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In a Power Surge Move, Chinese Electric Car Battery Maker Eyes Global Market

In a Power Surge Move, Chinese Electric Car Battery Maker Eyes Global Market
Contemporary Amperex Technology Ltd (CATL) poised to go from hometown hero to national champion, and beyond in China even as a dusty village on the outskirts of Ningde, a third-tier city in China's southeast, seems an unlikely place for the headquarters of such a potential company.
This thanks to China's top-down industrial policy diktats - move up the value chain, clean up polluted urban skies, and shift to plug-in cars.
China’s production capacity for lithium-ion car batteries in the past year has been tripled in order to keep up with a surge in China's sales of electric cars and as China's answer to Japan's Panasonic Corp and South Korea's LG Chem Ltd.
CEO Huang Shilin said last week that the company's value quadrupled to 80 billion yuan ($11.5 billion), after a second major funding round completed in October.
CATL could be a dominant force globally and hopes to list on Beijing's over-the-counter exchange as part of plans to raise at least another 30 billion yuan by 2020. CATL could be placed ahead of Tesla Motor Inc's gigafactory in Nevada by its plans to grow its battery capacity sixfold by 2020 to 50 gigawatt hours.
"We continue to walk where the country guides us," Huang said. "We hope by 2020 we can achieve performance and price that lead the world."
The emerging segment's dependence on government policy and rapidly evolving technology is not without risk despite the ambitious expansion.
As battery costs remained stubbornly high and orders dried up, A123, a U.S. automotive battery maker, went from IPO to bust in just three years.
"People think we're a big successful company, but we think we're in jeopardy every day," marketing director Neill Yang said. "The market environment and technology changes so fast that if we don't follow the trend we could die in three months."
people in the industry say that a battery maker must first shed any foreign investment to be eligible for subsidies and other policy support to become a Chinese champion.
Robin Zeng had started Amperex Technology Ltd (ATL), a company now majority-owned by Japan's TDK, before he set up CATL.
Yang said, when electric vehicle sales first started to take off. He declined to elaborate on the circumstances of that divestment, ATL, which initially had a 15 percent stake in CATL, liquidated that holding last year.
TDK still collects royalties on some intellectual property used by CATL even though it separated from CATL to focus on batteries for mobile consumer electronics.
"The reason is strategic and confidential. ATL still keeps a close relationship with CATL," said a person familiar with the situation, who was not authorized to speak to the media.
By forcing smaller firms to consolidate or go out of business, Beijing is also rolling out other policies that could benefit leading producers like CATL even while government support for electric cars has driven demand for components such as batteries.
It is considering a rule that would increase minimum production requirements for battery makers by around 40 times to 8 gigawatt hours, the Ministry of Industry and Information Technology (MITI) said last month.
Compared to those for producing electric vehicles, which totaled $4.5 billion last year alone, Yang said subsidy support for batteries is fairly modest.

Christopher J. Mitchell

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