CATL makes massive investment to shore up competitive edge

China's CATL will invest 19.07 billion yuan ($2.75 billion) in businesses in the upstream and downstream sectors to recover its competitive edge, the company said last week. The announcement comes two months after it lost the crown of the world's largest power battery maker to LG Chem.

The investment targets are Chinese and foreign companies along the industry chain, and the amount of money appropriated overseas could reach $2.5 billion, the Shenzhen-listed company said in a filing on Tuesday.

CATL said the decision was based on the company's "long-term strategic development", and the goal is to further enhance its competitive edge in the power battery sector.

CATL has stakes in around 45 companies, 11 of which are wholly-owned. Most of them are companies in the battery materials and mobility industries.

CATL shipped the equivalent of 40.25 gigawatt-hours of automotive lithium-ion batteries in 2019.The company is an industry leader with a global share of 28 percent, according to South Korea's SNE Research.

Most of its products are sold in China, which is the world's largest electric car market. Statistics from Soochow Securities show that CATL has a roughly 50 percent market share in China. Major customers include Yutong, Nio, Great Wall Motors and WM Motor.

Overseas, CATL has big names on its list of customers, including Daimler and Volkswagen. But their sales have been quite small. Panasonic is Tesla's major battery provider.

The coronavirus pandemic and falling sales of electric cars in China have hurt CATL.

New energy vehicle sales started to fall in July 2019, and did not rise again until last month.

Xu Haidong, vice-chief engineer of the China Association of Automobile Manufacturers, said sales this year could reach 1.1 million, down from 1.2 million in 2019.

CATL's installed capacity totaled 10 GWh in the first half of the year, down 28 percent from the same period in 2019.

To make things worse, LG Chem overtook it as the world's largest battery maker, with its installed capacity surging 82.8 percent to 10.5 GWh in the same period, according to SNE Research.

At an industry forum on Wednesday, CATL founder and Chairman Zeng Yuqun said new energy vehicle sales surged 52 percent in Europe but fell 44 percent here in China.

"That means China may lose its No 1 position to Europe this year," Zeng said.

China overtook the United States as the world's largest electric car market in 2015 and has held the title since then. "The idea of Europe surpassing China this year makes me sad," Zeng said.

CATL is thus speeding up its overseas business. Earlier this month, Mercedes-Benz said it has entered the next stage of a strategic partnership with CATL, which covers the full range of battery technologies, from cells across modules to entire battery systems.

This agreement also involves CATL's cell-to-pack design, which eliminates conventional modules and integrates the cells directly into the battery.

"Working with CATL will see us accelerate our transformation towards carbon-neutrality," said Markus Schaefer, a board member of Daimler and its subsidiary Mercedes-Benz.

The two companies have started working on battery products that are to be featured in a number of vehicles within the next few years.

The EQS sedan, which is to be sold in 2021, will feature CATL cell modules. It will have a range of 700 kilometers and its charging time will be faster compared with current models.

CATL is building a plant in Germany, which will make it easier for Mercedes-Benz to purchase their battery products.

Zeng Duohong, a senior analyst at Soochow Securities, is optimistic about CATL's prospects. In a research report, she estimates CATL's overseas shipment could reach over 10 GWh in 2021, double this year's level.

The company's shipment could reach 350 GWh in 2025, almost nine times its figure in 2019, according to Soochow Securities.

But Zeng said China will remain CATL's major market.

"In the long run, we estimate it has a 40 percent market share in China, and a 20 percent market share overseas."