China’s CATL is innovating to stay ahead of battery makers’ competitors

The world’s largest electric vehicle battery maker introduced a new technology last month: a cell that runs on sodium instead of lithium, a cheap and abundant material that can be extracted from salt.

“Innovation is in the genes of CATL,” said Robin Zeng, co-founder and CEO of the Chinese company, “as well as the driving force behind our rapid development.”

Based in the provincial city of Ningde, better known for its tea plantations, Contemporary Amperex Technology has grown in less than 10 years to become the world’s largest group of batteries by market share, supplying carmakers from Tesla and BMW of the local start-up company Nio.

The company’s shares rose 160% last year, raising its market value to nearly $ 186 billion – surpassing that of any carmaker Tesla and Toyota, and more than its leading competitors Panasonic and LG Chem combined.

Zeng, born in a poor village in 1968 during the chaos of the Cultural Revolution, now costs almost as much as Jack Ma, the founder of Chinese internet giant Alibaba. His company has nine people on Forbes’ list of global billionaires, the record for the world’s most publicly traded companies.

CATL escapes Beijing’s broader restriction against China’s technology sector as it overcomes a surge in growing domestic demand for electric cars – 271,000 new energy vehicles were delivered to the country in July, up 164 percent on an annual basis, the Chinese Automobile Manufacturers Association announced on Wednesday.

But the pace of its growth, aided by Beijing’s favorable business policies in its vast domestic market, will be difficult to maintain. Local contenders are stepping up their efforts to challenge his dominance. Meanwhile, his position in the United States and Europe, where he faces more competition from international rivals, is even less secure.

Wu Hui, director of research at China’s Yiwei Institute of Economics, a think tank focused on electric vehicles, said the decline in CATL’s market share was “inevitable.”

“CATL’s rapid growth cannot be separated from the vast space of the Chinese market and government support for local companies,” he said. “As politics weakens, competition is now being introduced in general [of China’s] mobile battery market. “

© Imaginechina Limited / Alamy

Gotian High-Tech, which secured a € 1.1 billion investment from Volkswagen last year, is building a cathode materials plant in Hefei as part of plans to expand lithium-ion battery production.

BYD, China’s second-largest electric vehicle battery maker by market share, secured a delivery deal last year with China’s Ford joint venture, the first with a global carmaker.

CATL dominates the global production of lithium-iron phosphate batteries, which use iron and phosphate rather than expensive metals such as nickel and cobalt. These batteries are used by Tesla in its short- and medium-range electric cars made in Shanghai, some of which are exported to Europe.

Bar chart for the amount of battery capacity GWh in newly sold passenger electric cars (Q1,2021), showing CATL charges ahead

The company has managed to reduce the cost of these batteries well below the level of $ 100 per kilowatt-hour, which makes the cost of electric vehicles competitive with gasoline cars, according to analysts, through innovations such as minimizing cell housings to reduce material costs.

Analysts from the Chinese investment bank CICC expect the production of CATL batteries to increase from 200 gigawatt hours this year to more than 600 GWh by 2025 – 30% of the world market.

“The automotive industry never likes to be tied to a single supplier, but battery cell production is large-scale, and CATL has scale and low cost,” said John Regnart, an analyst at the Center for Advanced Engines in the UK. “It would be foolish to say that any company will maintain its dominance – look at Blockbuster and Nokia – but in the next five to 10 years they will have a pretty good job in the battery market.”

© Martin Shut / dpa-Zentralbild via Alamy

However, CATL faces stiffer competition in the global market from established players LG Chem and Samsung SDI, according to Mark Newman, CEO of the battery. In May, LG Chem briefly overtook CATL as the world’s largest battery maker in terms of car batteries, according to SNE Research.

“Outside of China, it’s completely different – CATL is the challenge,” Newman said. “It will be more difficult for them because they do not have the large-scale advantage in Europe. Much of their large-scale production advantage is very local. The jury does not know how successful they can be. “

CATL announced that the first European battery plant in the German city of Arnstadt, which will supply car manufacturers in the region from Volkswagen to BMW, will be put into operation by the end of next year.

A line chart of $ 000 per tonne showing rising lithium prices has accelerated CATL's efforts to develop alternative technologies

Navigating the EU and US diplomatic frictions, as well as trying to maintain economic advantages over Japanese and South Korean competitors, are new challenges for the company as it enters Europe, according to Wu.

Innovation can be a key differentiator. Last year, CATL created a laboratory called on 21C to work on battery innovations, including solid state batteries and sodium ion batteries. He says there are more than 5,000 employees working in research and development.

The company said its young scientists are pioneers in working on sodium ion batteries, which could help reduce costs. Prices of lithium, which is in limited supply, have almost doubled in the last year.

While sodium has a lower energy density than lithium, it is much easier and cheaper to obtain. The company said it would start by combining sodium ion with lithium ion cells.

Billy Wu, an expert in electrochemical manufacturing at Imperial College London, believes that sodium ion batteries are likely to appear first in stationary energy storage. Although the use of vehicles “does not exceed the capabilities of sodium ions”, he said, “it is still a little far”.

And he believes that Chinese industry will maintain its advantage.

“Several years ago, many Chinese battery manufacturers lagged far behind Korean and Japanese in terms of innovation,” he said. “But they have an army of PhD students, and if you throw in enough money, they’ll eventually catch up.”


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