Washington has its eyes on CATL, a battery supplier for electric vehicles, and Tencent (TCEHY), a gaming firm. Why are lawmakers calling those firms potential security threats to the U.S.?
On Monday, the U.S. Department of Defense designated CATL and Tencent as linked to China’s military. The label hurts their reputation and could potentially hurt their sales. Fortunately, this will not result in any restrictions for CATL.
Tesla (TSLA) needs CATL for batteries. The two firms are working on an agreement, where Tesla will gain a license for CATL technology for battery production in Nevada. In addition, CATL will supply battery cells to Tesla at its Shanghai plant. The chances are low that this labeling will disrupt Tesla’s plans.
A slowdown in CATL’s business would benefit other battery firms. That includes Panasonic and 3M (MMM).
Investors should brace for the U.S. to include more firms on the list. The trade war between the U.S. and China will only intensify in the next four years. This increases risks for investors holding any Chinese tech stocks. Investors may bet on such restrictions benefiting domestic firms. Ford Motor (F) may employ low-cost batteries that use CATL’s license. The low cost would enable Ford to sell cheap EVs.
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