Why is China interested in U.S. battery maker?

Jeff Horwich Aug 9, 2012

Jeff Horwich: A123 is a Massachusetts company that makes state-of-the-art electric car batteries — that fell on hard times recently. Their financial rescue has come from Wangxiang Group — China’s biggest auto-parts conglomerate. Wangxiang has offered $450 million for a controlling stake. At least one congressman has already raised questions about the deal. And it unfolds in the context of a Chinese corporate buying spree that includes lots of energy-related companies in the U.S.

Michael Dunne is a close watcher of the Chinese auto and energy sectors. He’s with me from Jakarta. Hello.

Michael Dunne: Good morning. How are you doing?

Horwich: I’m fine, thanks. So this acquisition of this car battery company, A123, by a Chinese company — why is this a significant move?

Dunne: The Chinese have declared that they want to lead the world in electric vehicles. The missing link in that formula, of course, is technology. Americans are still ahead in battery technology, the Chinese don’t have it yet. So here we go, A123 gets into financial trouble, needs money. The Chinese got the money, they see it as an opportunity.

Horwich: We can put this into context of Chinese companies gobbling up energy companies of all kinds. What’s the motivation there?

Dunne: Bottom line is that on the back of China’s sensational economic growth, demands for energy are at a level they’ve never even dreamed of. So that makes them nervous. They can no longer rely on themselves, they have to go overseas for energy. They want to take their reserves and instead of putting it into U.S. Treasuries, they’re saying why don’t we buy energy?

Horwich: Is China’s interest in activity in buying energy companies having an effect on the global energy market?

Dunne: Inevitably the demand in China has. It’s no secret that the price of oil, coal, and other commodities has gone up right in lockstep with China’s economic rise. Now that China’s slowing a little bit this year, we’ve seeing slackening in those prices. But if one looks 5-10 years out, the game will become very interesting because China’s demand for energy is sure to go up and as a result the impact on global commodity markets is going to be at a level we haven’t seen before.

Horwich: Michael Dunne, author and authority on the auto and energy industries in China, good to talk with you. Thank you.

Dunne: Thank you.

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