CATL to invest $5.9b in 3 new battery factories

Contemporary Amperex Technology Co Ltd, China's largest producer of automobile battery packs, is investing 39 billion yuan ($5.9 billion) to build three battery factories to further expand its operations in the country, according to a company announcement.

Industry experts said that its capacity expansion will enable other supply chain companies in the new energy vehicle sector to boost output and cash in on the rapid growth of the new energy vehicle sector in the country over the next few years.

CATL will invest 17 billion yuan to build a lithium-ion battery base in Fuding of Ningde, Fujian province. Another 12 billion yuan will be used to set up a unit in Liyang, Jiangsu province, while the remaining 10 billion yuan will be used to expand the existing power battery unit in Yibin, Sichuan province.

"The base construction, in line with the company's strategic development plan, will further improve the production capacity to meet future business development and market expansion needs. It will also bolster the company's long-term, stable development," CATL said in a regulatory filing on Tuesday.

Zeng Tao, an analyst at China International Capital Corp, said in a research note that the new investment will add an additional capacity of about 120 GWh to 150 GWh in the next two to four years.

"CATL has spent 73 billion yuan, according to public announcements, for capacity expansion this year," Zeng said.

On Wednesday, shares of CATL rose by 10.39 percent to 340 yuan per share. Leading lithium-ion battery companies and industry chain firms also saw their share prices rise, with Tianyuan Group hitting the daily limit of 6.07 yuan.

"CATL is looking to speed up its capacity expansion with an eye on growing its global market share to 40 percent. Given its insufficient production capacity currently, the battery maker is planning ahead for a boom in new energy vehicle sales," said Wang Jing, a research supervisor for high-end manufacturing at Shanghai Chaos Investment Group Co Ltd.

Sales of NEVs, which include electric batteries, plug-in hybrids and hydrogen fuel-cell vehicles, are expected to see rapid growth in the next 10 years, according to industry experts.

According to the latest development plan for the NEV industry from 2021 to 2035 approved by the State Council last month, China's NEV sales are expected to account for 20 percent of overall new car sales by 2025, while purely electric automobiles will account for the majority of new cars sold in the country by 2035.

"CATL's new investment will provide a strong impetus to the NEV supply chains, so that related companies can also expand their production to ensure raw materials on demand and at relatively low prices," she said.

The battery maker, whose battery packs are used by almost every major automobile brand, including in Tesla's Model 3 electric cars that are assembled in Shanghai, was reportedly to have invested $5 billion in a new manufacturing plant in Indonesia.

Ren Zeping, chief economist with Evergrande Group, said China is edging closer to its dream of becoming a major player in the conventional and new energy vehicle sectors. "After 10 years of planning and development, especially during the 13th Five-Year Plan period (2016-20), the country's NEV industry has already gained certain first-mover advantages and scale advantages. A basic industrial chain and charging infrastructure have been formed," he said.

"Government efforts (like the development plan) will have a far-reaching effect, especially when economies like Europe, Japan and South Korea are accelerating their efforts in electrification of vehicles while electric cars made by US automaker Tesla are gaining traction with customers in China," he said.

The NEV market in China has been the largest in the world for five consecutive years. Despite the COVID-19, the country's NEV sales reached 200,000 units in November, up 104.9 percent on a yearly basis, according to the China Association of Automobile Manufacturers.