Are Chinese Battery Companies the Next Huawei? – DNyuz

Are Chinese Battery Companies the Next Huawei?

The Biden administration wants half of all new cars sold in the United States to be electric by 2030. Meanwhile, the European Union has taken even bolder steps, mandating that all new cars and vans sold after 2035 emit zero emissions. Taken together, that’s good news–for China.

The Biden administration wants half of all new cars sold in the United States to be electric by 2030. Meanwhile, the European Union has taken even bolder steps, mandating that all new cars and vans sold after 2035 emit zero emissions. Together, this is good news for China.

Today, companies with close ties to the Chinese Communist Party (CCP) control nearly half of the global supply of electric vehicle (EV) batteries. While there is certainly merit in decarbonizing the transportation sector, a hasty embrace of EVs would do more than cement the market positions of Beijing’s battery behemoths. The United States and European countries could be exposed to cyber-threats, just as Huawei’s expansion unchecked allowed China to access critical Western telecom networks.

In developing the production of advanced batteries to power tomorrow’s high-tech revolution, Chinese central planners have been well ahead of the West. China’s 13th five-year plan, which governed its industrial investments between 2016 and 2020, highlighted how controlling battery and EV supply chains, including critical rare earth minerals, could give Beijing a competitive advantages over the United States and other countries. China’s current five-year plan goes further, linking breakthroughs in these two fields to China’s emergence as a “science and technology powerhouse.”

Two Chinese industry giants, CATL and BYD, now dominate the global EV and battery markets. CATL, frequently linked to Uyghur forced labor, produces one in three EV batteries, and BYD is on track to become the world’s top EV seller. Both companies owe their ascent to massive Chinese subsidies as well as their corporate connections with powerful CCP institutions. The CCP uses these and other links to exert direct and indirect influence over the internal governance of each company, its operations and hiring. This has serious implications on battery supply chains.

In the case of CATL, its founder and CEO, Zeng Yuqun, spent the last decade serving as a science and technology delegate to the Chinese People’s Political Consultative Conference, the highest-ranking entity overseeing China’s United Front–a complex web of organizations and individuals working to deepen the CCP’s control over Chinese industry and civil society. The United Front also directs China’s overseas talent recruitment programs, which, according to the FBI and leaked Chinese government directives, facilitate illegal foreign technology transfers and intellectual property theft. Zeng concurrently serves as a vice-chairman of the All-China Federation of Industry and Commerce, the country’s largest business association, whose bylaws state that it is “led by” the CCP and responsible for “fully implementing” Chinese President Xi Jinping’s agenda.

CATL’s close CCP connections go beyond mere political affiliations. Consistent with rules issued by China’s Securities Regulatory Commission in 2018 for all publicly listed enterprises, CATL’s articles of association, which govern its operations, explicitly note that “the company shall establish a Communist Party organization [internally] and carry out party activities.” These party cells and the company’s other party-state linkages provide the CCP with almost unfettered access to CATL’s proprietary technologies and strategic market data, potentially giving other Chinese entities a competitive edge and undermining U.S. and European companies’ positions in global markets.

Yet in a move reminiscent of Huawei’s push to dominate the 5G and smartphone sectors, CATL and BYD are already setting their sights on controlling battery-adjacent industries. These include EV charging networks and battery energy storage systems (BESS) for utilities to store power.

Moving into EV charging is a logical step for both companies, but BESS pushes the boundary of their influence. These systems store and harness energy and then release it via transmission lines in times of electricity shortages, or to provide a backup for wind and solar power. But there’s a catch: These Chinese batteries must be connected to host nations’ electrical grids, even though they are not presently subject to stringent review or oversight in either the United States or Europe. U.S. companies are not required to reveal any information about their partnership with Chinese battery firms.

Owing to these transparency gaps, a full accounting of ongoing and planned Chinese BESS projects in the United States remains elusive; however, several have broken ground in Florida, Virginia, Texas, and Nevada. Alarmingly, CATL batteries were reportedly installed on the U.S. Marine Corps base at Camp Lejeune, which is home to a special operations unit tasked with evacuating noncombatants from Taiwan should Beijing invade. CATL has similarly and aggressively marketed BESS in European capitals, with projects already underway in Britain, Hungary, and elsewhere.

Just as with Huawei, the risks posed by Chinese BESS are immediate and undeniable. Research from the British risk management firm Aon reveals that pervasive cybersecurity deficiencies associated with BESS control systems could allow malign actors to trigger wide-scale electrical grid blackouts.

And a 2022 U.S. Department of Energy report made clear that malicious actors are already “positioned well” to hack distributed energy systems, including BESS, in the United States. Suspected Chinese cyberattacks on India’s power grid in 2021 and 2022 highlight the former’s readiness to target critical infrastructure. The Biden administration’s own reported scramble to detect Chinese cyber actors lurking in U.S. infrastructure networks further underscores the threat.

Chinese-built EV charging networks are hardly safer. Internet-connected EV batteries and chargers exhibit many exploitable cybersecurity weaknesses typically associated with large-scale data breaches, according to a peer-reviewed British study. Similar research conducted by Sandia National Laboratories in the United States demonstrates how malicious actors can remotely install malware onto EVs during charging, enabling surreptitious monitoring and disabling of the vehicles. A separate report from Sandia notes that “there is currently no comprehensive EVSE [EV supply equipment] cybersecurity approach” in the United States, and that only “limited best practices” have been adopted by some industry players.

Of course, the danger isn’t solely digital. Multiple Chinese laws, but particularly its 2017 national security law and recently revised counter-espionage law, compel all Chinese companies to align their operations with Beijing’s strategic interests. During peace or war, Beijing could demand that Chinese firms aid in spying or sabotage, forcing them, for example, to share schematics of critical infrastructure obtained from their U.S. or European utility partnerships. These demands fit in with China’s national strategy of military-civil integration, which aims to break down the barriers between civil and military institutions.

Policymakers on both sides of the Atlantic were clearly late to recognize the Huawei threat. Despite billions of dollars spent by the U.S. government to rip out and replace Huawei gear, the company’s products still permeate the United States’ telecommunication architecture. The same goes for Europe.

Before CATL and BYD consolidate near-monopolies throughout U.S. or European markets, policymakers should order an immediate technical assessment of Chinese EV charging networks and energy storage systems to document potential cyber vulnerabilities and China’s ability to exploit them.

In the interim, the U.S. Defense Department and the defense ministries of other NATO members should halt all planned Chinese BESS projects on military bases and disconnect any systems that are already active.

Beyond simply investigating whether to impose punitive tariffs on Chinese EV imports, U.S. and European governments should also move swiftly to institute comprehensive regulatory measures and stringent oversight over these sectors. This includes examining potential technology transfer that could benefit the CCP. Subnational leaders also play a part, for example, by requiring that utility companies in their jurisdictions disclose any details about past, current, or future partnership with Chinese battery firms.

The threat posed by Beijing’s battery dominance is clear. It’s unclear whether Washington or its European allies will put decarbonization ahead of their long-term security requirements.

The post Are Chinese Battery Companies the Next Huawei? appeared first on Foreign Policy.