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Oct 06, 2023

A US Startup’s Failure Paved the Way for China’s EV Battery Dominance

The fall of startup A123 still haunts the US decades later—and reveals

The fall of startup A123 still haunts the US decades later—and reveals everything that's wrong with this country's approach to innovation.

Gabrielle Coppola

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On a 3-mile stretch of farmland in southwest Michigan, Ford Motor Co. 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 Co. Ltd., 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 $3.5 billion investment in a 2.5-million-square-foot factory, thousands of new jobs and the ability to produce enough batteries annually to power 400,000 electric vehicles when the plant opens in 2026. 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-1990s, a compound called lithium iron phosphate (LFP), the primary battery chemistry now used by CATL 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 startup A123 Systems LLC in Watertown, Massachusetts. In 2009, A123 was awarded hundreds of millions of dollars by the Barack Obama administration with the great hope that it would help kick-start 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 startup.