Maximum charge: China's CATL has become a global player
CATL has become the largest manufacturer of lithium-ion batteries in less than a decade. How did the small-town ship engineer's business become a global player?
Maximum charge: China's CATL has become a global player
New Sustainable Economics

Maximum charge: China's CATL has become a global player

Photo: AFP/Xinhua/Lin Shanchuan
Gergely Salát 03/10/2023 05:00

CATL has become the largest manufacturer of lithium-ion batteries in less than a decade. How did the small-town ship engineer's business become a global player?

CATL's predecessor was founded in 1999 by Zeng Yuqun, better known abroad as Robin Zeng, who is now the third richest man in China and the 38th richest in the world, according to Forbes. Originally from Fujian province, Zeng was well aware of the main trends of the time and, at the age of thirty-one, his company started producing batteries for the then fashionable portable devices - MP3 players, laptops - under US licences.

Two years after its launch, ATL (Amperex Technology Limited) was already producing one million batteries a year and had become known in the industry for its reliability and technical innovation. This led to the company's acquisition by TDK of Japan in 2005, which gave the company a taste of Japanese discipline and technology. Zeng stayed on as a manager at ATL and soon expanded the company's activities to include the production of smartphone batteries, making it a supplier to Samsung and Apple, among others.

The Age of Ningde

When air quality in Chinese cities became a major talking point during the 2008 Beijing Olympics, Zeng and his fellow executives realised that e-mobility was the future. And with so many e-cars, we would need so many batteries. At the time, they were quite underdeveloped, with early e-vehicles (EVs) needing many hours of charging to cover a few dozen kilometres. So ATL set up a research and development division, which invested millions of dollars to perfect the technology.

A new era was ushered in when, in 2009, China made the deployment of e-vehicles a government priority. This created a huge opportunity for Zeng, who in 2012 spun off ATL's car battery division into a new company, CATL (Contemporary Amperex Technology), in which TDK held a fifteen per cent stake for a few more years. The new company's Chinese name became Ningde Shidai, meaning "the era of Ningde" - Ningde is Zeng's hometown, and the company's headquarters are still located here.

Partner of giants

In the 2010s, China was hit by EV fever. This was fuelled by huge government subsidies, which could be up to a third of the price of a new e-car. EV companies were given soft loans, cheap land and government contracts, while the authorities limited the number of petrol cars that could be put on the market to ensure that everyone bought an e-car. No wonder that while in 2011, about 1,000 electric cars were sold in China, 6.5 million are expected to be sold in 2022 and between 8 and 10 million in 2023, more than the rest of the world combined.

The incredible growth rate has been cleverly exploited by CATL, which has a provision that only manufacturers - including foreign companies - that build Chinese batteries into their EVs could receive government subsidies. Thus, any company that wanted to make a dent in the Chinese market had to find a Chinese battery. As the other battery giant, BYD preferred to build its products into its own vehicles, CATL became a partner for BMW, Daimler, Hyundai, Honda, Tesla, Toyota, Volkswagen Volvo, and of course, a host of Chinese manufacturers. Thanks to these partnerships, CATL now accounts for about half of all Chinese production of vehicles and thirty-seven per cent of global production.

Its success is due to other factors besides state support. On the one hand, the main driver of CATL's development is research and development, with around 10,000 engineers now working in this field. On the other hand, they strive to control the entire production chain, from mine ownership to production and recycling. This gives them an advantageous bargaining position, which they exploit relentlessly. Thirdly, the company seeks long-term partnerships with the world's largest companies and, where necessary, employs expatriate professionals to ensure the best quality. Fourthly, economies of scale give it a significant advantage.

Flying pig

"Can a pig fly when the typhoon is over?" - Robin Zeng asked his colleagues in an internal email back in 2017. He was referring to a Chinese saying that pigs fly up during typhoons, meaning that it is easy to suddenly get high during big events. The question is whether we can stay up later. Zeng implied that the typhoon - with the support of the Chinese state - will pass sooner or later, so the company will have to learn to survive without it. And indeed, from 2019, the Chinese government has phased out subsidies. This has removed the upward pressure, and Chinese state actors have set up their own battery company, CALB, so CATL is now competing domestically with its own state.

CATL prepared for this eventuality, and their strategy was to make up for lost sales in China in foreign markets, and CATL embarked on a global expansion. It set up offices in its largest markets, acquired Western companies and opened its first foreign factory in the German province of Thuringia in early 2023.

A second will be built in Debrecen, Hungary, also primarily to serve German car manufacturers, and it was recently announced that Ford and CATL will jointly build a battery factory in Michigan. The latter, of course, has provoked Washington's displeasure, and in a sign of changing times, the Beijing government is also looking into the investment, fearing that the plant could allow the Americans to steal advanced Chinese technology...

CATL is therefore running ahead, and is particularly likely to succeed in Europe, where EU regulations mean that car manufacturers will need more and more batteries, while they are lagging behind in their production. CATL's dominance is unlikely to be threatened by market forces, the question is whether changes in domestic conditions and international political tensions will be able to hinder its further expansion.

The author is a senior researcher at the Hungarian Institute of Foreign Affairs and head of the Department of Chinese Studies at the Pázmány Péter Catholic University

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