CATL’s $4.5 billion investment

Several media reported that Contemporary Amperex Technology Co. Limited (CATL), which is one of the largest lithium-ion battery manufacturers, invest in $4.5 billion to build or upgrade domestic factories. This is because the demand of 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 and this trend is boon for CATL as well. As we see the number of a January report by Chinese brokerage Shengang Securities, CATL’s battery capacity is projected to 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 and its businesses cover Research and Development, manufacturing and sales in battery systems for new energy vehicles as well as energy storage systems. The company was founded in 2011 and its head office is located in Ningde, Fujian Province, and operates manufacturing bases in Ningde, Qinghai and Liyang. The Chinese technology giant has three main R&D centers that are based in Ningde, Shanghai and Berlin. In fact, according to CATL’s company overview page, 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, but 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 in order to follow the current trend called “ESG investment”.

On one hand, many experts forecast that CATL and LG Energy Solutions will compete each other by increasing their capacity as we see above the example of CATL. 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 to this, Tesla, which is the most valuable Electric Vehicle manufacturer, announced that the company was planning to 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 because of three reasons. First, mass production enables manufacturing companies to purchase more raw material, which 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 have a partnership with? A company that has top market share or a company that you do not know at all. Companies should be going concern and 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 is expected to grow rapidly in the next decade, and we will be able to see some ups and downs for each company at the same time. However, it is clear that CATL is increasing its capacity now and the company tries to be the market leader for a long time.