China’s Contemporary Amperex Technology Company Ltd (CATL) and Ford Motor Company are considering a new partnership to build a battery manufacturing plant in the USA to meet growing demand for electric vehicles (EVs) in the region, according to local reports.

The two companies are reported to be looking at Michigan and Virginia as potential locations for the multi-billion-dollar plant and are said to be exploring a new business arrangement that would give them access to tax benefits under the recent Inflation Reduction Act (IRA) without upsetting USA-China political sensitivities. The facility would produce lithium iron phosphate batteries for Ford.

Under pressure from the Chinese government, CATL earlier this year suspended plans to build a new manufacturing facility in North America in response to US House of Representatives Speaker Nancy Pelosi’s trip to Taiwan – which strained relations between the world’s two largest economies.

According to reports, a new partnership structure is being discussed whereby Ford would own 100% of the plant, including the building and related infrastructure, while CATL would operate the factory and retain its manufacturing and product technologies. This would allow the facility to qualify for tax credits under the new Inflation Reduction Act (IRA), while CATL would not be required to invest directly in the plant.

Other options are also being considering which would allow CATL to establish a presence in the fast-growing US EV market.

Ford already has a strategic partnership with South Korean EV battery manufacturer SK On, with the two companies having established a new joint venture called BlueOval SK which has plans to invest US$11.5bn to build two battery plants in the USA with a combined production capacity 140GWh per year.