A new Chinese electric vehicle battery giant has emerged

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As countries around the world seek to grab their share of the electric vehicle supply chain in a rush to go green, energy storage is becoming a key battleground. To add to the pressure, another major Chinese drum player is emerging.

China Aviation Lithium Battery Technology Co., or CALB, is seeking to go public in Hong Kong for up to $2 billion. Formed in 2015 under Luoyang Company, a wholly owned unit of China Airborne Missile Academy – part of state-owned aerospace and defense company Aviation Industry Corp of China Ltd. – CALB filed offering documents earlier this year. This will raise funds just as the race for manufacturing scale heats up.

CALB manufactures cells, modules and battery packs for electric vehicles and utility-scale energy systems – both in high demand as China ramps up storage facilities, with growing consumer interest in vehicles electricity and an energy crisis that is holding back the factory of the world.

With a grip on approximately 7.5% of the Chinese market(1), CALB is the second largest manufacturer of ternary batteries – those with a high nickel content that offer greater energy density compared to other chemistries – behind the The world’s largest manufacturer of power supplies, China’s Contemporary Amperex Technology Co. It also manufactures the lithium iron phosphate type. By next year, the Jiangsu Province-based company is expected to become one of the largest in the world, with a generating capacity of 145 gigawatt hours, overtaking BYD Co., backed by Warren’s Berkshire Hathaway Inc. Buffett, but still behind CATL, the South Korean LG. Energy Solutions Ltd. and another Chinese battery player, EVE Energy Co., according to analysts at Nomura Holdings Inc.

At present, every global player is trying to grow rapidly. Just last week, companies from Panasonic Holdings Corp. at Toyota Motor Corp. announced billions of dollars in commitments for production facilities. Around the world, industrial policy focused on electric vehicles and batteries is also becoming more aggressive, with the introduction of the US Inflation Reduction Act and China’s extension of its electric vehicle subsidies which were to expire this year. Beijing has already handed out around $15 billion over the past decade.

CALB’s capital increase will fund a rapid expansion of its production bases across the country. Since 2019, the company’s spending on ongoing builds has more than doubled every year, as has capacity. Manufacturing and operations personnel make up nearly half of the workforce, while research and development technicians make up about 45%. Installations are expected to range from 10 gigawatt hours to 20 gigawatt hours, with an investment of 5 billion yuan ($724 million) to 10 billion yuan each. It may not reach CATL scale anytime soon, but it has been growing at a faster rate. Over the next two years, the company expects its effective generation capacity to reach around 55 GWh, compared to more than 170 GWh for CATL in 2021. It has set up industrial bases across the country, from Changzhou in the south to Hefei in the east and as far as Xiamen, Chengdu, Wuhan and Jiangmen.

To circumvent supply chain issues, CALB sourced raw materials and finished goods. It has also secured its supplies with a stake in metals giant Tianqi Lithium Corp., alongside LG Chem Ltd., as well as a 2.5 billion yuan contract with Yunnan Energy New Material Co., which makes splitters – a key part of power supplies that is increasingly being used. rare. All told, these moves are designed to ensure he can continue to grow at home and, eventually, abroad.

CALB’s battery offensive will help bridge the growing gap between global demand and supply. Meanwhile, the rapid emergence of a powerful third player bodes well for China’s supply chain dominance. CALB also has no shortage of policy-friendly, state-backed shareholders, with a list of heavy hitters that includes a Treasury-backed fund dedicated to modernizing manufacturing and Three Gorges Capital. So far, Beijing’s support has not hampered its overseas ambitions or raised geopolitical issues: it has already established entities in Germany and the United States.

Until recently, Luoyang, which designs and produces batteries for civil and military industrial use, was a majority shareholder. It became a subsidiary in preparation for its IPO and to “minimize the impact and potential risk that could arise from military industrial activity,” CALB’s offering document notes.

Navigating has not been easy: with rapid scaling comes increasing pressure. Last year, CATL filed an intellectual property infringement lawsuit against CALB and asked its rival to pay about 190 million yuan for economic losses and expenses incurred, later raising the compensation amount to over of 500 million yuan. The CALB said the claims “lack merit” and disputes them.

There are also risks for investors, as the company indicates in its prospectus, as it has been added to the US list of non-sanctioned Chinese military industrial companies. Still, it has managed to attract support, with backers so far including Xiaomi Corp’s Lei Jun.

The expansion of CALB and other Chinese battery makers shows how far behind global players are in technology and capacity for growth. It also highlights why the Chinese battery industry is way ahead of the rest.

More from Bloomberg Opinion:

• For BYD, reaching the top spot is not easy: Anjani Trivedi

• How Chinese car batteries conquered the world: Anjani Trivedi

• The Iron Curtain Falls on Energy: Liam Denning

(1) Installed capacity from 2021. By battery installation by type, it holds 11.2% of the nickel cobalt manganese market and 2.6% of the LFP in China, as of July 2022.

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Anjani Trivedi is a Bloomberg Opinion columnist covering industrial companies in Asia. Previously, she was a reporter for the Wall Street Journal.

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