In a recent development, the Biden administration has rescinded its plans to allocate a $200 million grant to U.S. battery maker Microvast due to mounting criticism from Republican lawmakers over the company’s alleged ties to China. 

The Texas-based firm, which is constructing battery facilities in Kentucky and Tennessee, had already secured preliminary grants worth $2.8 billion aimed at bolstering domestic manufacturing of electric vehicle (EV) batteries. 

Energy Secretary Jennifer Granholm’s spokesperson confirmed the cancellation of negotiations with Microvast on May 23, however, refrained from providing specific reasons behind the decision.

Energy Department’s Rigorous Review Process

The Energy Department emphasized its stringent evaluation procedure before disbursing any awarded funds in a statement. The department further highlighted that it is not unusual for entities selected to participate in award negotiations to be denied a federal grant eventually. 

Charisma Troiano, spokesperson for the department, asserted that they had elected to cancel negotiations and not grant any funding to Microvast under this competitive funding opportunity.

Microvast Founder’s Response

Microvast’s founder and CEO, Yang Wu, expressed his surprise and disappointment at the Department of Energy’s (DOE) resolution to withdraw the grant, intended for the construction of a new facility in Kentucky, potentially employing hundreds of people. 

The company houses operations for its global business centrally in the U.S. In addition to refuting any ownership from the Chinese government or the Chinese Communist Party in the company, Wu emphasized that these entities neither control nor influence the company’s operations – an assertion notably relevant, considering Wu’s status as a U.S. citizen.

Reactions from Both Sides of the Aisle

Both Republican and Democratic lawmakers have commended the DOE’s decision. 

House Science Committee Chairman Frank Lucas, R-Oklahoma, praised the move, asserting that U.S. tax dollars should not be allocated to a company with significant ties to the Chinese Communist Party. Furthermore, Lucas highlighted the original intention of these funds: to strengthen American battery production and supply chains, rather than consolidating China’s dominance over them.

However, Lucas expressed frustration over the considerable lapse—over six months—before the Biden administration reached “such an obvious conclusion.” As part of his criticism, he cited Microvast’s alleged connections with the Chinese Communist Party, an issue raised repeatedly by him and other Republican lawmakers.

New Jersey Rep. Frank Pallone, the leading Democrat on the House Energy and Commerce Committee, praised the DOE for taking its fiduciary role over taxpayer money seriously with its decision.

Controversy Over the Grant

During a Senate Energy Committee hearing in February, Sen. John Barrasso, R-Wyo., scrutinized the proposed grant to Microvast, questioning whether it would ultimately benefit China. 

Barrasso referred to a Microvast filing with the Securities and Exchange Commission that stated an inability to protect its intellectual property rights in China – an issue exacerbated by the fact that China often requires foreign firms to partner with Chinese businesses to operate within the country.

In a May 1 letter to Granholm, Barrasso accused Microvast’s CEO of boasting about the company’s strong connections to China in discussions with the Chinese media. Barrasso expressed concerns that the allocation of $200 million in taxpayer funds to Microvast, a company so inherently linked to China, would be in direct opposition to the intent of the 2021 Infrastructure Law: building robust domestic manufacturing bases and supply chains for EVs and clean energy technologies.

Terming the Microvast grant example as “the Solyndra Syndrome,” Barrasso drew parallels between the Microvast case and the Obama administration’s dispersal of more than $500 million in loan guarantees to the failed solar company Solyndra. According to him and other Republican leaders, both instances underscored a lack of thorough vetting by successive Democratic administrations.

Biden Administration’s Push for Domestic Battery Production

Grants announced in October aimed to help U.S. companies with the extraction and processing of lithium, graphite, and other essential battery materials. As part of this broader effort, the Biden administration is actively working to incentivize the production and sales of EVs to curb climate change and boost domestic manufacturing.

At a White House event last year, President Biden highlighted the criticality of this mission, saying, “the future of vehicles is electric.” Biden emphasized that the DOE grants, along with the spending approved in the 2022 climate law, are imperative steps toward making significant strides in battery production within the United States.

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