The US Defense Department's move to ban purchases of batteries made by leading Chinese manufacturers will have "very limited "impact, industry experts and companies said on Monday.

 

This is part of Washington's efforts to decouple from and restrict China in the new energy vehicle and related supply chains, and will likely drag down the speed of the United States' own energy transformation, they added.

 

The US Defense Department passed a rule last month that will prevent battery purchases from six Chinese battery makers - Contemporary Amperex Technology, BYD, Envision Energy, EVE Energy, Gotion High-Tech and Hithium Energy Storage Technology - starting October 2027.

 

Gotion High-Tech told China Daily that the ban will have "no impact" on the company as it does not provide any products to the US Defense Department, and "has no such cooperation plans either".

 

Other companies did not reply to requests seeking comment.

 

Mo Ke, founder and president of market consultancy RealLi, said: "The ban imposes restrictions on military procurement rather than commercial purchases, and the scale of military procurement is small. The ban's overall impact on Chinese battery makers will be very limited."

 

However, behind the decision is Washington's efforts to decouple from China and restrict the country's rise in electric vehicle supply chains, as seen by the US Inflation Reduction Act (IRA) that was approved last year, Mo said.

 

Under the Act, to be eligible for half the amount of government subsidies per car, that is $3,750, at least 50 percent of the value of components of EV batteries must be manufactured or assembled in the US.

 

In addition, EVs with battery components or materials sourced from foreign entities of concern are excluded from the subsidy.

 

Zhang Xiang, an auto sector researcher at the North China University of Technology, said: "It is obvious that the US is trying to exclude China from the EV industrial chain and improve the manufacturing capabilities of the US in emerging sectors as a whole. But China has built the world's most complete NEV industrial chain, and it is difficult for the US to get rid of China's supply chain."

 

According to South Korean market consultancy SNE Research, China continued to dominate the global power battery market in the first 11 months of last year.

 

Six of the world's top 10 battery makers are from China, with their market share taking up 63.7 percent of the total.

 

"Only by introducing the world's most advanced cars and batteries to participate in market competition can the market develop well. The US' closed-door approach will lead to a delay in the popularization of NEV technology there and ultimately affect the speed of its own energy transformation," Zhang said.

 

Local Chinese manufacturers are finding alternatives despite intensified restrictions on the battery sector by the US.

 

CATL, for instance, has said that it will license its technology to Ford instead of directly producing batteries.

 

According to a research report by CITIC Securities, Chinese battery makers are expected to increase their global market share over the long term and offset negative effects of the IRA through methods like building overseas factories and technology licensing.