America's long tortured journey to build EV batteries. The fall of startup A one two three still haunts the US decades later and reveals everything that's wrong with this country's approach to innovation. By Gabrielle Coppola. On a three mile stretch of farmland in southwest Michigan, Ford is building a battery factory. The technology Ford needs to make cheap, stable batteries to power electric vehicles will come from China's contemporary Amperex Technology Company Limited, better known as CATL, the world's biggest battery manufacturer by most measures. Ford's deal with the Chinese giant is a coup for the state. It's getting a three point five billion dollar investment in a two point five million square foot factory, thousands of new jobs, and the ability to produce enough batteries annually to power four hundred thousand electric vehicles when the plant opens in twenty twenty six. But for anyone who's been paying attention, it's a devastating moment of irony for the US. The deal could have been the other way around. In the mid nineteen nineties, a compound called lithium iron phosphate LFP the primary battery chemistry now used by CAATL and most battery companies in China, was discovered by scientists at the University of Texas at Austin and commercialized a few years later by the start up A one two three Systems in Watertown, Massachusetts. In two thousand nine, A one two three was awarded hundreds of millions of dollars by the Barack Obama administration with the great hope that it would help kickstart production of electric cars in the US, But it was too early. There wasn't demand for evs, and car companies making vehicles that use less gas didn't want to risk relying on an unproven start up. By twenty twelve, A one two three had filed for bankruptcy and become a symbol of government waste, often mentioned in the same breath as Celindra, the California solar panel maker that filed for bankruptcy in twenty eleven after receiving a half billion dollars in federal loan guarantees. To this day, Dave Yo, A one two three's former chief executive officer, is dogged by occasional finger wagging when people learn he ran the company. You're the A one two three guy who stole all the government money is a line he's gotten more than once. Now, almost thirty years after the discovery of LFP, the US is scrambling to build its own battery supply chain, and the pioneer of the modern assembly line is turning to China to learn how to make the engine of the twenty first century. It's an unsubtle reminder that America learned the wrong lesson from A one two three. Rather than letting a potentially breakthrough technology or a young company trying to commercialize that technology live or die by the whims of the free market, the US could have been committed to a much longer game, and rather than allowing a battery discovery to slip through its fingers and into the hands of what's now its greatest economic and geopolitical rival, the US could have figured out how to nurture and protect a nascent industry that was inevitably going to encounter trial and error with the wisdom of hindsight, A one to two three is a case for tweaking the orthodox rules of American capitalism in the age of competition with China. In twenty thirteen, China's then biggest autoparts company purchased A one two three out of bankruptcy. That year, the Chinese government also began implementing its plan to build a domestic EV market at a breathtaking pace. A decade later, China accounts for fifty eight percent of the world's EV sales and eighty three percent of all lithium ion battery manufacturing, according to Bloomberg in nef Even if all of President Joe Biden's climate policies succeed in reviving American manufacturing, the US is now at least a decade behind China when it comes to battery manufacturing in terms of both the necessary technology and the capacity. Industry experts say, China has just marched ahead with a very consistent strategy over the past twenty years, says Brian Ingele, president elect of nat BAT International, a trade association that advocates for battery development in North America, we create all kinds of really cool technology, and then we abandon it soon after A one two threes collapse, some of its engineers answered the call of China's young and booming battery industry. One eventually became the billionaire chairman of a Chinese maker of carbon materials. A few of A one two three's former executives still wonder what would have happened if, at the time the US had found a way to keep the company going, a government supply contract or even a sale to another American business. Given time and support, could A one to two three have eventually become a billion dollar American battery behemoth, the lynch Pin and a homegrown battery supply chain. The US has an industry policy. Here's the policy. We don't have one, says Jeff Chamberlain, who spent more than a decade at Argonne National Laboratory trying to commercialize battery tech before starting a venture capital firm in twenty sixteen. I'm not saying we should become socialist or communist, but other countries that have decades long industrial policies, they're going to eat our lunch. In early two thousand and one, a twenty six year old entrepreneur named Rick Fulap started knocking on doors at the Massachusetts Institute of Technology, hoping to find someone to help him start a battery company. One of the people who answered was yet Ming Chung, a professor of material science, who invited his friend with a doctorate from Cornell University bart Riley to meet with them regularly. They narrowed in on Chung's idea for a self assembling battery. Batteries have three basic components, two electrodes, a cathode and an anode that store and release a charge, and an electrolyte that helps shuttle the charge between them. The material used to make batteries determine how much energy they store and at what cost. Chang's dream was to find three materials that would, under the right conditions, fall into the exact structure of a battery. That summer, they hatched A one two three and soon raised eight million dollars along with recruiting Vo an executive from a Rhode Island power equipment company, to be CEO. But six months in the team realized that making the self assembling battery a reality would take a long time. Meanwhile, Chang's lab was publishing science papers on LFP as a superior material, and he convinced Vio that A one two three could use it to pursue a commercial battery instead. LFP was discovered by a team of researchers led by Professor John Goodenough in nineteen ninety five, Goodenough, who would win the Nobel Prize decades later, had given his lab researchers at U T Austin an assignment take a lithium ion battery cell and swap out different metals to see if they can hold more energy without catching fire. As journalist Steve Levine chronicles in his new book The Powerhouse, which profiles the pioneers of modern battery chemistry, Goodnuff's team chose an iron and phosphorus compound and made a test cell. When they charged it, the compound formed an atomic crystal structure that easily shuttle lithium ions back and forth. They had stumbled onto a new cathode material, one that would prove to be cheaper and more stable than existing technology. Initially, LFP batteries were slow to charge and discharge. Scientists affiliated with a Canadian electric utility company solved that by coating LFP cathode particles with carbon, an innovation that could make the material commercially viable. Around the same time, A one two three's Cheung published an article in the scientific journal Nature Materials stating that doping an LFP cathode or injecting tiny amounts of metallic compounds, including an element called niobium, helped electrons travel faster, so the battery could produce ether even more instantaneous power. This discovery, which A one two three would later brand nano phosphate, became the company's key innovation, enabling batteries to produce two or three times more immediate power than any other similarly sized cell on the market. It didn't take long for A one two three to find applications for it. Within a few years, the startup secured a contract with Stanley Blackendecker to provide batteries for a new line of power tools, and raised another thirty two million dollars. Staring down an eighteen month deadline. With limited cash, A one two three decided to outsource to lower cost countries. They hired a company in Taiwan to make electrodes and cells, later shifting the electrode work to Korea. China, racing to match the electron manufacturing prowess of its neighbors, was also eager to accommodate the US startup. A one two three built its cathode plant in a low tax economic processing zone outside Shanghai set up by the Chinese government to help form or in companies lower production costs while creating local jobs. Despite the financial perks, intellectual property theft was a constant concern. A one to two three executives visiting from the US would return to their hotel rooms to find screws loose on their laptops. A staffer at A one two three's offices in chang Zhou found an envelope in the outgoing mail basket addressed to a competitor. They opened it to find blueprints of the cathode operation, along with the resume of an A one two three production engineer who was promptly fired. To protect A one two three's proprietary LFP cathode powder, the factory was divided into two buildings with limited access, so no single Chinese employee could see the entire process. Larry Beck, a chemistry professor at the University of Michigan who became A one two three's lead cathode material scientist, rented a building behind a scrap metal yard and turned it into a low profile chemistry lab, plucking iron from the heaps of sheet metal and dissolving it in acid to produce purified crystals needed to make LFP As the Chinese government nurtured a domestic EV industry by converting city bus fleets and offering tax breaks for EV purchases, local entrepreneurs emerged to capitalize on state support. Zung Yu Chun, now the forty first richest person in the world according to the Bloomberg Billionaire's Index, founded CATL in twenty eleven. While running a company that made batteries for consumer electronics. CATL cut its automotive teeth producing cells for BMW and its local Chinese partner, and would later recruit engineers from the West to sharpen its manufacturing skills. My job, as an older guy was to apply experiential learning so they could learn faster, says Bob Gallian, an American battery engineer Zung hired in twenty twelve who later became caatl's chief technology officer. CATL wasn't the only juggernaut to emerge from China's EV. Push BYD, which is already out selling Tesla with its combined EV and hybrid models, also started out making batteries for cell phones. Its founder, a chemist named Wang Chuanfu, bought a car company in two thousand and three. Five years later, at the Beijing Auto Show, BYD introduced the E six, an EV with an LFP battery that could go one hundred and eighty six miles on a single charge. Today, its Han Sidan, with its own BYD made battery, can go four hundred and ten miles. As Chinese entrepreneurs built companies that would turn the Communist Party's EV dreams into reality, executives at A one two three were riding their own wave of electric euphoria. The performance of the A one two three powered Blackendecker drill had attracted other potential customers. Gillette wanted to put A one two three's batteries in electric razors. Mattel wanted them for high end toys, but Fulap, then vice president for business development, knew that to take on Asian battery giants, A one two three needed to move into cars. In January two thousand eight, he called Mujib Ijaz, an engineer who was running Ford's EV skunkworks in Dearborn, Michigan. When Ijaz got the call from Fulab inviting him to lunch, the engineer was still reeling from the news from his bosses. A year earlier, at the auto show in Washington, d C. Ford had unveiled his breakthrough the Edge, a plug in hybrid suv that ran on hydrogen and battery power. Now, as the Big Three girded for a recession, he was told Ford was cutting off funding for his department. Ijas could get reassigned to another group within Ford, after all, he'd been with the company for fifteen years, but he was intrigued by Fulop's proposition. Working on batteries was something he'd always seemed destined for. The Son of Pakistani immigrants, a nuclear physicist and a solar panel entrepreneur, Ijaz was born and raised in Virginia, where his father was a professor at Virginia Tech and his mother graduated from the school with two doctorates. Dinner table conversation often revolved around the nineteen seventies oil embargo and how energy access was at the root of global conflict. After participating in a General Motor's sponsored solar car race as a college student, he was hooked. Within a week of Fulop's call, Ijaz was leading a one two three's automotive business, and several members of his four team soon joined him. Start up already had deals to build prototypes for b m W and Daimler truck and it was competing against l G KEM to supply batteries for the Chevy Vault. G m's new hybrid sedan. Chrysler had a new electric car division, and A one two three was vine to become its supplier. Two. As the economy crumbled in late two thousand and eight, everything started to align for A one two three. Four months after President George W. Bush agreed to throw g M and Chrysler a lifeline, Chrysler executives announced they would build an EV lineup with A one two three batteries. By June two thousand and nine, the federal government had taken ownership stakes in GM and Chrysler, and Obama sought to pump hundreds of billions of dollars of stimulus money into the economy. A one two three one apiece a two hundred and forty nine million dollar grant from the US Department of Energy to support construction of two manufacturing facilities in Michigan. That government backing, along with the Chrysler EV deal, helped propel A one two three's three hundred and eighty million dollar initial public offering that September. The startup wasn't profitable, but it was in promising talks with automakers in China, Europe and the US, and now had enough money to invest in high volume battery production, giving it the chops to compete with global manufacturers. But it didn't take long for A one two three's bet on EV's to start looking shaky. Sergio Marcione, CEO of the Italian car company Fiat Automobiles, had taken Chrysler off the US SA government's hands at a hefty discount with a promise to make small, fuel efficient cars. Marcione was a master negotiator and strategist who would bring Chrysler back from the dead, but he was not a fan of electric cars. By late summer two thousand and nine, he shut down Chrysler's EV division. Vo A one two three CEO still held out hope that a program to bring an electric Fiat five hundred mini car to the US would survive. It did, but despite the public declarations and almost two years of development work, Chrysler awarded the production contract to Samsung Electronics and Robert Bosch, a global supplier with whom it had existing contracts. Without Chrysler or GM, which went with LG on the Chevy Vault. A one two three had to scramble. Its new plants were set to open in September twenty ten, and it pieced together enough business to keep its Michigan factories humming. It had a deal to start making batteries for stationary power grids, a small contract with the US Department of Defense, and a joint venture with the Chinese car company GM agreed to use its batteries for the electric version of the compact Chevy Spark. The company's business prospects looked decent, but its survival was contingent on EV sales taking off. Around this time, it also settled a year's long legal battle with some LFP patent holders who accused the company of copying their carbon coating process. Then, in March twenty twelve, A one to two three ran into a problem. It was under contract to build battery packs for the Fisker Karma plug in Hybrid, a one hundred thousand dollars sedan created by famous Aston Martin designer Henrik Fisker. During a test drive for Consumer Reports magazine, a Fisker Karma abruptly shut down. IJAZ now A one two three's vice president for sell Engineering, was dispatched to the factory to investigate. He traced the issue to a handful of pouch like cells that hadn't been sealed properly, allowing electro light fluid to leak out, which could cause an electrical short The Fisker Karma's battery management system, sensing the problem, was shutting down as a safety measure. Out of an abundance of caution and perhaps a fear of litigation, Vio decided to publicly disclose the problem and issue a full recall and replacement of all battery packs shipped to Fisker. It would be painful, but he hoped the recall would burnish A one two three's reputation as an honest supplier. Instead, it tipped the company over a cliff, with product quality in doubt. Financing for A one two three's other projects dried up. The recall cost much less than feared and never triggered a battery fire, but it didn't matter. Fisker, a key customer, was in turmoil. In Washington. Obama's clean energy agenda was taking a beating after Solindra filed for bankruptcy in September the twenty twelve presidential election was less than a year away, and Republicans made sure to turn the administration's flailing bets into a handy return oracle. Prop A one two three was decried as a loser, along with Tesla, which had received a four hundred and sixty five million dollar loan from the DOE. Vio appealed to the White House for a lifeline and was rebuffed. The response was essentially, we did our part. You're on your own now, he recalls. Seven months after the defective Fisker batteries were discovered, at a decade after its founding, A one two three filed for bankruptcy. A one two three turned to Johnson Controls, a Milwaukee based auto supplier with its own battery business, to open the bidding for its assets, but Johnson Controls and its partners were outbid by Chinese auto parts giant Juan Chiang. Several congressional Republicans objected to the idea of a taxpayer funded tech startup going to a foreign company, but A one two three's creditors wanted whoever could offer the most money. The acquisition still had to be approved by the Committee on Foreign Investment in the United States or Cephius, an interagency group led by the Department of the Treasury that reviews mergers and acquisitions for national security concerns. As CEPHIUS analyzed the deal, Admiral Dennis Blair, a retired U. S. Navy commander and former Director of National Intelligence under Obama, reviewed the transaction. On December twentieth, twenty twelve, Blair published an op ed in Politico supporting Juan Chang's bid as long as Cepheus found no fault. He urged policymakers to recognize the importance of allowing the deal for both national security and international commerce. There are many sensitive technologies that the United States should protect, Blair wrote, the manufacturer of lithium ion batteries is not one of them. Almost all of A one two three's assets, patents, and technology breakthroughs went to China after the sale, as briefly did Ijaz. Uan Chiang's own battery business was rolled up under the A one two three name, and the news u A one two three pivoted from focusing on pure electric and hybrid vehicles to batteries for engines that shut off at stop lights to save gas. Ijaz was named CTO and visited Juan Chung's headquarters in hong Zhou. On the trip, his new boss asked Jaws to check out a company, an outside supplier of cathode material that was seeking to do business with Juan Chung. Wan Chung says it wanted Jas to kick the tires on the prospective supplier to protect A one two three's intellectual property and also its own commercial interests. The secret of A one two three's cathode powder was not only the list of ingredients, but also how they were processed. It required special mixing equipment and magnetic filters to remove contaminants. Using the wrong length of pipe or type of machinery could throw off the whole batch. As Jas toured the supplier's factory, he noticed the process looked familiar, very familiar. Jas finally came out an asp the new supplier if he was using A one to two three's blueprints. To his surprise, the man retrieved a three ring binder with his mugshot from when he'd been arrested for IP theft. It had all been a big misunderstanding, he said. Intellectual property rights were loosely enforced in China at the time, and some judges were inclined to favor Chinese companies. The government's tenure plan to dominate the EV industry was in full swing. To start a battery company was to heed a collectivist call for a new national industry. Instead of punishing him, the Chinese government had provided subsidies to help him build his own business. The man began thanking Ijaz profusely. A one two three had changed his life, he said. When the visit was over, the owner took Ijaws out to his car and popped the trunk. He wanted to give him a gift as a token of thanks. It was bedsheets, the weirdest damn gift with horses on them. IJA's recalls I found out before he had come into A one two threeis Z he had a bedsheet factory. Ijaz stayed at A one two three for another year before leaving in twenty fourteen to work on Apple's secretive electric car project. Six years later, while in pandemic lockdown with his wife and grown kids in Los Alto's California, he began thinking about the three barriers to mass EV adoption. Until batteries could go further on a single charge range, anxiety would persist lithium ion batteries with nickel and them were more prone to catch fire, and America still didn't have a homegrown battery giant to compete with CATL, LG and Panasonic. If Ajaz could hatch a company that focused on LFP batteries cheaper and more stable than the nickel based ones dominant in the West, he could solve all three problems. By July twenty twenty, Ijaz left Apple and founded Our Next Energy, dubbed one for short. In many ways, he was picking up where A one two three left off. He moved back to Michigan, his start up office in the suburbs of Detroit, standing only a mile from A One to two three's current US engineering center. Almost a sixth of One's three hundred and fifteen person staff are A one two three alumni, including the chief operating officer. Ijaz's goal at the moment trying to improve LFP batteries range, something CAATL and BYD have been trying to crack. With legions of battery scientists and a decade of high volume manufacturing experience. So far, One has designed a streamlined battery pack that has the same size and energy specs as a nickel cobalt battery without the higher price and spotty human rights record. A more ambitious product called Gemini aims to deliver seven hundred miles of range to passenger cars, double the three hundred and fifty miles a long range Tesla model S offers. The early excitement about One is eerily familiar. It's raised three hundred and fifty five million dollars from investors, including Bill Gates's breakthroth Through Energy Ventures, bmw I Ventures, and Franklin Templeton, with evaluation of one point two billion dollars. Last fall, the state of Michigan ordered it at least two hundred and twenty million dollars in cash and tax breaks to build a one point six billion dollar cell manufacturing plant in the Detroit suburbs, where it plans to hire twenty one hundred people after it starts production in twenty twenty four. Former House Speaker Nancy Pelosi and Michigan's Democratic Governor Gretchen Whitmer have visited One's offices, as have members of the state's congressional delegation. With the Inflation Reduction Act, the federal government will pay One as much as sixty five hundred dollars for every one hundred and five kilawat hour battery pack the start up produces. In Michigan, the IRA is also creating incentives for car companies to do business with one thanks to rules West Virginia's Democratic Senator Joe Manchin inserted their acquire batteries to be made in North America with raw materials sourced domestically or from US allies to qualify for consumer EV credits. If there was ever a poster child for what Biden is trying to achieve with his Climate bill, one is it. After more than three decades in the industry, Ijaz, now fifty six, finally seems to have momentum on his side. Detroit and the rest of the global auto industry are all in on EV's, even if it's out of desperation. Western carmakers who dragged their feet are now losing share in China. Tesla proved Americans will buy EV's, and FOURD and GM have introduced hit products such as the Mustang mach E and Cadillac Lyric. Electric and plug in hybrid vehicles are forecast to make up about half of US new car sales by the end of the decade, compared with a share in the high single digits last year, But there are no guarantees that a gambit to spur an American battery champion will work. One's success may depend as much on its founder's tenacity as on America's overcoming its tendency to get in its own way. In the risky, low margin battery business, a single manufacturing defect, as Jaws experienced with a one two three can be lethal for a startup. CAATL, LG, and the world's other battery giants have major backing in the form of government subsidies or a gigantic conglomerate behind them. That's why LG was able to absorb a one point nine billion dollar hit for the Chevy Bolt battery recall in twenty twenty one and keep on ticking, even though the national security threats posed by China seem like one of the few areas of bipartisan agreement left in Washington these days. The idea of government taking a more muscular role in commercializing technology doesn't sit well with many Americans. In a replay of twenty twelve, Republicans in Congress are already taking aim at Biden's clean energy agenda as a waste of taxpayer money and a misguided attempt to pick winners and losers. They argue that the price tag for the IRA seems grossly underestimated, and they're scrutinizing Energy Department loan recipients to find the next Celindra. And for all the fury over China's brazen plunder of American intellectual property, the consequences of our unchecked outsourcing don't attract nearly as much political scrutiny. All these years later, It's still unclear who had access to the spoils of the A one two three IP or how widely they were shared, but there are still traces of A one two three's technology inside China's vast battery supply chain. One of the top suppliers of LFP cathode material in the world today, Hubei one Run New Energy Technology, started out as a supplier to A one two three in chang Xhou. Beck, the A one two three material scientist who worked closely with the company to develop battery grade iron phosphate material, says Juan Run was an honorable partner. After the bankruptcy, though the Chinese upstart was freed of any non disclosure agreements. Meanwhile, CTL and BYD, which haven't been accused of infringement by A D S one three, invested billions in capital to create the scale and cost efficiencies they have today. CATL and BYD declined to comment. Wan Chung says its operations of A one two three have been run in a manner not detrimental or damaging to the US battery industry nor the Sino US relationship. The US has long thought of itself as an innovation machine powered by the virtues of shareholder capitalism. We stick with this belief, largely oblivious to emerging evidence that while free markets beat planned economies, there may be room for a modification that is even better, wrote Andy Grove, legendary CEO and co founder of Intel, in this magazine thirteen years ago. If the US neglects to alter its industrial policy, he warned at the time, it will fall behind in every technological revolution. If what I'm suggesting sounds protectionist, he wrote, so be it. Ijaz has been watching the repercussions of this inaction on for years, ever since his first trip to China in two thousand and seven to show off his plug in hybrid Ford edge. Back then it was a new battery technology never seen before in China. Now China controls the means to make it. Even if the US does stay the course, Ijaz concedes, it won't be enough to compete on EV's. Chinese companies, already pushing into new markets in Europe and South America can lower costs by achieving scale faster than anyone. Even if Ford, his former employer, wanted to tap a homegrown supplier such as One instead of a Chinese behemoth like CATL, It's simply not realistic yet. The car company, just like most major car companies, is under the gun to pump out EV's, and it's already desperately behind. It doesn't have the luxury of waiting for Ijaz's young startup to get its footing. The amount of money that we're putting in is better than I've ever seen before, and the IRA is a better step than I've seen before. With the right money and the right decision, we can move the needle here, Ijaz says, But boy, is it gonna take a lot more than what we're doing with Danny Lee and chun Ying Jiang

America's long tortured journey to build EV batteries. The fall of startup A one two three still haunts the US decades later and reveals everything that's wrong with this country's approach to innovation. By Gabrielle Coppola. On a three mile stretch of farmland in southwest Michigan, Ford is building a battery factory. The technology Ford needs to make cheap, stable batteries to power electric vehicles will come from China's contemporary Amperex Technology Company Limited, better known as CATL, the world's biggest battery manufacturer by most measures. Ford's deal with the Chinese giant is a coup for the state. It's getting a three point five billion dollar investment in a two point five million square foot factory, thousands of new jobs, and the ability to produce enough batteries annually to power four hundred thousand electric vehicles when the plant opens in twenty twenty six. But for anyone who's been paying attention, it's a devastating moment of irony for the US. The deal could have been the other way around. In the mid nineteen nineties, a compound called lithium iron phosphate LFP the primary battery chemistry now used by CAATL and most battery companies in China, was discovered by scientists at the University of Texas at Austin and commercialized a few years later by the start up A one two three Systems in Watertown, Massachusetts. In two thousand nine, A one two three was awarded hundreds of millions of dollars by the Barack Obama administration with the great hope that it would help kickstart production of electric cars in the US, But it was too early. There wasn't demand for evs, and car companies making vehicles that use less gas didn't want to risk relying on an unproven start up. By twenty twelve, A one two three had filed for bankruptcy and become a symbol of government waste, often mentioned in the same breath as Celindra, the California solar panel maker that filed for bankruptcy in twenty eleven after receiving a half billion dollars in federal loan guarantees. To this day, Dave Yo, A one two three's former chief executive officer, is dogged by occasional finger wagging when people learn he ran the company. You're the A one two three guy who stole all the government money is a line he's gotten more than once. Now, almost thirty years after the discovery of LFP, the US is scrambling to build its own battery supply chain, and the pioneer of the modern assembly line is turning to China to learn how to make the engine of the twenty first century. It's an unsubtle reminder that America learned the wrong lesson from A one two three. Rather than letting a potentially breakthrough technology or a young company trying to commercialize that technology live or die by the whims of the free market, the US could have been committed to a much longer game, and rather than allowing a battery discovery to slip through its fingers and into the hands of what's now its greatest economic and geopolitical rival, the US could have figured out how to nurture and protect a nascent industry that was inevitably going to encounter trial and error with the wisdom of hindsight, A one to two three is a case for tweaking the orthodox rules of American capitalism in the age of competition with China. In twenty thirteen, China's then biggest autoparts company purchased A one two three out of bankruptcy. That year, the Chinese government also began implementing its plan to build a domestic EV market at a breathtaking pace. A decade later, China accounts for fifty eight percent of the world's EV sales and eighty three percent of all lithium ion battery manufacturing, according to Bloomberg in nef Even if all of President Joe Biden's climate policies succeed in reviving American manufacturing, the US is now at least a decade behind China when it comes to battery manufacturing in terms of both the necessary technology and the capacity. Industry experts say, China has just marched ahead with a very consistent strategy over the past twenty years, says Brian Ingele, president elect of nat BAT International, a trade association that advocates for battery development in North America, we create all kinds of really cool technology, and then we abandon it soon after A one two threes collapse, some of its engineers answered the call of China's young and booming battery industry. One eventually became the billionaire chairman of a Chinese maker of carbon materials. A few of A one two three's former executives still wonder what would have happened if, at the time the US had found a way to keep the company going, a government supply contract or even a sale to another American business. Given time and support, could A one to two three have eventually become a billion dollar American battery behemoth, the lynch Pin and a homegrown battery supply chain. The US has an industry policy. Here's the policy. We don't have one, says Jeff Chamberlain, who spent more than a decade at Argonne National Laboratory trying to commercialize battery tech before starting a venture capital firm in twenty sixteen. I'm not saying we should become socialist or communist, but other countries that have decades long industrial policies, they're going to eat our lunch. In early two thousand and one, a twenty six year old entrepreneur named Rick Fulap started knocking on doors at the Massachusetts Institute of Technology, hoping to find someone to help him start a battery company. One of the people who answered was yet Ming Chung, a professor of material science, who invited his friend with a doctorate from Cornell University bart Riley to meet with them regularly. They narrowed in on Chung's idea for a self assembling battery. Batteries have three basic components, two electrodes, a cathode and an anode that store and release a charge, and an electrolyte that helps shuttle the charge between them. The material used to make batteries determine how much energy they store and at what cost. Chang's dream was to find three materials that would, under the right conditions, fall into the exact structure of a battery. That summer, they hatched A one two three and soon raised eight million dollars along with recruiting Vo an executive from a Rhode Island power equipment company, to be CEO. But six months in the team realized that making the self assembling battery a reality would take a long time. Meanwhile, Chang's lab was publishing science papers on LFP as a superior material, and he convinced Vio that A one two three could use it to pursue a commercial battery instead. LFP was discovered by a team of researchers led by Professor John Goodenough in nineteen ninety five, Goodenough, who would win the Nobel Prize decades later, had given his lab researchers at U T Austin an assignment take a lithium ion battery cell and swap out different metals to see if they can hold more energy without catching fire. As journalist Steve Levine chronicles in his new book The Powerhouse, which profiles the pioneers of modern battery chemistry, Goodnuff's team chose an iron and phosphorus compound and made a test cell. When they charged it, the compound formed an atomic crystal structure that easily shuttle lithium ions back and forth. They had stumbled onto a new cathode material, one that would prove to be cheaper and more stable than existing technology. Initially, LFP batteries were slow to charge and discharge. Scientists affiliated with a Canadian electric utility company solved that by coating LFP cathode particles with carbon, an innovation that could make the material commercially viable. Around the same time, A one two three's Cheung published an article in the scientific journal Nature Materials stating that doping an LFP cathode or injecting tiny amounts of metallic compounds, including an element called niobium, helped electrons travel faster, so the battery could produce ether even more instantaneous power. This discovery, which A one two three would later brand nano phosphate, became the company's key innovation, enabling batteries to produce two or three times more immediate power than any other similarly sized cell on the market. It didn't take long for A one two three to find applications for it. Within a few years, the startup secured a contract with Stanley Blackendecker to provide batteries for a new line of power tools, and raised another thirty two million dollars. Staring down an eighteen month deadline. With limited cash, A one two three decided to outsource to lower cost countries. They hired a company in Taiwan to make electrodes and cells, later shifting the electrode work to Korea. China, racing to match the electron manufacturing prowess of its neighbors, was also eager to accommodate the US startup. A one two three built its cathode plant in a low tax economic processing zone outside Shanghai set up by the Chinese government to help form or in companies lower production costs while creating local jobs. Despite the financial perks, intellectual property theft was a constant concern. A one to two three executives visiting from the US would return to their hotel rooms to find screws loose on their laptops. A staffer at A one two three's offices in chang Zhou found an envelope in the outgoing mail basket addressed to a competitor. They opened it to find blueprints of the cathode operation, along with the resume of an A one two three production engineer who was promptly fired. To protect A one two three's proprietary LFP cathode powder, the factory was divided into two buildings with limited access, so no single Chinese employee could see the entire process. Larry Beck, a chemistry professor at the University of Michigan who became A one two three's lead cathode material scientist, rented a building behind a scrap metal yard and turned it into a low profile chemistry lab, plucking iron from the heaps of sheet metal and dissolving it in acid to produce purified crystals needed to make LFP As the Chinese government nurtured a domestic EV industry by converting city bus fleets and offering tax breaks for EV purchases, local entrepreneurs emerged to capitalize on state support. Zung Yu Chun, now the forty first richest person in the world according to the Bloomberg Billionaire's Index, founded CATL in twenty eleven. While running a company that made batteries for consumer electronics. CATL cut its automotive teeth producing cells for BMW and its local Chinese partner, and would later recruit engineers from the West to sharpen its manufacturing skills. My job, as an older guy was to apply experiential learning so they could learn faster, says Bob Gallian, an American battery engineer Zung hired in twenty twelve who later became caatl's chief technology officer. CATL wasn't the only juggernaut to emerge from China's EV. Push BYD, which is already out selling Tesla with its combined EV and hybrid models, also started out making batteries for cell phones. Its founder, a chemist named Wang Chuanfu, bought a car company in two thousand and three. Five years later, at the Beijing Auto Show, BYD introduced the E six, an EV with an LFP battery that could go one hundred and eighty six miles on a single charge. Today, its Han Sidan, with its own BYD made battery, can go four hundred and ten miles. As Chinese entrepreneurs built companies that would turn the Communist Party's EV dreams into reality, executives at A one two three were riding their own wave of electric euphoria. The performance of the A one two three powered Blackendecker drill had attracted other potential customers. Gillette wanted to put A one two three's batteries in electric razors. Mattel wanted them for high end toys, but Fulap, then vice president for business development, knew that to take on Asian battery giants, A one two three needed to move into cars. In January two thousand eight, he called Mujib Ijaz, an engineer who was running Ford's EV skunkworks in Dearborn, Michigan. When Ijaz got the call from Fulab inviting him to lunch, the engineer was still reeling from the news from his bosses. A year earlier, at the auto show in Washington, d C. Ford had unveiled his breakthrough the Edge, a plug in hybrid suv that ran on hydrogen and battery power. Now, as the Big Three girded for a recession, he was told Ford was cutting off funding for his department. Ijas could get reassigned to another group within Ford, after all, he'd been with the company for fifteen years, but he was intrigued by Fulop's proposition. Working on batteries was something he'd always seemed destined for. The Son of Pakistani immigrants, a nuclear physicist and a solar panel entrepreneur, Ijaz was born and raised in Virginia, where his father was a professor at Virginia Tech and his mother graduated from the school with two doctorates. Dinner table conversation often revolved around the nineteen seventies oil embargo and how energy access was at the root of global conflict. After participating in a General Motor's sponsored solar car race as a college student, he was hooked. Within a week of Fulop's call, Ijaz was leading a one two three's automotive business, and several members of his four team soon joined him. Start up already had deals to build prototypes for b m W and Daimler truck and it was competing against l G KEM to supply batteries for the Chevy Vault. G m's new hybrid sedan. Chrysler had a new electric car division, and A one two three was vine to become its supplier. Two. As the economy crumbled in late two thousand and eight, everything started to align for A one two three. Four months after President George W. Bush agreed to throw g M and Chrysler a lifeline, Chrysler executives announced they would build an EV lineup with A one two three batteries. By June two thousand and nine, the federal government had taken ownership stakes in GM and Chrysler, and Obama sought to pump hundreds of billions of dollars of stimulus money into the economy. A one two three one apiece a two hundred and forty nine million dollar grant from the US Department of Energy to support construction of two manufacturing facilities in Michigan. That government backing, along with the Chrysler EV deal, helped propel A one two three's three hundred and eighty million dollar initial public offering that September. The startup wasn't profitable, but it was in promising talks with automakers in China, Europe and the US, and now had enough money to invest in high volume battery production, giving it the chops to compete with global manufacturers. But it didn't take long for A one two three's bet on EV's to start looking shaky. Sergio Marcione, CEO of the Italian car company Fiat Automobiles, had taken Chrysler off the US SA government's hands at a hefty discount with a promise to make small, fuel efficient cars. Marcione was a master negotiator and strategist who would bring Chrysler back from the dead, but he was not a fan of electric cars. By late summer two thousand and nine, he shut down Chrysler's EV division. Vo A one two three CEO still held out hope that a program to bring an electric Fiat five hundred mini car to the US would survive. It did, but despite the public declarations and almost two years of development work, Chrysler awarded the production contract to Samsung Electronics and Robert Bosch, a global supplier with whom it had existing contracts. Without Chrysler or GM, which went with LG on the Chevy Vault. A one two three had to scramble. Its new plants were set to open in September twenty ten, and it pieced together enough business to keep its Michigan factories humming. It had a deal to start making batteries for stationary power grids, a small contract with the US Department of Defense, and a joint venture with the Chinese car company GM agreed to use its batteries for the electric version of the compact Chevy Spark. The company's business prospects looked decent, but its survival was contingent on EV sales taking off. Around this time, it also settled a year's long legal battle with some LFP patent holders who accused the company of copying their carbon coating process. Then, in March twenty twelve, A one to two three ran into a problem. It was under contract to build battery packs for the Fisker Karma plug in Hybrid, a one hundred thousand dollars sedan created by famous Aston Martin designer Henrik Fisker. During a test drive for Consumer Reports magazine, a Fisker Karma abruptly shut down. IJAZ now A one two three's vice president for sell Engineering, was dispatched to the factory to investigate. He traced the issue to a handful of pouch like cells that hadn't been sealed properly, allowing electro light fluid to leak out, which could cause an electrical short The Fisker Karma's battery management system, sensing the problem, was shutting down as a safety measure. Out of an abundance of caution and perhaps a fear of litigation, Vio decided to publicly disclose the problem and issue a full recall and replacement of all battery packs shipped to Fisker. It would be painful, but he hoped the recall would burnish A one two three's reputation as an honest supplier. Instead, it tipped the company over a cliff, with product quality in doubt. Financing for A one two three's other projects dried up. The recall cost much less than feared and never triggered a battery fire, but it didn't matter. Fisker, a key customer, was in turmoil. In Washington. Obama's clean energy agenda was taking a beating after Solindra filed for bankruptcy in September the twenty twelve presidential election was less than a year away, and Republicans made sure to turn the administration's flailing bets into a handy return oracle. Prop A one two three was decried as a loser, along with Tesla, which had received a four hundred and sixty five million dollar loan from the DOE. Vio appealed to the White House for a lifeline and was rebuffed. The response was essentially, we did our part. You're on your own now, he recalls. Seven months after the defective Fisker batteries were discovered, at a decade after its founding, A one two three filed for bankruptcy. A one two three turned to Johnson Controls, a Milwaukee based auto supplier with its own battery business, to open the bidding for its assets, but Johnson Controls and its partners were outbid by Chinese auto parts giant Juan Chiang. Several congressional Republicans objected to the idea of a taxpayer funded tech startup going to a foreign company, but A one two three's creditors wanted whoever could offer the most money. The acquisition still had to be approved by the Committee on Foreign Investment in the United States or Cephius, an interagency group led by the Department of the Treasury that reviews mergers and acquisitions for national security concerns. As CEPHIUS analyzed the deal, Admiral Dennis Blair, a retired U. S. Navy commander and former Director of National Intelligence under Obama, reviewed the transaction. On December twentieth, twenty twelve, Blair published an op ed in Politico supporting Juan Chang's bid as long as Cepheus found no fault. He urged policymakers to recognize the importance of allowing the deal for both national security and international commerce. There are many sensitive technologies that the United States should protect, Blair wrote, the manufacturer of lithium ion batteries is not one of them. Almost all of A one two three's assets, patents, and technology breakthroughs went to China after the sale, as briefly did Ijaz. Uan Chiang's own battery business was rolled up under the A one two three name, and the news u A one two three pivoted from focusing on pure electric and hybrid vehicles to batteries for engines that shut off at stop lights to save gas. Ijaz was named CTO and visited Juan Chung's headquarters in hong Zhou. On the trip, his new boss asked Jaws to check out a company, an outside supplier of cathode material that was seeking to do business with Juan Chung. Wan Chung says it wanted Jas to kick the tires on the prospective supplier to protect A one two three's intellectual property and also its own commercial interests. The secret of A one two three's cathode powder was not only the list of ingredients, but also how they were processed. It required special mixing equipment and magnetic filters to remove contaminants. Using the wrong length of pipe or type of machinery could throw off the whole batch. As Jas toured the supplier's factory, he noticed the process looked familiar, very familiar. Jas finally came out an asp the new supplier if he was using A one to two three's blueprints. To his surprise, the man retrieved a three ring binder with his mugshot from when he'd been arrested for IP theft. It had all been a big misunderstanding, he said. Intellectual property rights were loosely enforced in China at the time, and some judges were inclined to favor Chinese companies. The government's tenure plan to dominate the EV industry was in full swing. To start a battery company was to heed a collectivist call for a new national industry. Instead of punishing him, the Chinese government had provided subsidies to help him build his own business. The man began thanking Ijaz profusely. A one two three had changed his life, he said. When the visit was over, the owner took Ijaws out to his car and popped the trunk. He wanted to give him a gift as a token of thanks. It was bedsheets, the weirdest damn gift with horses on them. IJA's recalls I found out before he had come into A one two threeis Z he had a bedsheet factory. Ijaz stayed at A one two three for another year before leaving in twenty fourteen to work on Apple's secretive electric car project. Six years later, while in pandemic lockdown with his wife and grown kids in Los Alto's California, he began thinking about the three barriers to mass EV adoption. Until batteries could go further on a single charge range, anxiety would persist lithium ion batteries with nickel and them were more prone to catch fire, and America still didn't have a homegrown battery giant to compete with CATL, LG and Panasonic. If Ajaz could hatch a company that focused on LFP batteries cheaper and more stable than the nickel based ones dominant in the West, he could solve all three problems. By July twenty twenty, Ijaz left Apple and founded Our Next Energy, dubbed one for short. In many ways, he was picking up where A one two three left off. He moved back to Michigan, his start up office in the suburbs of Detroit, standing only a mile from A One to two three's current US engineering center. Almost a sixth of One's three hundred and fifteen person staff are A one two three alumni, including the chief operating officer. Ijaz's goal at the moment trying to improve LFP batteries range, something CAATL and BYD have been trying to crack. With legions of battery scientists and a decade of high volume manufacturing experience. So far, One has designed a streamlined battery pack that has the same size and energy specs as a nickel cobalt battery without the higher price and spotty human rights record. A more ambitious product called Gemini aims to deliver seven hundred miles of range to passenger cars, double the three hundred and fifty miles a long range Tesla model S offers. The early excitement about One is eerily familiar. It's raised three hundred and fifty five million dollars from investors, including Bill Gates's breakthroth Through Energy Ventures, bmw I Ventures, and Franklin Templeton, with evaluation of one point two billion dollars. Last fall, the state of Michigan ordered it at least two hundred and twenty million dollars in cash and tax breaks to build a one point six billion dollar cell manufacturing plant in the Detroit suburbs, where it plans to hire twenty one hundred people after it starts production in twenty twenty four. Former House Speaker Nancy Pelosi and Michigan's Democratic Governor Gretchen Whitmer have visited One's offices, as have members of the state's congressional delegation. With the Inflation Reduction Act, the federal government will pay One as much as sixty five hundred dollars for every one hundred and five kilawat hour battery pack the start up produces. In Michigan, the IRA is also creating incentives for car companies to do business with one thanks to rules West Virginia's Democratic Senator Joe Manchin inserted their acquire batteries to be made in North America with raw materials sourced domestically or from US allies to qualify for consumer EV credits. If there was ever a poster child for what Biden is trying to achieve with his Climate bill, one is it. After more than three decades in the industry, Ijaz, now fifty six, finally seems to have momentum on his side. Detroit and the rest of the global auto industry are all in on EV's, even if it's out of desperation. Western carmakers who dragged their feet are now losing share in China. Tesla proved Americans will buy EV's, and FOURD and GM have introduced hit products such as the Mustang mach E and Cadillac Lyric. Electric and plug in hybrid vehicles are forecast to make up about half of US new car sales by the end of the decade, compared with a share in the high single digits last year, But there are no guarantees that a gambit to spur an American battery champion will work. One's success may depend as much on its founder's tenacity as on America's overcoming its tendency to get in its own way. In the risky, low margin battery business, a single manufacturing defect, as Jaws experienced with a one two three can be lethal for a startup. CAATL, LG, and the world's other battery giants have major backing in the form of government subsidies or a gigantic conglomerate behind them. That's why LG was able to absorb a one point nine billion dollar hit for the Chevy Bolt battery recall in twenty twenty one and keep on ticking, even though the national security threats posed by China seem like one of the few areas of bipartisan agreement left in Washington these days. The idea of government taking a more muscular role in commercializing technology doesn't sit well with many Americans. In a replay of twenty twelve, Republicans in Congress are already taking aim at Biden's clean energy agenda as a waste of taxpayer money and a misguided attempt to pick winners and losers. They argue that the price tag for the IRA seems grossly underestimated, and they're scrutinizing Energy Department loan recipients to find the next Celindra. And for all the fury over China's brazen plunder of American intellectual property, the consequences of our unchecked outsourcing don't attract nearly as much political scrutiny. All these years later, It's still unclear who had access to the spoils of the A one two three IP or how widely they were shared, but there are still traces of A one two three's technology inside China's vast battery supply chain. One of the top suppliers of LFP cathode material in the world today, Hubei one Run New Energy Technology, started out as a supplier to A one two three in chang Xhou. Beck, the A one two three material scientist who worked closely with the company to develop battery grade iron phosphate material, says Juan Run was an honorable partner. After the bankruptcy, though the Chinese upstart was freed of any non disclosure agreements. Meanwhile, CTL and BYD, which haven't been accused of infringement by A D S one three, invested billions in capital to create the scale and cost efficiencies they have today. CATL and BYD declined to comment. Wan Chung says its operations of A one two three have been run in a manner not detrimental or damaging to the US battery industry nor the Sino US relationship. The US has long thought of itself as an innovation machine powered by the virtues of shareholder capitalism. We stick with this belief, largely oblivious to emerging evidence that while free markets beat planned economies, there may be room for a modification that is even better, wrote Andy Grove, legendary CEO and co founder of Intel, in this magazine thirteen years ago. If the US neglects to alter its industrial policy, he warned at the time, it will fall behind in every technological revolution. If what I'm suggesting sounds protectionist, he wrote, so be it. Ijaz has been watching the repercussions of this inaction on for years, ever since his first trip to China in two thousand and seven to show off his plug in hybrid Ford edge. Back then it was a new battery technology never seen before in China. Now China controls the means to make it. Even if the US does stay the course, Ijaz concedes, it won't be enough to compete on EV's. Chinese companies, already pushing into new markets in Europe and South America can lower costs by achieving scale faster than anyone. Even if Ford, his former employer, wanted to tap a homegrown supplier such as One instead of a Chinese behemoth like CATL, It's simply not realistic yet. The car company, just like most major car companies, is under the gun to pump out EV's, and it's already desperately behind. It doesn't have the luxury of waiting for Ijaz's young startup to get its footing. The amount of money that we're putting in is better than I've ever seen before, and the IRA is a better step than I've seen before. With the right money and the right decision, we can move the needle here, Ijaz says, But boy, is it gonna take a lot more than what we're doing with Danny Lee and chun Ying Jiang