The Biden administration surprised lawmakers on Monday by reversing its decision to award a $200 million grant to a Chinese-affiliated energy technology company. In a call with congressional staff, officials from the Department of Energy (DOE) announced that Microvast, a Texas-based company specializing in electric vehicle battery technology, would no longer receive the lucrative grant that had been designated in the 2021 infrastructure package. Republican lawmakers had been urging the agency to withdraw the grant ever since the company’s Chinese connections came to light last year.

A DOE spokesperson stated, “As responsible stewards of American taxpayer dollars, the Department of Energy maintains a rigorous review process prior to the release of any awarded funds, and it is not uncommon for entities selected to participate in award negotiations under a DOE competitive funding opportunity to not ultimately receive an award.”

The spokesperson further confirmed that the DOE had chosen to cancel negotiations and not award funds to Microvast from this particular funding opportunity. However, no specific reasons were provided for this decision. During the grant awarding process, the DOE must assess various factors, including the applicant’s capability to fulfill the responsibilities outlined in the award, past performance, financial management, and accounting systems.

Applicants are required to share confidential information, which can influence the DOE’s final decision. In October, the DOE had announced that Microvast was among the 20 American companies chosen to receive a portion of the nearly $3 billion allocated through the infrastructure bill to enhance domestic battery manufacturing capabilities.

However, according to the company’s third-quarter financial disclosure filed with the Securities and Exchange Commission (SEC), 69% of Microvast’s revenue was generated in China, with only 3% coming from the United States. The filing also acknowledged the significant influence exerted by the Chinese government over its business activities, with the potential for intervention at any time and without notice.

Senator John Barrasso, the Ranking Member of the Senate Energy and Natural Resources Committee, stated, “The Department of Energy has finally retreated from sending U.S. taxpayer dollars to Microvast, an electric vehicle battery company with close ties to Communist China. I’m stunned it took the Biden Administration this long to admit the obvious: no company beholden to Communist China should be considered for U.S. government grants or loans.”

It was previously reported that Microvast, which was incorporated in Texas, also established a subsidiary called Microvast Power Systems in Huzhou, China, in 2006. The company began manufacturing lithium battery components in Huzhou in 2010.

Microvast Power Systems signed an agreement in December 2018 with the local government entity Huzhou Saiyuan to issue convertible bonds. As part of the arrangement, Microvast pledged its 12.39% equity holding of Microvast Power Systems to Huzhou Saiyuan to facilitate the issuance of convertible bonds.

In a recent SEC filing, the company acknowledged that the Chinese government could intervene and exert substantial influence over its business activities at any time without notice. In April 2022, the SEC placed Microvast on a watchlist due to financial auditing issues related to its foreign ties, a move that could result in the company being delisted.

Despite this, the DOE had previously defended the grant, asserting that Microvast was an American company and that the funding would enable the company to establish manufacturing capabilities in the United States.