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The world’s biggest electric vehicle battery maker, CATL, has reported record first-half profits, cementing its position as the market leader even as doubts grow over its planned expansion into the US.
Billionaire founder Robin Zeng’s group now supplies most big carmakers, including Tesla, Volkswagen and Ford, making CATL a central pillar of China’s dominance of the supply chain for electric vehicles.
The first six months of the year underline how CATL continues to ride growing global demand for electric vehicles. Profits at the Shenzhen-listed company surged 154 per cent to Rmb20.7bn from the same period a year earlier, matching analysts’ expectations. Sales jumped 67.5 per cent to Rmb189.2bn, according to a filing on Tuesday.
The group’s gross margins, meanwhile, rose to 20.4 per cent at its core EV battery business, up 5.3 percentage points from a year earlier.
While CATL counts big US carmakers as customers — the group set up its first North American base in Detroit in 2018 — it does not yet produce batteries in America. In February, CATL signed a deal with Ford that would lead to the US carmaker licensing the Chinese group’s technology for use in a $3.5bn Michigan factory.
The deal potentially paves the way for CATL to take part in the fledgling US electric vehicles boom despite Joe Biden’s Inflation Reduction Act, which was designed to cut American reliance on China and boost domestic manufacturing.
However, last week the two Republicans who chair the ways and means committee and the select committee on the Chinese Communist party said they were investigating “serious ethical and legal concerns” over alleged links between CATL and forced labour in Xinjiang.
Pointing to Beijing’s decision this month to restrict exports of gallium and germanium, metals used in chips, electric vehicles and a range of telecoms products, the senators said that the CATL deal risked exposing “US taxpayers to the whims of the Chinese Communist party and its politics”.
Asked about the comments from the senators, CATL said in a statement that the deal was progressing normally.
As concern in Washington builds, it remains unclear how the Ford licensing agreement will be treated under the IRA. The law sets out that components from “foreign entities of concern” — including China — are ineligible for generous consumer tax credits after next year.
Whether Chinese battery makers can access the US car market will have significant implications for CATL’s Korean rivals — LG, SK and Samsung — as well as Japan’s Panasonic, companies that have hoped for an American market free of Chinese competition.
CATL’s recent pivot to developing sodium-ion batteries has also caught the attention of battery industry experts as the new technology offers a lower-cost, sustainable alternative to lithium-ion batteries.
Sodium-ion batteries are 15 per cent to 20 per cent cheaper than the dominant battery technologies made with nickel with manganese and cobalt, NMC, or lithium iron phosphate (LFP), according to research published this week by Bernstein analysts in Hong Kong.
Despite sodium batteries’ lower energy density compared with NMC and LFP — which means they will struggle to power the most advanced electric vehicles — CATL, one of the leaders in this new technology, is expected to mass-produce the first generation sodium-ion batteries for Chinese carmakers this year.
