CATL to Invest 80 Billion in European Battery Expansion

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In a strategic move that stands to reshape the electric vehicle (EV) battery landscape in Europe, CATL, China’s leading battery manufacturer, embellished its international profile by forging a significant partnership with the European automotive giant StellantisThis joint venture, publicly announced on December 10, involves the establishment of a battery factory in Spain, with an impressive investment of approximately €4.038 billion (around 30 billion yuan). Both companies will share ownership equally, each holding a 50 percent stake, and this initiative marks CATL's third battery production facility in Europe.

CATL's mastermind, Zeng Yuqun, expressed confidence in the project, citing Stellantis's extensive operational experience in the region as a critical component for ensuring successThis collaboration is not merely a business endeavor; it reflects a deeper alignment of strategic interests amid a rapidly shifting landscape in the automotive sector, especially toward electric mobility.

The collaboration has been brewing for over a year

In November 2023, Zeng spearheaded the signing of a memorandum of understanding with Stellantis to explore the formation of the joint ventureFollowing this, CATL’s Luxembourg subsidiary joined forces with Stellantis’s Spanish and French divisions, STLA, to finalize the agreementInterestingly, this comes at a time when Stellantis has been grappling with a significant transformation towards electric vehicles in the face of rising competition from Chinese EV brands in Europe.

Stellantis itself is a powerhouse, formed from the merger of Fiat Chrysler Automobiles and the PSA GroupWith established brands such as Peugeot, Citroën, Jeep, and Maserati under its umbrella, it sold approximately 6.17 million vehicles last year and generated a net revenue of about 1.446 trillion yuanAs part of its strategy to regain competitiveness in the EV market, Stellantis has committed to launching low-cost electric cars targeting the €25,000 price bracket (approximately 180,000 yuan). The use of lithium iron phosphate batteries — which CATL specializes in — is key to realizing this vision, making this partnership mutually beneficial.

For Zeng, the opening of the new battery plant in Spain represents a significant milestone, following previous investments in Germany and Hungary

The German facility began operations in January 2023 with an investment of about €1.8 billion and a planned capacity of 14 GWhMeanwhile, the Hungarian factory is estimated at €7.34 billion, scheduled to boast a remarkable capacity of 100 GWhWith the new Spanish factory’s investment, CATL’s total capital injection in European plants has reached €10.35 billion (approximately 80 billion yuan), a clear testament to Zeng’s aggressive expansion strategy on the continent.

However, the journey is not without its challengesThe market for electric vehicle batteries has become increasingly competitive, and the supply-demand dynamics are in constant fluxBetween January and September of this year, CATL reported total revenues of 259.045 billion yuan, a 12.09% decrease year-on-yearAmidst the fluctuations in lithium carbonate prices, Zeng has pivoted towards refining costs and enhancing technological performance, introducing high-performance cell types like the Shenxing and Qilin to add value and sustain profitability.

On the very day the joint venture was announced, Zeng also revealed a special dividend proposal, reflecting his commitment to maintaining investor confidence despite operational concerns beginning to surface

The growing financial scrutiny became evident when CATL recorded asset impairment losses of 6.65 billion yuan for the first three quarters of the year, a stark rise from 2.8 billion yuan the previous yearCoupled with a low capacity utilization rate of only 65.33% in the first half, and rising inventory levels reaching 55.2 billion yuan by the end of September, Zeng is actively seeking to diversify the company's client base.

In recent years, Zeng has diligently cultivated partnerships with various international automotive manufacturers, including BMW, Daimler, Volkswagen, Ford, Hyundai, Honda, and Volvo to ensure stable orders and mitigate operational risksHe has also taken proactive steps to engage with the European market through extensive research and communication, considering diverse avenues such as the potential for battery recycling initiatives in Europe.

The demand for electric vehicle batteries remains robust, and as of October, there was a notable surge in market activity, often referred to as a "rush to install" among leading manufacturers

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As CATL navigates this landscape, it has regained a market valuation exceeding a trillion yuan, with share prices reflecting a remarkable recovery — closing at 267.1 yuan on December 11, an increase of over 40% from three months prior.

As domestic markets in China edge towards saturation, Zeng has clearly set his sights beyond the bordersIn May of this year, he issued a directive emphasizing the vast growth potential in international markets and laid out a strategic business structure to capitalize on thisHe has personally taken charge of overseas operations, while a dedicated team of co-presidents manages specific overseas functions, directly reporting to him.

Currently, CATL has established or is preparing eight manufacturing facilities across Europe, Indonesia, and the United StatesTo mitigate risks, Zeng has also embraced a technology licensing model that permits collaboration with various international car manufacturers without the need for equity stakes

For instance, CATL agreed with Ford to support the construction of a battery factory in Michigan, with Ford retaining ownership while CATL contributes its operational expertise and technology.

Data for the first eleven months of this year demonstrates that CATL enjoys a commanding 31.8% market share in the global power battery installation sector, showcasing a staggering 180% year-on-year growthIn contrast to competitors, foreign automakers appear more willing to pay premium prices for high-quality batteries, resulting in overseas revenues surpassing 50.5 billion yuan, accounting for over 30% of total revenueThe gross profit margin from international operations stands impressively at 29.65%, marking an annual increase of over 8%.

In Zeng Yuqun's resolute vision for the future, success in overseas markets is met with accolades; he embodies the sentiment that those who venture into international waters become the company's heroes

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