Upstart EV battery company will help China become technology leader

EV battery
CATL EV battery factory located in a small southeast China city will have enough capacity to surpass Tesla output.  Bloomberg photo by Qilai Shen.

CATL EV battery factory located in a small southeast China city will have enough capacity to surpass Tesla output.  Bloomberg photo by Qilai Shen.

Contemporary Amperex Technology Ltd., leader in EV battery market in China

Contemporary Amperex Technology Ltd., or CATL, is a relatively new company in the EV battery industry and is heralded in a Bloomberg report as the next global powerhouse in the electric vehicle industry.

The company is planning to build a $1.3 billion factory which will have enough capacity to outproduce Tesla and far outpace EV battery suppliers to GM, Nissan and Audi.  Previous forecasts for 2020 call for 100 billion yuan in sales, a massive leap from 14.9 billion yuan in its last full-year earnings reported in 2016.

Already the largest seller to Chinese EV manufacturers, CATL is planning to use money raised from a pending IPO backed by Goldman Sachs to enter the European and US markets by building a battery-cell plant second only to Tesla’s Gigafactory in Nevada.

The new factory will make China the leader in EV battery technology and would quintuple CATL’s production and make it the world’s largest EV battery cell manufacturer.  The factory could be online by 2020.

“China, unabashedly, wants to be the Detroit of electric vehicles,” said Anthony Milewski, a managing director at Pala Investments Ltd., told Bloomberg. “There is no question in my mind that they are going to lead the world in capacity and, eventually, in the technology.”

CATL is also helping the Chinese government in its push for cleaner air and fewer imports.  According to Bloomberg, CATL is a manifestation of Beijing’s aggressive support for EVs.

In 2015, China became the world’s largest market for EVs and last year, sales of new-energy vehicles, which include battery-powered, plug-in hybrid and fuel-cell vehicles hit 777,000 units and could top 1 million this year.

Last year, the company spent €30 million to acquire 22 per cent of Finland’s Valmet Automotive Oy.  The company is a contract manufacturer for Mercedes-Benz and supplier to Porsche AG and Lamborghini.

CATL also has a partnership with BMW’s motorsport teams for races in Europe and Macau.

This year, Bloomberg reports CATL is posting ads for jobs in the Detroit area on LinkedIn.  The company says it is meeting with a number of US automakers to discuss partnerships.

“Their intentions are very clear,” Simon Moores, London-based managing director of battery sector consultant Benchmark Mineral Intelligence told Bloomberg. “To not just be China’s biggest battery producer but the world’s largest.”

Company founder Zeng Yuqun, 49, began the company in seven years ago after working his entire career on lithium-ion batteries for consumer electronics.

In 2011, Zeng made a gamble on the direction the Chinese government would take on EVs, starting up his battery company at a time when there were only 1,014 alternative-energy vehicles sold in China.

The decision proved correct as the Chinese government now provides generous incentives for buyers of non-gasoline vehicles.  As well, carmakers looking to qualify for government subsidies must use domestic batteries as foreign brands are ineligible.

CATL invested heavily in research last year, spending about 11 per cent of revenue in the first half of the year.  One-fifth of CATL’s 18,000 plus workforce is made up of R&D staff.  The company says it will use 4.2 billion yuan from the IPO to develop next-generation batteries.

“Their ambitions are 100 per cent global, and I believe they are going to be global competitors,” Milewski, who’s also chairman of Toronto-based Cobalt 27 Capital Corp told Reuters. “You have the Chinese government behind them, and you have some of the smartest people in the world working there.”

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