The secret to becoming a dominant family in the CATL era

CATL has won the championship in the global power battery market for six consecutive years and is the world's largest manufacturer and seller of power batteries. In the latest list of global power battery installed capacity from January to February 2023 released by SNE Research, a Korean market research institution, CATL has undoubtedly topped the list again. SNE Research believes that the pattern of the global battery industry does not seem to change significantly for a period of time, and the dominance of Chinese companies is expected to be maintained for a period of time. Although CATL is facing "siege" from many battery manufacturers, it will be difficult to be replaced or copied by other manufacturers in the short term.

Ningwang dominates the global power battery market

Data recently released by SNE Research shows that from January to February 2023, the global installed capacity of electric vehicle (EV, PHEV and HEV) batteries was 75.2 GWh, a year-on-year increase of 39%, continuing the growth trend since the third quarter of 2020 .

Among them, CATL still leads the global power battery market and is the only battery manufacturer with a market share of more than 30%. However, CATL's installed capacity increased by only 34% year-on-year, far less than last year's 100%-200% year-on-year growth, and its market share also fell by 1.2 percentage points to 33.9%. As the world's largest battery company, CATL's growth slowdown has also impacted the global power battery market. However, CATL is not sitting still. It seems to be trying to use the "lithium rebate" plan to bind Ideal, NIO, Jikrypton and other companies strategic customers to fend off smaller competitors.

In contrast, BYD has further widened the gap with LG New Energy and continues to be the runner-up in the global power battery market. BYD's installed capacity surged 122.6% year-on-year, and its market share increased from 11.3% to 18.2%. According to data estimated by SNE Research, in the first two months of 2023, BYD's global electric vehicle sales increased by 93.7% year-on-year to 352,000 units, while Tesla's sales increased by only 55% in the same period. BYD is still the world's best-selling of electric car manufacturers. Relying on the global electrification trend and scale effect, BYD has successfully ranked at the forefront of the global electric vehicle and battery industry.

Japanese and Korean battery giants rank 3 to 6 on the list. LG New Energy's installed capacity increased by 3.4GWh year-on-year, and its market share was basically the same. It ranked third for two consecutive months this year. Thanks to Tesla's substantial growth in sales, Panasonic, which had weak growth last year, had a good start this year, ranking third for two consecutive months. It has maintained growth every month, and the year-on-year growth rate is even higher than that of CATL; SK On’s installed capacity increased by only 3.8%, making it the battery company with the smallest growth rate on the list; in contrast, Samsung SDI had the largest growth rate among Japanese and Korean companies. Battery manufacturer.

China's second-tier battery manufacturers are still ranked at the bottom of the Top 10 list, and will be under greater competitive pressure this year than larger manufacturers. China Airlines, which hopes to be among the top five in the world, had a bad start and was ranked 7th. Its installed capacity was almost the same as the same period last year and its market share decreased by 1.1 percentage points. Guoxuan Hi-Tech's installed capacity fell by 8.2% year-on-year and was the only one on the list to show a downward trend. manufacturers; Yiwei Lithium Energy's installed capacity increased by as much as 73.9% year-on-year, and its market share was close to Guoxuan Hi-Tech; Sunwoda's installed capacity increased slightly by 17.5%, but its market share fell by 0.3 percentage points.

Overall, in the first two months of this year, the market share of China's six major battery manufacturers was as high as 60.7%, higher than the 57.1% in the same period last year, mainly due to BYD's market share increasing by 6.9 percentage points; Japanese battery manufacturers' The market share also increased slightly by 0.6 percentage points to 10.4%; however, the market share of South Korea's three major battery manufacturers decreased by 0.2 percentage points compared with the same period last year, to about 23.7%.

CATL will be difficult to replace or copy in the short term

SNE Research believes that the pattern of the global battery industry does not seem to change significantly for a period of time, and the dominance of Chinese companies is expected to be maintained for a period of time. Bloomberg columnist Anjani Trivedi has a similar view to SNE Research. She believes that no company can compete with CATL in the short term, and even the transformation of global electrification depends on CATL. Trivedi also believes that the road to electrification without CATL will not be easy. CATL does not necessarily need Ford and Tesla, but automakers in the United States and even around the world that are eager to quickly electrify do need CATL.

In recent months, news that CATL would enter the U.S. market with partners such as Ford Motor and Tesla has caused a stir. The growing number of automakers turning to a Chinese company that has dominated the market for years also raises a broader question - how did it become so dependent on global automakers? How did it successfully position itself as such an important cog in the global electrification process?

Many people believe that CATL’s current strong position in the global power battery market comes from its huge scale. CATL supports pragmatic technologies, develops targeted partnerships, and develops viable production markets at increasingly lower prices, which are adopted by Tesla, Mercedes-Benz, and many other car companies in their electric vehicles. CATL batteries. However, Trivedi believes the key to CATL's strong position is the way it has scaled up its products and manufacturing facilities - licensing intellectual property and acquiring minority stakes. Where possible, CATL has built large factories and invested in raw material mines to tightly control supply. CATL has penetrated deeply into the value chain and supports small electric vehicle companies. CATL has created a vast global empire of partners and factories, making it an almost integral part of the global electrification transition.

Secondly, CATL’s “overseas” layout also laid the foundation for its dominant position in the market. It is reported that CATL’s overseas revenue will increase by 176% year-on-year in 2022, accounting for nearly a quarter of its total revenue. CATL's most ambitious international projects are located in Europe, where tightening regulatory rules have accelerated the popularity of electric vehicles and the prospects for energy storage products remain bright. CATL already has factories in Hungary and Germany and is considering building a third factory in the region.

Although the United States was not a priority country during the CATL era, it was not completely ignored. In 2020, CATL purchased a factory in Glasgow, Kentucky, investing nearly US$100 million and planning to employ about 350 workers. CATL made this layout before the United States introduced the Inflation Reduction Act. Two years ago, CATL also opened its first sales outlet in North America in Detroit.

In addition to Europe and the United States, CATL is also deploying its battery business in other regions around the world. In Japan, CATL cooperates with Toyota Motor subsidiary Daihatsu Motor to supply electric vehicle batteries; in Indonesia, CATL has invested nearly US$6 billion in some Indonesian state-owned nickel miners; in Thailand, where the development of electric vehicles lags behind, CATL is licensing proprietary technology to Arun Plus Co., a subsidiary of Thailand’s state-owned oil and gas giant PTT Pcl; and in Bolivia, CATL is helping to develop untapped lithium reserves.

CATL's important position in the automotive and electric vehicle supply chain is also due to other factors. It's clear from the efforts of other battery manufacturers that mass-producing high-quality batteries is no easy task. Every factory CATL now builds has lower costs, is virtually self-sufficient in the supply of raw materials and components, and maintains firm control over R&D activities. It is expected that CATL's battery production capacity will increase to a maximum of 800 GWh by the end of next year, more than doubling from the end of 2022. CATL spent more than 48 billion yuan on this and cleverly adjusted commodity pricing contracts to increase profit margins. CATL has more than 5,500 domestic patents and 1,065 international patents, and has been vigorously protecting its intellectual property rights through legal means.

However, the expansion of CATL has not been smooth sailing. Over the past six years, CATL's gross profit margin has dropped from 43.7% in 2017 to 20% in December last year. However, there is always a balance that needs to be struck between profit margins and market share. Investors have long been worried about whether falling profit margins will ultimately hamper CATL's growth, so CATL recently adjusted battery pricing that will help reduce costs more broadly.

At this rate of development, and with its "tentacles" firmly rooted in all parts of the world, it will be difficult for CATL to be replaced or copied in a short period of time.