reviews, localization rate requirements, and supply chain security rules are deeper constraints.

Chinese car makers' advantages in battery technology, manufacturing costs, and product iteration speed still exist, but now looking, to convert these advantages into global market share, it's not just about selling cars, must build manufacturing, supply chain, and service systems into target markets.

So, this new round of competition triggered by Chinese NEV industry going overseas, is shifting from the product itself to who can build a complete operational system in more markets.

Zhiliao Auto original article, please contact us if reprinting.

*Pictures from internet, please contact author to delete if infringing*