Chinese firm approved to buy U.S. electric car battery company

Beijing residents wearing masks walk through fog as severe pollution continues to affect the capital on January 29, 2013. The Chinese government has introduced massive subsidies for electric cars in an effort to combat the problem as auto parts maker Wanxiang purchases a U.S. battery maker.

After months of deliberation by the U.S., China's largest auto parts maker has won government approval to buy A123 Systems, an American manufacturer of electric car batteries. The result might be a huge loss of potential jobs in America.

For Chinese auto parts maker Wanxiang, the timing of this deal was perfect. The U.S. government had just given A123 $129 million to develop top-of-the line electric car batteries -- and that’s when the Chinese company swooped in.

"In the auto industry, you build it where you sell it," says Asia auto analyst Michael Dunne. "Demand for the short term, at least, looks to be bigger in China than the United States. That looks like production for A123 may very well shift over to China."

Along with production will probably go American jobs, all lost because China’s government is offering attractive incentives to people who want to buy electric vehicles. The central government gives electric car buyers a check worth $9,500. Last week, amidst a public outcry over hazardous air pollution, the city of Beijing matched that sum resulting in a whopping $19,000 subsidy for people who buy electric cars.

About the author

Rob Schmitz is Marketplace’s China correspondent in Shanghai.

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