Bangkok Post

A pact between Tesla and a Chinese battery firm could prove lucrative.

CATL chairman Zeng Yuqun’s partnershi­p with Elon Musk could boost the Chinese company’s global market share at a time of falling battery sales. By Chunying Zhang, David Stringer and John Liu

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Tesla Inc needs to succeed in China if it wants to dominate the world of electric cars —especially in a post-virus world. To do that, Elon Musk is turning to a battery engineer who once helped Apple Inc extend the life of its MacBook laptops.

Zeng Yuqun, 52, built Contempora­ry Amperex Technology Co Ltd into China’s battery champion in less than a decade, creating the largest global producer of rechargeab­le cells for the plug-in vehicles considered to be the future of cars.

That effort has helped propel him from a modest hillside village and $30-a-month job with a state-run company to an estimated $17 billion fortune.

CATL’s products are in almost every major global auto brand, and starting this month they’ll also power electric vehicles manufactur­ed by Tesla at its new factory on the outskirts of Shanghai.

It’s an alliance with lucrative potential, combining the sector’s most-popular car — the Tesla Model 3 — with low-cost batteries in a market that last year bought more than three electric vehicles for every one sold in the United States, but faces an uncertain future as the pandemic rocks the global economy.

There’s already a developing partnershi­p between the two executives, according to Zeng.

The pair trade text messages to discuss prospectiv­e innovation­s in technology, their responses to the challenges wrought by the coronaviru­s and the Tesla chief’s primary obsession: cheaper batteries and vehicles.

“Elon talks about cost all day long, and I told him to be assured that I would have solutions,” Zeng said in an interview at CATL’s headquarte­rs in Ningde, where his 20th-floor office overlooks a fishing hub on China’s southeaste­rn coast now transforme­d by clusters of battery plants and laboratori­es. “We get along well. He’s a fun guy.”

CATL’s batteries can offer the Palo Alto, California-based company key advantages in China, particular­ly the potential to boost margins and lower sticker prices in a market on track to have 59 million EVs on the road by 2030, even after the impact of the virus.

Most importantl­y, Zeng is expected to supply Tesla with lithium-iron-phosphate (LFP) batteries that use a cheaper mix of raw materials and cost about 20% less to make than other common types of packs, according to BloombergN­EF.

Tesla and CATL — the latter confirmed in a February filing it would become a supplier to the carmaker — declined to disclose precise details, including the types of packs involved.

Working with a domestic supplier like CATL could further burnish Tesla’s relations with Chinese authoritie­s, which have been key to its local success. What’s more, Zeng serves on the Chinese People’s Political Consultati­ve Conference, the advisory body to top leadership. There, he’s put forward proposals to further focus on renewable energy.

For CATL, the alliance comes at a crucial time. Battery sales fell almost a third in the first five months of 2020, according to SNE Research, as car purchases plunged in China amid the pandemic, trade war and a scaling back of government subsidies.

Electric-car sales have declined about 38% from a year ago, according to the China Associatio­n of Automobile Manufactur­ers, and that risks exposing the country’s multibilli­on-dollar EV push as a bubble.

The battery producer’s domestic market share also ebbed as Tesla rolled out its first China-made Model 3s with batteries from LG Chem Ltd and Panasonic Corp. Starting next year, CATL should supply components for about half the Shanghai plant’s output, according to Sanford C. Bernstein.

Aligning with Tesla will boost domestic sales, though CATL also needs to secure additional clients to improve its prospects outside China, where LG Chem and Samsung SDI Co, among others, are positionin­g themselves at a rapid pace.

“CATL’s success is largely because of the strong demand in China,” BNEF analyst Daixin Li said. “In the future, as EV markets outside China are growing quickly, maintainin­g and even increasing market share in the global market will rely on how successful­ly it can secure demand outside China.”

The battery supplier has an eye on extending links with Tesla overseas, including to the automaker’s first European factory under constructi­on outside Berlin.

CATL, which also supplies Volkswagen AG and BMW AG, is building its own facility in central Germany and encouragin­g Chinabased suppliers to set up outposts there.

“We won’t exclude the possibilit­y to supply its Berlin Gigafactor­y,” Zeng said in the interview.

Tesla didn’t respond to requests for comment.

Zeng has delivered in the past for bluechip partners. His team helped BMW’s China joint venture develop its early battery-powered models, and CATL now has an 11-year supply contract with the German parent.

At CATL’s forerunner company, Zeng helped Apple deliver long-life batteries for the MacBook Air.

The supplier now sees an advantage in accelerati­ng research on lower battery costs to help electric-powered cars achieve price parity with, and subsequent­ly supplant, gas guzzlers.

“You have to be more innovative, more cost-efficient, with better performanc­e,” Zeng said. “That’s the only way to beat them.”

CATL is poised to commercial­ise new types of batteries made without cobalt, among the most-expensive raw materials. Beyond that, it wants to eliminate other costly metals, such as nickel and manganese.

According to Zeng, the supplier also is capable of producing a long-life battery that lasts 16 years and two million kilometers (1.24 million miles), and is intended for use in multiple vehicles and in energy storage. That’s a milestone others, including Tesla and General Motors Co, are chasing.

“What we do is try to bring innovation­s to the structure and chemical system, which will enable Tesla cars to drive a longer range at a better cost,” said Zeng. “That’s probably why Tesla likes us.”

‘‘ Elon talks about cost all day long, and I told him to be assured that I would have solutions. We get along well. He’s a fun guy. ZENG YUQUN Chairman of Contempora­ry Amperex Technology Co Ltd

 ?? PHOTOS BY BLOOMBERG ?? Contempora­ry Amperex Technology Co’s headquarte­rs building, right, and production facilities stand in this aerial photograph taken in Ningde, Fujian province.
PHOTOS BY BLOOMBERG Contempora­ry Amperex Technology Co’s headquarte­rs building, right, and production facilities stand in this aerial photograph taken in Ningde, Fujian province.
 ??  ?? Cross-sections of electric vehicle batteries are displayed in the welcome centre at the CATL headquarte­rs.
Cross-sections of electric vehicle batteries are displayed in the welcome centre at the CATL headquarte­rs.
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