Theft Of Tesla Battery Manufacturing Secrets Triggers Arrest

Two men with a business in China are charged by US authorities of stealing battery manufacturing tech from Tesla

US authorities have issued charges against a Canadian and a Chinese national, both living in Ningbo (China), over the alleged theft of battery manufacturing technology.

On Tuesday the US Department of Justice (DoJ) announced that two men have been charged with ‘conspiracy to send trade secrets belonging to a leading US-based electric vehicle company.

The US authorities did not name the company involved, but did reveal the identities of both men. Klaus Pflugbeil, 58, a Canadian national and resident of Ningbo, was arrested on Tuesday in Nassau County, New York.

Tesla's Gigafactory 3 in Shanghai. Image credit: Tesla
Tesla’s Gigafactory 3 in Shanghai. Image credit: Tesla

Manufacturing secrets

His co-defendant Yilong Shao, 47, of Ningbo, China, remains at large.

Pflugbeil had been arrested on Long Island, where he thought he was going to meet with businessmen to negotiate a sale price for the information, federal authorities said.

Instead, the businessmen were undercover federal agents.

Both men are charged with conspiracy to transmit trade secrets, which carries up to 10 years in prison if convicted.

“The defendants stand accused of stealing valuable proprietary technology from a US electric car manufacturer and using it to set up a rival business overseas,” said Assistant Attorney General Matthew G. Olsen of the Justice Department’s National Security Division.

“This blatant theft of advanced trade secrets relating to battery components and assembly blunts America’s technological edge, and the Justice Department will hold accountable those who would try to cheat our country of its economic potential and threaten our national security,” said Olsen.

The technology at issue involves high-speed battery assembly lines that use a proprietary technology owned by Tesla.

US federal prosecutors allege that Pflugbeil and Shao “are operators of a PRC-based business (Business-1) that sold technology used for the manufacture of batteries, including batteries used in electric vehicles. The defendants built Business-1 using Victim Company-1’s sensitive and proprietary information, and marketed their business as a replacement for Victim Company-1’s products.”

Tesla theft

The Associated Press named the US-based EV victim as Tesla.

Both men had worked at a Canadian company that developed the technology and was bought in 2019 by “a US-based leading manufacturer of battery-powered electric vehicles and battery energy systems,” authorities said in the complaint.

In 2019, Tesla had purchased Hibar Systems, a battery manufacturing company based in Richmond Hill, Ontario.

The US said the “proprietary technology provided a substantial competitive advantage to Victim Company-1 in the battery manufacturing process. Victim Company-1 spent at least $13 million developing the Battery Assembly Trade Secret.”

The US also said that “in or about July 2020, Pflugbeil and Shao opened Business-1, which has since expanded to locations in China, Canada, Germany, and Brazil. Business‑1 makes the same precision dispensing pumps and battery assembly lines that Victim Company-1 manufactured using its proprietary technology.”

A lawyer for Pflugbeil did not immediately return phone and email messages seeking comment Tuesday night, the Associated Press reported.

Tesla also did not immediately return an email message.