CATL mulls further European investment

TRANSITIONING to global EV use is being driven by massive investments by companies such as battery manufacturer Contemporary Amperex Technology Co. Ltd. (CATL). But replacing combustion engine cars with EVs relies on a number of crucial elements including batteries, specifically manufacturing enough of them.

Addressing that issue is the China’s CATL, the world’s biggest maker of electric-vehicle batteries, which has under consideration a third factory in Europe where the uptake of EVs is accelerating.

If the plan gets the nod, it will mean massive expansion and investment for the Chinese-based battery maker already heavily committed elsewhere.

CATL’s European boss, Matthias Zentgraf, recently told Bloomberg News the company was: “Thinking about this, but currently there is no clear decision or activity,” adding that “internal discussions are already underway.”

Only last month, CATL announced expansion plans that will see it build a second European plantin Hungary after an investment of €7.3 billion ($A11.04b) in partnership with Mercedes-Benz.

The new facility is designed to produce 100GWh output and will also supply other European car-makers the Volkswagen Group, BMW and Stellantis. The second plant will be under construction for five years coming on stream in 2027.

“We will not build a third plant if there is no prospect for the demand volume,” said Mr Zentgraf.

Through early and sound investment, efficient manufacturing and a stroke of good fortune, CATL has been able to maintain a big sales lead (by a factor of two) over rivals including the world’s number two battery manufacturer, LG Energy Solution.

Bloomberg says in their report that CATL rebounded from its sharpest-ever drop in quarterly earnings at the start of 2022, with first-half net income rising 82 per cent from a year earlier and revenue jumping 156 per cent… a monumental increase that has prompted the company to consider fast tracking a third European factory.

Until now the company’s focus has been in China where CATL has established several production bases with subsidiaries in the US, Japan and Europe. 

It is at the moment spending ¥27 billion ($A5.82b) on two battery projects in China’s Shandong and Fujian provinces.

Bloomberg reports that Mr Zentgraf declined during the video call to comment on whether CATL would supply batteries to Tesla’s new factory in Berlin. Other sites for new battery plants are under consideration by CATL including in Mexico and also the US to supply Tesla, Ford and others.

That process has been delayed in part due to political tensions between China and the US, Bloomberg reported.

CATL’s first European plant comes on stream soon in the central German city of Erfurt.

However, fuel constraints after Russia’s invasion of Ukraine, specifically gas shortages and prices, are posing a challenge for CATL. Unfortunately for the battery maker, more than half of Germany’s gas imports came from Russia before the war.

“We are affected with the shortage of natural gas, which is very important for the cell production process because we need a lot of energy,” said Mr Zentgraf.

Gas accounts for about half of the German CATL plant’s energy requirements.

“We are working on substitutions for this intensively. We already have a very, very promising idea to replace natural gas to buy renewables.

“Contingency plans will enable the plant to stay operational through winter if gas supplies fall short or prices are too high.”

Bloomberg reported that Mr Zentgraf called for the EU to offer more flexible state aid to help localize and expand the EV-battery supply chain and complement billions of dollars of investment from battery makers.

“Concentrate that subsidy money into building up the supply chain for battery businesses overall,” he said.

with Bloomberg News