World’s biggest EV battery maker pivots to AI, grids and ships

{"text":[[{"start":10.16,"text":"In a huge industrial building in Xiamen, south-east China, lie the charred, melted remains of battery cells jolted by a massive electrical charge to simulate a lightning strike."}],[{"start":21.16,"text":"The high-voltage test is just one of many being carried out on new battery systems, made by China’s CATL, designed to power AI data centres and back up electricity grids."}],[{"start":32,"text":"Unlike the car batteries that CATL has been making for years, these systems have to operate around the clock under all kinds of conditions — hence the simulated lightning strikes among scores of tests in extreme operating environments."}],[{"start":45.34,"text":"Chen Xiaobo, who leads the research centre, told the FT that after “many years” of developing lithium cells for cars, the company believes its batteries can now be integrated into “much larger-scale systems”."}],[{"start":56.56,"text":"CATL’s facility in Xiamen is symbolic of the Chinese group’s ambition to move beyond making low-cost lithium batteries, a business it dominates worldwide."}],[{"start":65.92,"text":"“The original motivation for investing in this laboratory emerged from the evolution of energy storage itself — from today’s distributed, low-voltage storage systems towards higher-voltage, grid-oriented energy storage applications,” Chen said."}],[{"start":null,"text":"

"}],[{"start":80.42,"text":"For Robin Zeng, the chemistry whizz who founded CATL after making batteries for early Nokia and Motorola mobile phones, investments like the Xiamen centre are also part of a years-long effort to foster — and dominate — new battery-powered industries."}],[{"start":95.06,"text":"The Chinese group controls about 40 per cent of the market for EV batteries, which contributed about three quarters of its $61.4bn in sales last year."}],[{"start":105,"text":"Several investments highlight how CATL is positioning itself to take a foothold in new sectors that stem from the megatrends of AI, the replacement of oil, gas and coal via renewable energy and the electrification of the world’s transport and heavy industry systems."}],[{"start":120,"text":"“Our ambition is not just limited to being a battery supplier to [carmakers] . . . we see ourselves as a high-tech company for the renewable energy sector,” Oscar Luo, CATL’s head of overseas investment, told the FT in June when it announced the deployment of battery swapping stations for electric lorries in Europe."}],[{"start":137.6,"text":"CATL has made direct investments into 152 entities, as well as indirect investments, via its subsidiaries and funds, into more than 9,900 businesses, according to data from Chinese corporate information service Tianyancha. That compares favourably with rival BYD’s 109 direct and 2,856 indirect investments."}],[{"start":null,"text":""}],[{"start":159.72,"text":"CATL has already won about 30 per cent of the battery energy storage system market, a sector that is growing rapidly due to AI. Luo highlighted investments in large battery systems for powering buildings, ports, mines and factories, as well as small-scale systems for aircraft and drones."}],[{"start":176.52,"text":"The company has also deployed its batteries on close to 1,000 vessels, mostly smaller craft operating close to the Chinese coastline, at ports or in rivers."}],[{"start":185.52,"text":"As many of these sectors are only just starting to wean themselves off fossil fuels, CATL executives have promised to support the development of related infrastructure, including investing billions of dollars to build vast networks of battery swapping stations for cars, trucks and ships."}],[{"start":200.04,"text":"Chen, the Xiamen centre boss, said that at a “component level” testing for battery cells and packs was mature. However, once these battery components are integrated into more complex systems — such as storage containers, electric aircraft and ships — and large-scale energy storage systems, “the level of integration becomes significantly greater and more complex”, he added."}],[{"start":null,"text":""}],[{"start":221.78,"text":"As part of an industry-wide approach, he said CATL’s testing facilities were open to its customers, such as data centre owners or electricity grid operators, too."}],[{"start":231.36,"text":"Many of CATL’s recent investments, as well as its research and development budget, have been channelled towards battery technologies and chemistries, such as sodium. In April, the company touted that the bottlenecks for commercialisation of sodium batteries had been overcome and the group was moving to mass production by the end of this year."}],[{"start":248.48,"text":"Other investments in recent months include spending close to $1bn on a 38 per cent stake in Chinese data centre operator VNET. It has also built a 49 per cent stake in Zhongheng Electric, which owns a leading domestic supplier of high-voltage direct current power systems."}],[{"start":248.98,"text":"On Friday CATL said revenue rose by 55 per cent to Rmb277bn ($40.9bn) for the six months to June, with net profit up 42 per cent to Rmb43.3bn ($6.4bn), amid strong demand for energy storage systems."}],[{"start":286.44,"text":"The company’s Shenzhen-listed shares are up almost 40 per cent over the past 12 months and it also announced plans to buy back up to Rmb40bn in stock."}],[{"start":296.12,"text":"Given its increasing importance to the world’s energy systems, CATL has found itself in the crosshairs of both Washington and Beijing. In January last year, the company was designated by the Pentagon as having military links — an allegation the company strongly denies."}],[{"start":null,"text":""}],[{"start":312.02,"text":"On the Chinese side, Beijing has become increasingly wary over leaking of Chinese intellectual property related to cutting-edge batteries, fears that could slow down CATL’s overseas ambition."}],[{"start":323.16,"text":"Still, in the wake of the oil price shock this year following the US-Iran war, many analysts are raising their long-term forecasts for battery demand."}],[{"start":332.16,"text":"Researchers at Bernstein in Hong Kong forecast that global battery demand will grow from 1.8 terawatt hours last year to 5.7 TWh by 2030 and 16.6 TWh by 2050. This pace reflects a compound annual rate of 9 per cent over the next 25 years. These forecasts follow a 10-fold growth over the past five years as falling battery costs improve their economics."}],[{"start":357.76,"text":"Spurred by both rising demand and geopolitical tensions, CATL is striving to secure its own supply chains. The company has spent heavily over many years to secure access to key resources, including lithium and nickel, and in April established a mining subsidiary with registered capital of Rmb30bn ($4.4bn)."}],[{"start":379.44,"text":"Neil Beveridge, who leads Bernstein’s energy research, said that while some investors have questioned CATL’s push into non-core areas, others regard its battery dominance as akin to TSMC’s stronghold over the manufacturing of high-end semiconductors."}],[{"start":393.52,"text":"TSMC, like CATL, has a market share of about 40 per cent for its core products, while boasting the highest margins in the sector and the greatest share of the profit pool."}],[{"start":404.76,"text":"Beveridge added: “There are some parallels that we see with TSMC. It’s built on their technology leadership . . . that can effectively shield them from the competition and enables them to make much higher margins than the rest of the industry.”"}],[{"start":423.52,"text":""}]],"url":"/Users/oliverzhang/ft/ftcoffer/public/a_288798_1785315691443-2444-950a9535-e78e-499f-b045-a46c90d05ee0.mp3"}