Seven years since foundation, Contemporary Amperex Technology, or CATL, has become one of China’s biggest battery producers, and now has aggressive plans for further expansion which would see it surpass Tesla’s giant “gigafactory” in the US.

The Financial Times reports that the rise of CATL is an important part of China’s strategy to seize global leadership of the battery industry in anticipation of a long-term shift from polluting internal combustion engines to electric vehicles (EVs).
Contemporary Amperex Technology, or CATL
China is the world’s biggest and fast-growing market for EVs and the batteries that power them, spurred by hefty government subsidies intended to encourage car manufacturers and consumers to embrace the technology. By 2020, China is aiming to have 5 million EVs on its roads, up from about 1m today.

The government’s motivation is threefold – reduce air pollution, curb dependency on oil imports and third, take the opportunity to challenge US, European and Japanese dominance of the car market.

Mark Newman, an analyst at Bernstein in Hong Kong, told the FT an “electric revolution” is poised to redistribute value away from traditional manufacturers in the $1.8tn global car market. “Battery systems and the battery supply chain, the key enabler of electrification, offer arguably the most dramatic growth,” he adds.

CATL is among the “clear scale leaders in batteries”, Newman says, alongside its Chinese rival BYD, South Korea’s LG Chem and Samsung SDI, and Panasonic of Japan, which is developing a $5bn production facility with Tesla in the US.

If all goes to plan, CATL will push in front of rivals as it expands manufacturing capacity at least fivefold from 7.5 gigawatt hours of battery cells last year. An extra 10GWh is under construction with a further 24GWh to follow. Together, these facilities would far outstrip the 35GWh gigafactory being opened in phases by Tesla and Panasonic in the Nevada desert. CATL plans to finance its expansion by selling 10 per cent of the company for Rmb13.12bn ($2.1bn) in an initial public offering this year, implying a valuation of about $20bn. Unlike BYD and Tesla, CATL does not make its own EVs.

Its biggest customer is the Chinese carmaker Geely. Several international marques, including BMW and Daimler of Germany, use CATL batteries in the Chinese market and the company is laying the foundations for international expansion. Last year, it invested €30m in a 22 per cent stake in Valmet Automotive, a Finnish engineering company that assembles cars for Mercedes-Benz. Analysts say the tie-up could give CATL an entry point to the European market and help it meet the exacting standards demanded by western manufacturers.

“Western manufacturers are focused on quality of batteries, not only in length of life but also safety,” says Moores. “Panasonic, LG and Samsung still lead on quality, but CATL will be the top volume producer and then, over time, their quality will increase. My expectation is that they will end up in western vehicles.”

The biggest challenge for EV battery manufacturers remains costs compared to conventional types.

 A battery pack with a 500km range costs about $14,000, compared with $5,000 for a petrol engine, even though that gap is being closed incrementally.

One key risk is the scarcity of raw materials used in making batteries, especially lithium, cobalt and nickel. Cobalt prices doubled last year in response to rising battery demand. CATL has said it is looking for potential investments in upstream mineral assets to secure supplies. A majority of the world’s cobalt comes from the Democratic Republic of Congo, where Chinese companies are prominent.