Canadian arrested for 'stealing secret' to speedy Tesla battery production

Special tech allegedly lets Musk's assembly lines produce 5-10 times more kit than rivals

Canadian battery exec Klaus Pflugbeil, a 58-year-old who lives in Ningbo, China, was arrested in Long Island yesterday for trying to sell undercover agents "battery assembly trade secrets" so crucial to Tesla's ops that it spent millions on them.

According to a court filing unsealed yesterday, Pflugbeil is now up on conspiracy charges along with his business partner and co-defendant, 47-year-old Chinese national Yilong Shao. According to the US Justice Department, Shao is still at large. Pflugbeil pitched up to sell the secrets to some Long Island-based businesspeople on Tuesday, but they were actually undercover agents, allege the feds.

Tesla is not directly named in the complaint – the docs identify the company as Victim Company-1, a "US-based leading manufacturer of battery-powered electric vehicles and battery energy systems" — but giveaway details in the complaint talk about its 2019 acquisition of a Canadian company that has expertise in "continuous motion assembly." Tesla bought Hibar Systems, whose pumps are used by battery manufacturers around the world for electrolyte filling, back in 2019. Hibar has multiple patents in this space, now belonging to Tesla Inc.

Both Pflugbeil and Shao used to work for Hibar, according to the complaint, which goes on to claim the pair operated a China-based business that sold tech used for the manufacture of batteries, including those used in electric vehicles. The complaint alleges that they built their company using Tesla's "sensitive and proprietary information, and marketed their business as a replacement for [Tesla]'s products."

The feds claim Pflugbeil was a Hibar employee from 1997 to 2009, and was an exec at their China outpost from 2007 to 2009. Shao, meanwhile, was a sales and service technician at Hibar from 2010 to 2020, or so the doc claims, with Pflugbeil allegedly having access to a server containing the trade secret, identified in the complaint as "continuous motion assembly."

The complaint states:

Continuous motion assembly, a proprietary technology developed over many years by [Hibar], and currently owned by [Tesla], allows manufacturers to run battery production lines at high speed, without pausing. With the Battery Assembly Trade Secret, a battery manufacturer can produce five to ten times more parts per minute than a competitor who does not have access to the Battery Assembly Trade Secret.

Las Vegas meeting

The next time Reg readers go to something as incredibly fun and exciting as a processing and packaging trade show in Las Vegas, be aware that undercover agents might be on the prowl. Indeed, they testify in the complaint to meeting Shao at a trade show in September 2023 where they "posed as businesspeople who were interested in purchasing a battery assembly line" in order to set it up in Long Island.

Pflugbeil was apparently lucky enough to have skipped the trade show, or so the complaint alleges, but agents claim that Shao made the introduction to Pflugbeil, who then is claimed to have sent them "proprietary information which must be kept confidential."

Pflugbeil's proposal, the feds allege [PDF], had "at least half a dozen drawings" containing "information related to the Battery Assembly Trade Secret."

The Canadian was cuffed yesterday, according to the complaint, a day after making a 15-hour flight from Hong Kong to JFK, New York, to meet with the undercover agents in Long Island.

As for the alleged stolen IP, the vital tech gave Tesla such an enormous advantage that the company had spent "millions of dollars on research and development for the Battery Assembly Trade Secret," the complaint claims. "Between 2004 and 2017 alone, [Tesla] spent approximately $13 million" on R&D for continuous motion assembly.

The complaint adds that "after acquiring" the Canadian manufacturer, Tesla stopped selling the pumps and battery assembly lines directly to customers and instead signed licensing agreements with a Japanese company authorizing it to make and sell the precision dispensing pumps. "Only the Licensee is permitted to legally make and sell the precision dispensing pumps. No one is authorized to sell the Battery Assembly Trade Secret."

If found guilty, Pflugbeil faces a maximum of 10 years in prison. ®

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