How has CATL stirred the global EV battery industry?
The rising star of the global EV battery industry has stirred rivalry in China and triggered worldwide cooperation. But how did CATL do this in 10 years?
Zeng Yuqun founded ATL in 1999 in Hong Kong, producing batteries for electronic devices. ATL developed its lithium polymer battery on top of a patent they acquired from a US company. It quickly became the dominant player in local battery sales by pushing South Korean companies behind. By 2001, ATL was shipping over one million batteries for consumer electronics. By 2011, it was time to enter a new chapter in battery technology, and Zen launched CATL into the electric vehicle (EV) battery business. In a few years, CATL surpassed the Japanese and S.Korean giants in EV battery production, leaving almost no choice for the European and the US automakers to use their batteries in their electrification journey.
As manufacturing in Tesla’s Shanghai plant began in 2019, CATL’s penetration of production lines reached a new level. While supplying local EV makers such as Nio and Xpeng and building solid business ties with Tesla, CATL received a lithium-ion battery cell testing qualification certificate from Volkswagen in June 2021. A month later, CATL and Ford announced global strategic cooperation to bolster EV adaption.
CATL ranked 80th in the world’s most valuable company as of December 2022, reaching almost a $140bn market cap. But as the giant continued to grow, it has also triggered a worldwide rivalry in the EV battery market. The impressive success of CATL stems from the aim of getting free of Japanese and Korean manufacturers, says APAC expert Baran Gumusel:
“The significant development of CATL is related to human factors and government support. BMW was the first major OEM partner of CATL. The pilot project provided access to information even though it was not profitable. Thus, CATL gained technical know-how by producing without profit or facing losses. The chance of partnering with an automotive giant was the critical factor. Secondly, CATL has many ex-pats under its roof. Since its establishment in 2011, the strategic partnerships and ex-pats provided the expertise CATL has today.”
Spreading the supply chain
Providing mass production lines with thousands of EV batteries inevitably requires a lot of investment. After solidifying its production base in China, CATL focused on the main overseas target, Europe. While having provided advanced manufacturing to China for decades, Germany needed the means to equip its EVs with batteries on a large scale. CATL was eager to help:
- CATL established its subsidiary in Munich in 2014. In 2018, CATL announced the plan to build its first battery plant in Erfurt, to become operative in 2022.
- In August 2022, CATL announced a $7.34bn investment to build a 100 GWh battery plant in Debrecen, Hungary. In September, a plan for a third European plant was announced to become operative in five years.
CATL’s European strategy is to keep proximity to its customer’s production facilities, including Mercedes-Benz, BMW, Stellantis and Volkswagen.
Competition rises in China
In the first half of 2022, CATL’s revenue jumped 82%, while the company also announced the plan of the first gigafactory in North America.
But following the price increase of CATL in March due to rising material costs, many EV makers started to look for alternatives. In September, Xpeng announced that CATL is no longer its primary battery provider. XPeng, among the top three customers of CATL as of this year, has chosen the strategy to work with several smaller producers.
One of these companies, Sunwoda, is developing a fast-charging battery for Xpeng. The other two suppliers are EVE and CALB. The former announced the plan to establish a cylindrical battery production facility in Malaysia this month. The latter has seven production sites in China and plans to open two more in Guangdong province. CALB expects to reach 200 GWh production capacity by the end of 2022. The company also plans to build a factory in Europe.
The rivalry between CATL and the state-owned CALB continues in the court too, as CATL sued CALB over intellectual property infringement and demanded 510 million yuan (US$76.5 million), according to South China Morning Post.
The West is awakening
Becoming dependent on foreign suppliers differs from the business model western automakers can accept. The European Battery Alliance (EBA) wants to produce one-third of all global batteries in Europe by 2030. Major moves have been taken under this strategy:
- Volkswagen and Bosch announced a partnership in January to provide industrial-scale solutions for battery manufacturing in Europe.
- Mercedes-Benz and Volkswagen announced cooperation with the Canadian government in August, supplying EV battery minerals from Canada.
Moreover, Vietnamese EV maker VinFast announced a $4bn investment this year to build an EV and battery manufacturing plant in North Carolina, expected to start production in 2024.
Another agreement to supply the US market was signed between Toyota and Panasonic in the summer to build EV batteries in the US, with the minerals provided by Australian lithium producer Ioneer.
Fierce competition to come
According to China Automotive Battery Innovation Alliance figures from 2021, CATL has a market share of 47.45% in the Chinese EV battery market. In contrast, CALB holds 7% and Sunwoda only 2.5%. Globally, CATL grabbed a market share of 34.8% in the first half of 2022, according to SNE Research. But as the rivalry continues to grow in the lucrative battery market, there’s much to come. CATL will only stir the competition in the market in 2023 when it announces where to build the $5 bn gigafactory in North America.
Main image: Shutterstock
The in-article photo shows CATL's Sichuan plant, courtesy of Prnewswire.