Another Chinese Investment: Michigan Rising Investigates MEDC Ties To Blacklisted Company Another Chinese Investment: Michigan Rising Investigates MEDC Ties To Blacklisted Company - Michigan Rising Action

Another Chinese Investment: Michigan Rising Investigates MEDC Ties To Blacklisted Company

Another Chinese Investment: Michigan Rising Investigates MEDC Ties To Blacklisted Company

October 25, 2024

About American Lidar

Michigan Rising Action’s Investigation

Timeline

Meetings

People

Details of Hesai’s plans for Michigan Revealed

What The State of Michigan Offered Hesai

About American Lidar 

On the other hand, Hesai has faced significant scrutiny over national security concerns. The U.S. Department of Defense (DOD) recently re-listed the company on a roster of entities with alleged ties to China’s military, which Hesai disputes. Despite these denials, reports suggest that Hesai’s lidar technology has been used in Chinese military vehicles. The dual-use nature of lidar, which can serve both commercial and military purposes, is at the heart of these concerns​ (Devdiscourse; Defense News). The inclusion of Hesai on this list could affect its business dealings with U.S. entities and has already prompted some lobbying firms to terminate relationships with the company​ (Defense News.)

The tension between Hesai’s innovative role in advancing lidar technology and the geopolitical concerns surrounding its ownership and affiliations continues to make the company a focus of both technological and political discussions in the U.S. and beyond.

Michigan Rising Action’s Investigation 

In May of 2024 The Wall Street Journal reported blacklisted Chinese companies are rebranding as U.S. entities to avoid sanctions imposed by the U.S. government. Among them was Hesai Group, which set up a subsidiary in Michigan called “American Lidar” in December 2023. However, after Hesai was added to the Defense Department’s list of Chinese military entities, the company paused plans for the Michigan facility. 

In recent years Michigan Economic Development Corporation has enjoyed unprecedented authority and resources to attract foreign manufacturing investors to Michigan, since late 2021 when the state Legislature expanded its scope in late 2021 through the creation of a virtually unrestricted incentives fund, colloquially called “SOAR.” These investments have been subjected to widespread public criticism in the press–in no small part because of their reliance on public officials signing nondisclosure agreements, and one investment, in a company called Gotion, has been investigated by Congress

As a result of The Wall Street Journal’s reporting, Michigan Rising Action (MRA) asked for all communications MEDC employees and officials may have had with Hesai or American Lidar leadership. After months of non-response from the state agency, which is required by law to acknowledge receipt of a FOIA inquiry within 5 business days, MRA sued MEDC for a response. The results can be found at this link and an analysis of the content follows. The results provide vivid insight into how Chinese companies leverage state-funded resources to circumvent U.S. barriers and access the domestic economy.

Timeline

The results span from April 2023 to early January 2024, and show the steady progression of Hesai’s efforts to establish a manufacturing facility, from initial discussions in April 2023 to planned meetings and site visits extending into early 2024. Discussions between Hesai and local officials appear to stop just before the U.S. Department of Defense announced in late January 2024 that Hesai had been added to the Department’s blacklist. 

 Here’s the timeline of key exchanges:

April 10, 2023:

  • Rob Gibson (Hesai) initiates communication with Genal Pratt (MEDC) regarding Hesai’s interest in establishing a manufacturing facility in Michigan. Discussions focus on site selection and planning for a visit by Hesai’s CEO​.

April 14, 2023:

  • Rob Gibson corresponds with Jordan Twardy (City of Dearborn) to discuss potential locations and site visits, including a timeline of 7-12 months for securing a location​.

April 19, 2023:

  • Rob Gibson contacts MEDC regarding additional referrals from the Mayor of Dearborn, asking for a decision on engaging with a local real estate agent, Bill Darwich​.

April 24, 2023:

  • Rob Gibson shares details of Hesai’s requirements for the manufacturing facility with Amanda Murray (Lakeshore Advantage) and others. He also coordinates meetings with key stakeholders for Hesai’s CEO’s visit to Michigan on May 2-3​.

April 25, 2023:

  • A Microsoft Teams check-in meeting is scheduled between Hesai, MEDC, and others to discuss the ongoing process and project timeline​.

April 27, 2023:

  • Magda Duck (MEDC) confirms that The Right Place and the Detroit Regional Partnership are working on finding suitable sites for Hesai’s manufacturing facility​.

December 21, 2023:

  • An email exchange introduces Rob Gibson to Vlatko Tomic-Bobas (MEDC) ahead of the CES 2024 event, where a meeting is planned at Hesai’s booth to discuss progress​).

January 3, 2024:

  • Final coordination for the CES 2024 booth meeting between Rob Gibson and Vlatko Tomic-Bobas​.

Meetings

The exchanges included in the document primarily center on Hesai’s intention to open a manufacturing facility in or near Dearborn, Mich. with some light customer service operations. However, among the emails, a few key meetings stand out: 

CES Booth Meeting:

  • A booth meeting at CES (Consumer Electronics Show) in 2024 was scheduled between Hesai representatives and Michigan Economic Development Corporation (MEDC) officials. The meeting involved Rob Gibson (Hesai) and Vlatko Tomic-Bobas (MEDC), with Magda Duck facilitating the introduction.

CEO Visit and Meetings (May 2023):

  • Rob Gibson mentioned that Hesai’s CEO, Dr. David Li, would be visiting Michigan on May 2-3, 2023. The purpose of the visit was to meet with key individuals involved in the site selection process. Hesai wanted to present options and potentially finalize a location for the manufacturing facility.

Site Selection Discussions:

  • Several emails discussed scheduling meetings to evaluate potential manufacturing sites. For example, Rob Gibson coordinated with Jordan Twardy (City of Dearborn) to set up meetings with the Mayor of Dearborn, MEDC, and other local officials to explore available properties in the region. There were also plans to meet with real estate and economic development representatives from cities like Taylor and Grand Rapids​.

MEDC Check-in Meeting:

  • A virtual meeting was scheduled for April 25, 2023, with representatives from MEDC and Hesai to discuss the project’s progress and logistics​.

People

Emails also include a short (14 individuals), but telling list of local, company and state officials who were regularly involved in Hesai’s plans to establish its U.S. manufacturing center in Michigan.

  1. Rob Gibson – Director of Automotive Business, Hesai Technology. He is leading the North American manufacturing project and coordinating with local authorities for site selection​.
  2. David Li – CEO of Hesai Technology. 
  3. Magda Duck – Greater Asia Investment Promotion Representative at the Michigan Economic Development Corporation (MEDC). She facilitates communication between Hesai and local authorities​.
  4. Vlatko Tomic-Bobas – Investment Director for the European region at the MEDC. He is involved in the CES booth discussions and the broader project coordination​.
  5. Brian Connors – A contact included in the emails, likely working with Due East Advisors on Hesai’s expansion.
  6. Courtney Henderson – Another individual copied in the emails, possibly part of the advisory or management team​.
  7. Genal Pratt – A representative from MEDC, involved in discussions about site selection and supporting Hesai’s manufacturing expansion in Michigan​.
  8. Rachel Donaldson – Part of MEDC, copied on communications regarding site selection and other logistical aspects​.
  9. Bill Darwich – A real estate agent from Century 21, referenced in an email about potential engagement for the project​.
  10. Amanda Murray – Vice President of Business Solutions at Lakeshore Advantage, involved in the discussion of potential sites for Hesai’s plant​.
  11. Jordan Twardy – Director of Economic Development, City of Dearborn, assisting Hesai in finding a location in the Dearborn area​.
  12. Jackie Lovejoy – President of Dearborn Area Chamber of Commerce, helping connect Hesai with potential partners and sites​.
  13. Paula Fisher – Economic and Community Development official from the City of Taylor, providing information about available properties​.
  14. Edward A. Wujek – Executive Vice President at CBRE, a real estate company, working on identifying potential sites for Hesai’s Michigan manufacturing facility​.
  15. Shiree Moreno – A contact from Dearborn, copied in discussions about identifying properties for the facility​.

Details of Hesai’s plans for Michigan Revealed

These email conversations contain extensive details about Hesai Technology’s plans to establish a manufacturing center in Michigan for lidar production. Here are the key points:

  1. Phases of Development: Hesai’s manufacturing facility will be developed in three phases:
    • Phase 1: Capacity for 500,000 lidar units per year.
    • Phase 2: Expanded capacity to 1 million units per year.
    • Phase 3: Final capacity expansion to 1.5 million units per year.
    • The total capital expenditure (CapEx) for this project is estimated at $72 million .
  2. Facility Requirements:
    • The facility needs a total of 625,000 square feet, including regular production areas, temperature and humidity-controlled zones, and cleanrooms. Specifically, an ISO Class 7 cleanroom of 108,000 square feet will be required .
    • Hesai is also looking for advanced infrastructure, such as pre-installed compressed air systems, fire prevention, office spaces, and parking for over 150 employees .
  3. Job Creation and Staffing:
    • The facility will create jobs across manufacturing, quality control, HR, logistics, and management. By the final phase, the facility is expected to employ 1,500 operators and 170 office staff .
  4. Engagement with Michigan Authorities:
    • The Michigan Economic Development Corporation (MEDC) is heavily involved in assisting Hesai in site selection. Rob Gibson, Director of Automotive Business at Hesai, has been coordinating with local government bodies such as the City of Dearborn and real estate consultants to find suitable locations
    • MEDC representatives actively acknowledge Hesai as an “FDI” (a term used to describe a foreign direct investment in which an ownership stake in a foreign company or project made by an investor, company, or government from another country) and refers to Hesai’s “two headquarters.” This is presumably a reference to Hesai’s Shanghai and Palo Alto offices, although the company claims in SEC filings to be a Cayman Islands-based holding company. 
    • Cities such as Dearborn and Taylor are being considered, with the MEDC facilitating communication and meetings between Hesai and local stakeholders .
  5. Timeline:
    • The company aims to have the manufacturing center operational by Q2 2025, with specific discussions and site tours happening in early 2024 .

What The State of Michigan Offered Hesai

MEDC offered and supplied a suite of services and incentives that  reflect a coordinated effort by multiple entities in Michigan to assist Hesai in its U.S. expansion, with a focus on site selection, property identification, and logistical support for its manufacturing project.  Hesai was offered several forms of assistance and services from various organizations and government entities as it pursued establishing a manufacturing facility in Michigan. According to MRA’s FOIA, the following support was provided:

  1. Site Selection Assistance:
    • The Michigan Economic Development Corporation (MEDC) played a central role in helping Hesai identify potential sites for its manufacturing facility. MEDC representatives, such as Genal Pratt and Rachel Donaldson, were involved in coordinating the site search and connecting Hesai with local partners​.
    • The City of Dearborn and The City of Taylor also offered site selection assistance. Representatives from these cities provided information about available properties and facilitated communication with real estate brokers.
    • Amanda Murray from Lakeshore Advantage provided Hesai with suggestions for locations and connected Hesai with brokers for specific properties​.
  2. Real Estate and Property Tours:
    • Real estate agents and brokers, including those from CBRE (Edward A. Wujek) and Ford Land CBRE Realty, were actively involved in identifying potential properties that could meet Hesai’s requirements. They offered to conduct tours and assist with property evaluations.
    • Farbman Group, a large property owner, was also mentioned as a potential partner for manufacturing and office space tours in Southeast Michigan​.
  3. Coordination with Economic Development Agencies:
    • Both The Right Place (an economic development organization in West Michigan) and the Detroit Regional Partnership confirmed their ability to support Hesai in finding suitable sites for the new manufacturing center.
    • The MEDC worked with these organizations to ensure that Hesai received comprehensive information about potential locations in both Southeast Michigan and the Grand Rapids/Lakeshore area​.
  4. Incentives and Benefits:
    • Although specific financial incentives or tax benefits are not explicitly mentioned in the extracted portions of the document, it is clear from the involvement of the MEDC and local governments that Hesai would be eligible for economic development benefits and support. Discussions of potential incentives and benefits were likely part of the ongoing engagement with MEDC​.

Follow up/Unanswered Questions

  • Communications between Hesai & MEDC drop off in late 2023. It is not clear what happened – was property purchased? Did construction/development begin? Did the federal government get involved 
  • On a related project, Gotion, Rep Elissa Slotkin alludes to a national security review for FDI projects that MEDC is involved in – what does that process include? Was Hesai subjected to it? What was the result? 

Bottom Line: Is MEDC (or agencies like it) properly equipped to handle large-scale investment projects from nations of concern?

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