CATL’s $4.5 billion investment
Several media reported that Contemporary Amperex Technology Co. Limited (CATL) will invest in $4.5 billion to build or upgrade domestic factories. CATL is one of the largest lithium-ion battery manufacturers in the world. Nowadays, demand for lithium-ion batteries, which are one of main parts in Electric Vehicles, soars up.
To combat climate change, not only countries but also cities set new policy to boost the sales of EVs. As a result, this trend is boon for CATL as well. In the January report by Chinese brokerage Shengang Securities, CATL’s battery capacity will be from 109 gigawatt hours in 2020 to 336 gigawatt hours in 2023. Of course, the number might be higher, due to the rapid increase of EV sales.
Who is CATL?
Contemporary Amperex Technology Co., Limited (CATL) is a global leader in the development and manufacturing of lithium-ion batteries. In addition, its businesses cover Research and Development, manufacturing and sales in battery systems for new energy vehicles as well as energy storage systems. The founders established the company in 2011 and its head office is in Ningde, Fujian Province.
CATL operates manufacturing bases in Ningde, Qinghai and Liyang. The Chinese technology giant has three main R&D centers. They are in Ningde, Shanghai and Berlin. In fact, according to its homepage, CATL was ranked as the top share in the consumption volume of EV battery products for the third consecutive years.
How is the lithium-ion battery market now?
Panasonic, which is the Japanese multinational electronics company, had top share of the lithium-ion battery market until 2018. However, CATL and LG Energy Solutions become top two companies in terms of market share now. As we see the other article, LG Chem decided to split its battery business to follow the current trend, “ESG investment”.
On one hand, many experts forecast that CATL and LG Energy Solutions will compete each other by increasing their capacity. On the other hand, Panasonic thinks of its competitive advantage as the safety and high density of batteries. It means that the Japanese electronics giant takes different actions from Korean or Chinese company. In addition, Tesla, which is the most valuable Electric Vehicle manufacturer, announced that it would produce its own battery cell in September 2020.
Which company and which region will lead the market?
As for manufacturing industry, mass production is one of key success factors.
First, mass production enables manufacturing companies to purchase more raw material. Thus, it leads to the increase of buying power and to cost reduction in the end.
Second, mass production gives companies opportunities for trial and error. The more opportunities companies have, the more they can innovate business processes, products and services.
Third, companies can earn high reputation from their stakeholders. If you were the CEO of a company that is involved with a supply chain, which company do you want to collaborate with? A company that has top market share or a company that you do not know at all. It is natural that they are worrying about their clients’ solvency. Of course, reputation is not the same as going concern but leads to a better relationship with other companies as well.
The lithium-ion battery market will grow rapidly in the next decade. Of course, there are some ups and downs for each company at the same time. However, it is clear that CATL is increasing its capacity now. The company tries to be the market leader for a long time.