China’s Contemporary Amperex Technology (CATL), the world’s leading supplier of electric vehicle batteries, is trying to head off three risks to its business by securing crucial minerals, seeking out more overseas buyers, and expanding beyond the auto industry.
CATL has taken a series of steps on the supply chain front, an area investors are watching closely.
In a late July investor presentation, CATL said it would share the benefits of its mining program with “strategic customers” and promote the development of the industrial chain.
The government of Bolivia announced in June that CATL would lead a USD 1.4 billion project to build lithium extraction plants at two salt flats. Overall investment in the project will exceed USD 9.9 billion, the government said.
Bolivia is home to the world’s largest lithium reserves, estimated at more than 20 million tonnes. However, developing them has not progressed as smoothly as in other lithium-rich countries. The South American country may require improvements in electricity and road infrastructure to make the plants work. The salt flats are also a popular tourist attraction, raising another hurdle to the project.
In July, CATL established a unit overseeing mining operations in the Chinese province of Sichuan, according to local media. Just before that, Chinese mining authorities had announced bidding on lithium exploration rights in the new company’s area.
The company is involved in roughly 20 projects worldwide for mining lithium, cobalt, nickel and more, according to Soochow Securities.
CATL’s net profit more than doubled on the year to RMB 20.7 billion (USD 2.88 billion) for the first half of 2023. Sales jumped 68% to RMB 189.2 billion (USD 25.9 billion), thanks to expanding demand from the EV market in China and elsewhere.
Automotive batteries account for 70% or so of CATL’s top line. The business had a gross profit margin of roughly 20% in the first half, up more than 5 percentage points on the year and contributing to the improved earnings. A year earlier, CATL was weighed down by higher prices for lithium and other materials.
CATL is also focused on winning over new overseas customers as competition heats up.
China’s BYD not only manufactures EVs but has also expanded the output of its own batteries and moved to sell them to other car companies. BYD is exploring a potential stock market listing for its battery business, a move that would give it a wider scope as a supplier.
CATL is looking to supply batteries for EVs in Thailand and elsewhere in Southeast Asia. In June, CATL said that it would provide a Thai company with battery assembly technology and production equipment.
In Germany, CATL has begun production at a new factory whose clients are believed to include BMW. CATL said last August that it would build a factory in Hungary.
This overseas push is bearing fruit. In the first five months of 2023, CATL led the world in the EV market share at 36.3% in terms of installed battery capacity, according to South Korea’s SNE Research.
CATL roughly doubled its overseas sales from the year-earlier period. Foreign operations have grown to account for nearly 40% of CATL’s overall business. BYD, the No. 2 battery supplier, does not have much of a presence outside China.
CATL’s overseas expansion has not been without headwinds. In late July, the chairmen of two U.S. congressional committees wrote that the committees had launched investigations into the company’s partnership with Ford Motor. The two companies plan to build a battery factory in the U.S.
Even as it boosts production capacity, CATL needs to keep up with emerging technologies, such as all-solid-state batteries, which hold the promise of being safer and more durable than current tech.
CATL is also under pressure to explore battery uses beyond autos. The company has already developed technology similar to semisolid-state batteries, a precursor to solid-state batteries. One possible use is in aviation. CATL established a joint venture with the Commercial Aircraft Corp. of China in July, as per Chinese media reports.