IN AMERICA, IF you want to dominate an industry, you channel your inner Elon Musk and scream it out. But CATL, the Chinese company that makes batteries for some of Mr. Musk’s Tesla electric vehicles (VEs), is different. When your columnist first contacted him in 2017, the broom was swift. “We want to focus only on our products and are not accepting any interviews at this time.” Nowadays it is only slightly less blunt. “Unfortunately, we are sorry that it is difficult for us to organize [interviews] right now. ”The temptation is to give him a dose of his own medicine and ignore it.
And yet, in 2017, the company, founded just six years earlier as Contemporary Amperex Technology Ltd, grew from being the world’s third-largest battery maker to its largest. It has since reached a market value of 1.3 billion yuan ($ 200 billion), more than the second, third and fourth producers – South Korea. LG Chem, Japanese Panasonic and Chinese BYD-combined. In recent days, the rise in its stock price has made its 53-year-old founder, Zeng Yuqun, richer than Jack Ma, a much better-known Chinese tech baron. Considering Mr. Ma’s blackball by the Chinese government, the fact that Mr. Zeng kept his head down now seems shrewd.
The world will hear a lot more about it CATL in the future. Indeed, one of the justifications for its high valuation is that it is poised to expand beyond mainland China, the largest VE market where it represents about half of lithium-ion battery sales, to Europe, Indonesia and perhaps even America. Its profitability far exceeds that of its global peers. Its technology has become at least as good as theirs, allowing it to surpass them and contribute significantly to a global clean energy revolution. And yet this is also what Sam Jaffe from Cairn TIME, a battery consulting company, calls the “dream child” of the Chinese government-industrial complex. This makes it a potential flashpoint in the scorching world of technological geopolitics.
CATLThe low profile begins with its provenance. Mr. Zeng created it in the backwaters of Ningde, a subtropical city better known for tea than technology, in Fujian Province where he grew up in a hillside village. But for a long time he had great ambitions. In 1999 he founded Amperex Technology Ltd (ATL), a manufacturer of lithium-ion batteries for portable devices, which it sold to TDK, a Japanese firm, in 2005. One of its big customers was Apple, maker of the iPhone.
Seeing the potential of VE batteries, which China wanted to transform into a strategic industry, Zeng led a split of ATL in 2011, severing ties with its Japanese parent company, perhaps to please Chinese authorities, says Mark Newman, a battery executive who previously covered the company as an investment analyst. When listed in 2018, CATL had a low percentage of direct and indirect state ownership. More importantly, the government had its back. For years, China has used subsidies to favor domestically produced batteries for cars and electric buses, thereby sidelining South Korean competitors such as LG Chem and Samsung IDS. CATL, one of the two leading Chinese producers, benefited the most. The other, BYD, made cars as well as batteries. For this reason, many rival car manufacturers in China, including foreigners such as Tesla and Bmw– gave it a wide seat and turned to Mr. Zeng instead.
It is, however, unfair to attribute CATLsuccess purely in economic nationalism. According to Bloomberg’s James FrithNAVE, a consulting firm, when CATL faced with the removal of subsidies in 2019, it quickly overtook its South Korean rivals to produce the latest high-nickel batteries, which outlast the cheaper lithium-iron-phosphate ones that were the food base of China. Chinese automakers are more daring than their Western counterparts (aside from Tesla) in embracing innovative chemistry, he adds, resulting in CATL more freedom to experiment. It also gets more for its investment in China than its competitors elsewhere and has a cheaper workforce, making its operating margins, just under 15%, the best in the industry. Strong earnings provide more cash to invest in the expansion. Neil Beveridge of Bernstein, an investment firm, expects its capacity to quadruple to roughly 500 gigawatt hours (GWh) battery cells per year by 2025. This is a similar amount to what is promised by all the gigafactories around the world today. Only Mr. Musk sets more wacky goals.
Zeng and the art of maintaining market share
The most of CATLThe expansion will come to China, where it has growing export activity. But by the end of this year, it is also expected to start production at its first offshore plant, with a capacity of 14GWh in Erfurt, Germany, from where it will supply automakers like Bmw, Volkswagen and Daimler. His move overseas appears to be driven by a desire to retain his market leadership as a VE sales outside China are accelerating. Its South Korean and Japanese rivals have a greater global presence. Simon Moores, a battery consultant, believes a next step will be in America.
Yet energy, even clean things, is a dirty business, clouded by geopolitical rivalries and economic chauvinism. There are already fears in the West that CATL ‘China’s profitability will allow it to offer cut-price products overseas, reopening the wounds caused when China’s subsidized solar panels swept the world in the 2010s. -conductors, are increasingly mentioned in terms of the arms race. Europe and America offer big incentives for locally made batteries and adjacent supply chains to catch up with China. They see a strategic vulnerability in being too dependent on a Chinese supplier.
Therefore, CATL will have to be smart. It already has more alliances with global automakers than any other battery company; Jointly building factories close to their operations around the world would earn it political support. He will have to counter geopolitical paranoia by emphasizing the importance of cheap batteries, both for VEs and clean electricity networks, in the fight against climate change. More transparency wouldn’t hurt either. It’s a fine line between being shy and acting like he’s got something to hide. ■
This article appeared in the Business section of the print edition under the headline “Superpower Surge”