BEIJING, October 21  (TMTPOST)— Contemporary Amperex Technology Co. Ltd. (CATL), the world’s top electric vehicle (EV) battery maker, may have more obstacles in its North American expansion.

Source: Visual China

CATL’s planned investment in battery plants in northern Mexico, South Carolina or Kentucky has slowed down because of new U.S. rules on sourcing battery materials, Reuters cited people with knowledge of the matter Friday. CATL management was reported to have decelerated the process of vetting sites in North America since late August, when a new law came into effect imposed tougher restrictions on EV battery sourcing.

Under the Inflation Reduction Act, EV companies must source at least 50% of their battery components by value in the United States or allied countries beginning in 2024, a percentage that increases to 80% after 2026. On top of that, 100% of battery components have to be made in North America by 2029.

The new rules would make costs of manufacturing batteries in the United States more than importing them from China even if CATL obtains subsidies to set up factories from the Biden administration, according to the sources.

CATL didn’t respond to the report. It is not clear how long the Chinese battery giant intends to delay in expansion in North America or if it can work out any solutions to cost increases there.

Report in March said CATL was considering investing $5 billion to set up facilities across North America to supply Tesla and other customers, and it was reported in May that the company weighed to split the investment between two locations in U.S. and Mexico, both near the border of Texas, which is the home of Tesla’s new factory. In early August, CATL was said to decide to hold off its announcement about building battery plants in North America until September or October, in light of the concern of triggering more tensions following the U.S. House Speaker Nancy Pelosi’s trip to Taiwan.

Despite the ongoing headwinds in North America, CATL seems shift its focus to Europe to increase production. The company announced in August to invest 7.34 billion euros to build a 100 GWh battery plant in Debrecen of east Hungary, its second battery plant in Europe. A month later, Matthias Zentgraf, CATL’s regional president in Europe, said his company is considering building the third facility to produce electric vehicle-used batteries in Europe, and has not made clear decision or movements on it yet.