Volkswagen, BMW, Honda, Tesla. You may know these names as carmakers. You may also know these companies as spearheading the electric car revolution.
But what you may not know is the company that powers their vehicles. Contemporary Amperex Technology Co Ltd, or CATL, is the world’s largest producer of electric vehicle batteries. The China-based behemoth accounted for almost half of EV batteries in China, and posted a profit of US$621 million in 2019, according to the company’s filings on the Shenzhen Stock Exchange.
Relatively obscure outside the EV industry, CATL rocketed from unknown startup in 2011 to today’s battery giant, fueled by the huge demand for EVs within China’s automotive market.
Straight Outta Ningde
Located in eastern Fujian province, Ningde is one of the many anonymous fishing villages dotting China’s coast. It’s known to Chinese gourmets for its yellow croaker – a specialty fishery from the area.
Recently however, Ningde has become famous for another, completely unrelated industry: EV batteries, thanks to CATL. The company was founded by Ningde local Zeng Yuqun, who holds a doctorate in chemistry. Prior to setting up CATL, Zeng started Amperex Technology Ltd (ATL), a company now majority-owned by Japan’s TDK. While at ATL, Zeng helped extend the life of Apple’s MacBook Air laptops, as well as supply batteries to various Chinese phone manufacturers.
He later decided to move into the EV battery sector – a fortuitously-timed move. In 2010, the Chinese government announced subsidies for electric passenger vehicles that previously were reserved for buses and cargo delivery vans. The move triggered a decade of sustained EV sales growth in China, while enticing many other companies to produce EV battery cells.
As cars with Chinese batteries qualified for subsidies, carmakers chose to partner with local suppliers over international ones like Panasonic or LG Chem. CATL landed its first big contract with BMW, who was developing a small electric crossover based on the X1 platform, marketed under the Zinoro brand.
Years later, Zeng would say that the deal’s real value was not in the revenue it generated, but in the rigorous technical standards BMW’s engineers helped CATL set for its battery-cell manufacturing. It also burnished CATL’s credentials and boosted its reputation as an EV battery supplier.
By 2017, CATL became the world’s largest battery-cell maker. Its Chinese name literally means “the age of Ningde”, and its time had come. Its main research and development centre is based in Ningde, with entire city blocks filled with laboratories and apartment towers for CATL staff, including the “Cloud-Capped Pavilion” neighborhood where Zeng and his wife have a top-floor home.
Despite this, concerns also loom over the horizon. The COVID-19 pandemic has hammered vehicle sales. But CATL’s worries started much earlier.
Its profit growth rate has been decreasing, from 1,609 percent in 2015 to 206 percent in 2016 to 36 percent in 2017. Favourable government policy is also ending for CATL, when the government stops providing subsidies by the end of 2020. This could mark the entry of foreign battery makers into the lucrative Chinese market.
Other Chinese battery makers are also revving up their production in anticipation of a post-pandemic EV vehicle sales boom. Warren Buffett-backed BYD is expanding its battery production line, while smaller manufacturers are looking to cater to carmakers that have to wait in line to sign deals with CATL.
Nevertheless, CATL’s lead in the area appears insurmountable – and it is taking steps to ensure it stays that way. CATL’s new goal is to becoming a battery technology leader for the global EV market.
The Million-Mile Battery
Lithium-ion is the backbone of modern battery technology. It is energy-dense, can deliver a steady current, and can be recharged quickly. Li-ion batteries are found in satellites, power backups, iPhones, and of course, electric vehicles.
However, Li-ion batteries degrade over time. The electrochemical processes that power the battery become less and less efficient the more it is recharged. For EVs, this is one of the main issues holding back consumer adoption of EVs. Replacing an EV battery pack is expensive – costing almost as much as buying an entirely new car. The battery lifespan currently used in electric cars is rated at around 250,000 kilometres or eight years.
CATL is ready to produce a battery that lasts 16 years and 2 million km. Extending that lifespan is viewed as a key advance because the pack could be reused in a second vehicle. That would lower the expense of owning an EV. These batteries are expected to enter production in late 2020.
Deals and Development
Tesla, the US EV leader, has already inked a deal with CATL to supply batteries to it. CATL batteries are set to go into Model 3 sedans produced at Tesla’s massive new factory near Shanghai, which started deliveries around the beginning of this year.
For now, Elon Musk’s firm is not looking to use CATL’s revolutionary new battery. Instead, CATL is expected to supply Tesla with lithium-iron-phosphate (LFP) batteries that use a cheaper mix of raw materials and cost about 20 percent less to make than other common types of packs.
As part of its international push, CATL has an eye on extending links with Tesla overseas, including to the automaker’s first European factory under construction outside Berlin. CATL, which also supplies Volkswagen AG and BMW AG, is also building its own facility in Erfurt, Germany.
Back home in Ningde, the firm is building a 3.3 billion-yuan (US$470 million) R&D complex intended to be a global flagship. Spending by CATL on R&D jumped about 50 percent last year to almost 3 billion yuan, and the firm has almost 5,400 staff focused on the tasks. They include 143 workers with Ph.Ds, who enjoy such perks like their own canteen and even a company-run dating service.
The sophisticated laboratories in China and Germany are a marked contrast to Zeng Yuqun’s early career, where he once used paper clips as a temporary fix to stop vibrating equipment from damaging cells. Now, with its new plant in Erfurt, CATL plans to scale up its annual production to reach 60 GWh from 2026.