China's Battery Giant Zooms Ahead --- CATL is in talks with global automakers including Tesla to expand in the U.S.

"HONG KONG -- The chairman of China's battery-making champion said he wasn't fazed by rising geopolitical tensions over the control of future technologies, as the company sets its sights on expanding in the U.S.

Contemporary Amperex Technology, the world's largest maker of batteries for electric vehicles, is in talks with Tesla and other automakers to license its battery technology in the U.S., instead of building its own battery plant there, Robin Zeng, founder and chairman of the company known as CATL, said in an interview with The Wall Street Journal.

The scale of cooperation and other details about what Tesla would license from CATL, based in Ningde, China, is still being discussed and would depend on the carmaker's cash flow, Zeng said.

"Geopolitics is a very transitory issue. Each government administration only lasts four or five years, but business relationships last for decades," Zeng said. He added that CATL's technologies were unlikely to be embroiled in a wider tech war as governments globally are focused on combating climate change.

CATL is already licensing its technology to Ford Motor to help the American carmaker produce vehicle batteries at a plant in Michigan. Ford owns and operates the factory, paying royalties to CATL for the batteries produced. The Chinese company's Ford partnership will be the model for similar cooperation with other carmakers in the U.S., Zeng said.

In recent months, U.S. lawmakers have raised concerns about links between the Chinese battery juggernaut and China's ruling Communist Party. Last September, Ford paused construction of its $3.5 billion battery plant amid months of scrutiny by lawmakers on its partnership with CATL.

Ford has since restarted building the factory, which is part of its strategy to produce lower-cost batteries to reduce EV price tags for drivers.

In the U.S., the Inflation Reduction Act aims to shut out batteries and critical minerals from so-called foreign entities of concern over the next two years, a move industry players say is meant to reduce China's involvement in the supply chain of the U.S. EV industry. Starting in 2025, buyers of cars that use Chinese suppliers would be ineligible for a $7,500 clean-vehicle tax credit.

The law has already pushed some Chinese battery-materials makers to look for ways to bypass the rules, including by forming joint ventures with U.S. free-trade partners such as South Korea and Morocco in the hopes of qualifying for U.S. subsidies so they can more easily expand in the U.S.

Analysts at Morgan Stanley have highlighted the risk that geopolitics could slow CATL's global expansion, forecasting CATL will only gain a market share of 3% in the U.S., versus an expected 35% of the European Union market by 2030.

Zeng, who founded a company making batteries for iPods and laptops in 2004, eventually spinning off its vehicle-battery business as CATL years later, added that he preferred licensing agreements to opening production plants in the U.S. Manufacturing in the U.S. is much more expensive and less efficient versus producing in China, he said.

In 2020, CATL purchased a small facility in Glasgow, Ky., with the intention of producing batteries for the American market. Last August, however, the battery manufacturer put the property back on the market for sale, according to a statement from the Barren County Economic Authority.

After snagging a deal to produce batteries for Germany luxury carmaker BMW's China-made EVs in the early 2010s, CATL has gone from strength to strength.

CATL is now one of Tesla's largest battery suppliers, with its batteries installed in Tesla's Model 3 and Y vehicles, many of which are exported from China to Europe. It also produces components for automakers including Volkswagen and Daimler. Analysts describe the company as a linchpin in the lithium-ion battery supply chain, with investments in raw materials and a large battery recycling business.

CATL holds almost half of the market in China and in 2023, one in three electric vehicles sold globally contained the company's lithium-ion batteries, according to industry analyst SNE Research.

The battery giant's business selling energy-storage batteries has also come under fire in the U.S. North Carolina-based Duke Energy said it plans to phase out the use of energy-storage batteries made by CATL from a Marine Corps base in North Carolina and from other civilian projects by 2027, amid policymakers' concerns about their links to Beijing.

Even if the U.S. struggles to build its own domestic battery supply chain without China's help, CATL would still likely face sizable headwinds to expanding there, said Chris Berry, president of Washington-based House Mountain Partners.

"Just about the only thing politicians inside the Beltway in Washington, D.C., can agree on today is that China is 'the enemy,' " Berry said. "Given the aims of the Inflation Reduction Act to reshore much of the supply chain, allowing CATL to operate in the U.S. is perceived as flying in the face of the stated aims of the IRA."" [1]

1. China's Battery Giant Zooms Ahead --- CATL is in talks with global automakers including Tesla to expand in the U.S. Lin, Liza; Liang, Rachel.  Wall Street Journal, Eastern edition; New York, N.Y.. 26 Mar 2024: B.4.