CATL aims to plug into the global mar­ket

Bat­tery maker based in Fu­jian sets sights on keep­ing up with surge in elec­tric car sales

China Daily (Hong Kong) - - BUSINESS - By REUTERS in Ningde, Fu­jian

A dusty vil­lage on the out­skirts of Ningde, a third-tier city in China’s south­east, seems an un­likely place for the head­quar­ters of a po­ten­tial global leader in fu­ture auto mo­tive tech­nol­ogy.

Yet China’s ma­jor in­dus­trial pol­icy de­ci­sions — move up the value chain, clean up pol­luted ur­ban skies, and shift to plug-in cars — have Con­tem­po­rary Am­perex Tech­nol­ogy Ltd (CATL) poised to go from home­town hero to na­tional cham­pion, and be­yond.

China’s an­swer to Ja­pan’s Pana­sonic Corp and South Korea’s LG Chem Ltd has tripled its pro­duc­tion ca­pac­ity for lithium-ion car bat­ter­ies in the past year to keep up with a surge in China’s sales of elec­tric cars.

Af­ter a se­cond ma­jor fund­ing round com­pleted in Oc­to­ber, the com­pany’s value quadru­pled to 80 bil­lion yuan ($11.5 bil­lion), CEO Huang Shilin said last week.

CATL, which hopes to list on Bei­jing’s over-the-counter ex­change as part of plans to raise at least an­other 30 bil­lion yuan by 2020, could be a dom­i­nant force glob­ally.

It has al­ready over­taken LG Chem in lithium-ion car bat­tery pro­duc­tion, and is chas­ing down Pana­sonic and War­ren Buf­fett-backed BYD Co Ltd.

CATL plans to grow its bat­tery ca­pac­ity six­fold by 2020 to 50 gi­gawatt hours, which could put it ahead of Tesla Mo­tor

The mar­ket en­vi­ron­ment and tech­nol­ogy changes so fast that if we don’t fol­low the trend we could die in three months.” Huang Shilin, CEO of Con­tem­po­rary Am­perex Tech­nol­ogy Ltd

Inc’s gi­gafac­tory in Ne­vada.

“We hope by 2020 we can achieve per­for­mance and price that lead the world,” Huang said.

The com­pany, founded just five years ago, is al­ready push­ing be­yond China’s bor­ders, with of­fices in Swe­den, Ger­many and France and plans to build a fac­tory in Europe. Com­pany rep­re­sen­ta­tives say that be­cause of non-dis­clo­sure agree­ments they can only list BMW as a cus­tomer for now.

De­spite the am­bi­tious ex­pan­sion, the emerg­ing seg­ment’s de­pen­dence on govern­ment pol­icy and rapidly evolv­ing tech­nol­ogy is not with­out risk.

A123, a US au­to­mo­tive bat­tery maker, went from IPO to bust in just three years as bat­tery costs re­mained stub­bornly high and or­ders dried up.

“Peo­ple think we’re a big suc­cess­ful com­pany, but we think we’re in jeop­ardy ev­ery day,” mar­ket­ing di­rec­tor Neill Yang said. “The mar­ket en­vi­ron­ment and tech­nol­ogy changes so fast that if we don’t fol­low the trend we could die in three months.”

To be­come a Chi­nese cham­pion, a bat­tery maker must first shed any for­eign in­vest­ment to be el­i­gi­ble for sub­si­dies and other pol­icy sup­port, peo­ple in the in­dus­try say.

Be­fore he set up CATL, Robin Zeng had started Am­perex Tech­nol­ogy Ltd (ATL), a com­pany now ma­jor­ity-owned by Ja­pan’s TDK.

ATL ini­tially had a 15 per- cent stake in CATL, but liq­ui­dated that hold­ing last year, Yang said, when elec­tric ve­hi­cle sales first started to take off. He de­clined to elab­o­rate on the cir­cum­stances of that di­vest­ment.

TDK sep­a­rated from CATL to fo­cus on bat­ter­ies for mo­bile con­sumer elec­tron­ics, but still col­lects roy­al­ties on some in­tel­lec­tual prop­erty used by CATL, a spokesman for the Ja­panese com­pany said.

“The rea­son is strate­gic and con­fi­den­tial. ATL still keeps a close re­la­tion­ship with CATL,” said a per­son fa­mil­iar with the sit­u­a­tion, who was not au­tho­rized to speak to the me­dia.

ATL and CATL still share a Ningde cam­pus, al­though the front gate and main of­fice bear only the ATL name.

Zeng, a Ningde lo­cal with a doc­tor­ate in chem­istry, ap­pears to be the re­main­ing link be­tween the two com­pa­nies he founded. He de­clined an in­ter­view re­quest.

While govern­ment sup­port for elec­tric cars has driven de­mand for com­po­nents such as bat­ter­ies, Bei­jing is also rolling out other poli­cies that could ben­e­fit lead­ing pro­duc­ers like CATL, by forc­ing smaller firms to con­sol­i­date or go out of busi­ness.

The Min­istry of In­dus­try and In­for­ma­tion Tech­nol­ogy said last month it is con­sid­er­ing a rule that would in­crease min­i­mum pro­duc­tion re­quire­ments for bat­tery mak­ers by around 40 times to 8 gi­gawatt hours.

Only BYD and CATL are roughly in line with that min­i­mum, though Chi­nese me­dia re­ports sug­gest He­fei Guox­uan High-Tech Power En­ergy Co Ltd and Tian­jin Lishen Bat­tery Joint-Stock Co Ltd may be close to or above that level by next year.

Yang said sub­sidy sup­port for bat­ter­ies is fairly mod­est com­pared to those for pro­duc­ing elec­tric ve­hi­cles, which to­taled $4.5 bil­lion last year alone.

CATL has been nom­i­nated as one of three bat­tery mak­ers — with Guox­uan and Lishen — for in­cen­tives un­der China’s 13th Five-Year Plan (2016-20), promis­ing around $15 mil­lion if it can meet tar­gets, Yang said. He noted, though, that a sin­gle pro­duc­tion line costs $40 mil­lion.

Among na­tional 2020 tar­gets: to halve bat­tery costs to be­low 1 yuan (14 cents) per kilo­watt hour, and im­prove en­ergy den­sity by two-thirds.

To get there, CATL is ramp­ing up spend­ing on re­search and de­vel­op­ment, where it em­ploys more than 1,000 peo­ple with ad­vanced sci­ence de­grees.

“The strength of their R&D in­vest­ment is quite large,” said Fu Yuwu, chief of the So­ci­ety of Au­to­mo­tive En­gi­neers of China, adding he hopes the com­pany can be­come a global leader.

“They have such large scale and the sup­port of China’s huge mar­ket, all the more rea­son they should do a good job of in­ter­na­tion­al­iz­ing,” he said.

LONG WEI / FOR CHINA DAILY BAI TIEJUN / XIN­HUA

Left: A BMW i8 plug-in hy­brid sports car is on dis­play at an auto show for new en­ergy ve­hi­cles in Hangzhou, Zhe­jiang prov­ince, in Septem­ber. Con­tem­po­rary Am­perex Tech­nol­ogy Ltd based in Fu­jian prov­ince is a bat­tery sup­plier for BMW. Right: A tech­ni­cian as­sem­bles lithium-ion car bat­ter­ies at a fac­tory in Liaon­ing prov­ince.

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