CATL and Robin Zheng: The “king without throne” of the battery industry, holding 35% of the global electric vehicle battery

Tram Ho

Maybe many people have never heard of CATL, but their customers are world famous names, from Tesla, BMW, KIA and most recently, Vietnam’s VinFast. More than 30% of electric vehicles worldwide are using CATL batteries, making Robin Zheng quickly the new “king” of this field.

Part of that success lies in rare metal mines in China, the Democratic Republic of the Congo, and Indonesia, which help CATL control the supply of battery materials, while remaining unaffected by the global supply chain. increasingly fragile.

According to S&P Global Commodity Insights, lithium, nickel, and cobalt prices hit a record high in 2022, after supply disruptions caused by Covid-19 and the Ukraine conflict left electric vehicle manufacturers reeling.

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Headquarters of CATL, the giant of the electric vehicle battery industry (Image: Forbes)

The advantages and scale of raw material management have allowed CATL to set the conditions and pass the burden of rising raw material prices to customers. Professor Mark Greevens of the IMD School of Management, Switzerland said: “CATL imposes terms, a minimum contract term of 5 years and rarely accepts to adjust its batteries according to the manufacturer.”

Those decisions are making Zheng a lot of money – about $30 billion to date. The Chinese billionaire is second only to Elon Musk in Bloomberg’s list of green billionaires, and 29 globally according to the Forbes ranking in 2022. Meanwhile, CATL currently has a market capitalization of about 179 billion USD, equal to both GM and Ford combined.

But in contrast to the loudness of the American billionaire, Robin Zheng often avoids the flash and rarely gives interviews. A style very typical in China, where pomp often hurts business. “In the West, a cult of individual leadership is promoted. But in China, that could lead to danger. No one is bigger than Beijing,” said Bill Russo, former head of Chrysler Northeast Asia, higher education at Shanghai-based consulting firm Automobility.

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CATL President Robin Zheng (Image: Wired)

Founded the company in 1999 with the original name of ATL, but Robin Zheng’s success story only began in 2010 with a failed deal.

In 2010, Herbert Diess, BMW’s supply manager, was traveling the world to convince several companies to switch from making phone batteries to batteries for electric cars. He met many big companies, including Bosch and TDK (Japan).

Robin Zheng, then a branch manager of TDK (ATL was acquired by TDK for $100 million in 2005), brushed it off: “Car batteries are too big, maybe we can’t do it.” Diess recounted in an interview in May 2022.

There was no cooperation between BMW and Robin, but Diess’s suggestion awakened Zheng. In 2009, the Chinese government set out a strategy to develop new energy vehicles with huge subsidy packages.

Taking advantage of that opportunity, in 2011, Zheng and some Chinese investors bought 85% shares of TDK’s battery manufacturing unit and renamed it CATL. BMW became their first customer. “Dies gave us the opportunity to make car batteries, and I am grateful to him for that,” Zheng admits.

That was the beginning of Robin Zheng’s journey to become “Battery King”, who was both passionate about technology but also very acumen in business. Yunfei Feng, research assistant at the IMD business school, said that when BMW agreed to cooperate with CATL, Zheng personally read through every line of BMW’s 800 pages of required documents.

The focus on technical details made all the difference. When CATL was just starting a new direction, BYD – another Chinese company – was seen as the market leader. But while BYD uses iron phosphate lithium batteries, CATL uses a mixture of nickel, manganese and cobalt aka NMC. NMC allows the car to go further and that gave CATL a big advantage when the Chinese government started a subsidy program for electric vehicles in 2015.

Many analysts consider the Made in China 2015 program to be the company’s great fortune. Between 2009 and 2021, the government subsidized about $14.8 billion in subsidies to buyers of electric vehicles instead of internal combustion engine vehicles, but on the condition that the vehicle be powered by a Chinese-made battery. This regulation has urged foreign car manufacturers to also use CATL batteries to be able to penetrate China’s lucrative domestic market.

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The largest EV corporations also have to depend on CATL (Image: Reuters)

However, Robin Zheng was not satisfied with that, he raised more capital to invest more in R&D and supply chain. From 2015-2017, CATL raised an additional 2 billion USD and went public in June 2018. “CATL can invest in the entire supply chain from mining, material handling, battery manufacturing and even recycling,” said Kevin Sang, energy storage analyst at Wood Mckenzie.

However, there have also begun to be concerns about the overwhelming influence of CATL.

Global semiconductor shortages, soaring battery prices, and supply chain bottlenecks are prompting customers to negotiate deals with CATL’s rivals, or build their own factories. BYD announced that it will “very soon” supply batteries to Tesla. GM is also planning a joint venture with LG to build a factory in the US. Toyota plans to open a plant in North Carolina/USA while Ford is building two plants side by side in Kentuky.

“CATL’s ‘buy it or leave’ negotiation policy also pushes customers to find smaller suppliers willing to tailor their products, ” added GS Greeven.

But getting rid of the dependency on CATL is not easy. Manufacturers will find it difficult to produce high-quality batteries at a reasonable price.

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Huge market share of CATL (Image: SNE Research)

CATL has doubled the number of R&D specialists to 10,000 by 2021, and spent $130 million to own a lithium mine in southern China. The company also announced new products that meet industry needs, such as ion-sodium batteries. This could be a breakthrough because sodium is the 6th most available element on earth, which will help reduce dependence on increasingly scarce lithium.

Source: Synthesis

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