Tesla representatives in China declined to comment. Ganfeng supplies BMW with lithium from Australian mines and has not informed the company of its project in Xinjiang, the German automaker said in a statement.
The United States and its allies have sanctioned individuals and entities with ties to Xinjiang and curbed some imports from the region over concerns about human rights abuses and the alleged use of forced labor . China has repeatedly denied the charges, with Foreign Ministry spokesman Zhao Lijian previously calling the charges “the lie of the century”.
Ties with suppliers exposed to Xinjiang are becoming increasingly problematic for many industries. The Uyghur Forced Labor Prevention Act, which took effect in the United States in June, will block imports unless companies can prove they were not made with forced labor. Already, some sunscreen products have been discontinued due to questions about the source of their raw materials.
Ganfeng’s expansion plans in Xinjiang risk bringing Elon Musk’s Tesla closer to the region’s human rights controversy. They also threaten to complicate its strategy in China, where a factory in Shanghai makes vehicles for the world’s biggest electric vehicle market and also for export to Europe and elsewhere in Asia.
The automaker in a May report disclosed a list of 12 mining and refining companies that are direct suppliers, with Ganfeng included among four lithium producers. Tesla, which has invested heavily in the Chinese market and previously opened a showroom in Xinjiang, said in the report that it found no cases of child labor, forced labor or inhumane treatment during audits. its suppliers.
Tesla will act to end relationships with suppliers that fail to meet standards or fail to correct issues of concern in a timely manner, according to the report.
“The risks to the electric vehicle industry from inputs from Xinjiang are enormous,” said Emily de La Bruyere, co-founder of Horizon Advisory, a US-based consultancy focused on forced labor issues. “This puts all battery production in China at risk of violating US law and global human rights standards, and this risk will only increase as China continues to develop industries related to electric vehicles. in Xinjiang.”
Stuck between China and the United States
A joint venture between a unit of Ganfeng and Xinjiang Geology and Mineral Investment aims to obtain quality lithium resources, Ganfeng said in a post on an online investor forum in June. The new company was registered in May in the region’s capital, Urumqi, with registered capital of around 90 million yuan ($20 million). The partners will aim to take advantage of local lithium resources and contribute to the economic development of the region, according to a statement posted on WeChat.
The new company is 49% owned by Ganfeng Zhongkai Mining Technology – itself a joint venture between Ganfeng Lithium and Jiangsu Nonghua Intelligent Agriculture Technology Co. Advertising System.
Companies have found themselves caught between the United States and China over the Xinjiang issue. Western activists and groups have urged them to cut ties altogether, but any attempt to distance themselves from the region risks the ire of the Chinese government. Tesla’s announcement of a showroom opening drew criticism from groups including the Alliance for American Manufacturing.
Volkswagen has also faced pressure on a production plant in Urumqi, prompting chief executive Herbert Diess to say the automaker’s presence in Xinjiang can be a force for good. Although VW and Ganfeng announced plans in 2019 for a 10-year supply pact, the companies currently have “no direct business relationship”, the automaker said in a statement.
In theory, Tesla and other automakers could find a way to maintain their relationship with Ganfeng while avoiding metals sourced from Xinjiang.
Ganfeng has an extensive network of operations and projects stretching from Australia to Argentina, which could give customers options to avoid the use of raw materials produced from future sites in Xinjiang, according to Seth Goldstein, a Chicago-based equity strategist at Morningstar who covers Tesla and battery supply chain companies. “The customer could probably request to buy lithium from Ganfeng’s other operations,” he said. “As far as Tesla is concerned, I don’t foresee any problems.”
But material separation may not be so straightforward for all consumers given the complexity of electric vehicle supply chains that involve multiple stages of component extraction, refining, manufacturing and assembly – usually spread across multiple sites – and the dangers of that obscuring the original source of the crude. materials.
“Any indication that Tesla, or another maker of electric vehicles or batteries, is in fact collaborating with companies that appear likely to use forced labor would be of serious concern to investors,” said Richard Clayton, research director at SOC Investment Group. , which works with the syndicate of pension funds that manage assets worth more than $250 billion ($367 billion) and own Tesla stock.
Companies in the sector face “significant reputational, regulatory and potentially legal risks arising from environmental practices and human rights” associated with battery metal mining, he said.