The gates of history turn on small hinges. We know about how Elon Musk and his minions stuffed several thousand batteries into a Lotus Elise laptop and voila! The electric car revolution has begun. Although it certainly is part this is not the case in the modern EV story All that. CATL also had a lot to do with helping electric cars go mainstream.
Wired published an extensive story this week on Zeng Yuqun, CEO of Contemporary Amperex Technology Limited, of CATL fame. The company is the largest lithium-ion battery maker in the world, with a market capitalization larger than Ford and General Motors combined. Zeng, known to most as Robin, is ranked 29th Forbes list of the richest people in the world.
what the Wired the article sheds light on the role of Herbert Diess, the current CEO of the Volkswagen Group, in the creation of CATL. In 2010, Zeng worked for TDK, a Japanese company that among other things made laptop batteries. Diess was in charge of purchasing for BMW. He approached several battery manufacturers in Europe, including Bosch, about supplying batteries for electric cars, but none were interested.
This is where one of the minor hinges of history came into play. Diess asked Zeng if TDK would be interested in making batteries for EVs, but Diess said Zeng “rejected” the idea, saying he couldn’t imagine building such large batteries. However, the following year, TDK decided to sell its battery division for electric cars. Zeng and a few colleagues bought it and renamed it CATL “Diess brought our company into the car battery business,” Zeng said. Handelsblatt in 2020. “I’m grateful to him for that.”
Meet CATL and Zeng Yuqun
Diess may have inspired CATL to enter the EV market, but over the years, Zeng earned a reputation as a founder who could handle both batteries and business. Lei Xing, a former Beijing media editor China Auto Review he said Wired that when CATL bought the US patent for mobile phone batteries in the early 2000s, Zeng himself worked to improve the battery design. When BMW agreed to use CATL as a battery supplier, it was Zeng who read the 800 pages of requirements line by line, according to Yunfei Feng, a research associate at IMD Business School.
At one time, BYD was the largest battery manufacturer in China, but it focused on LFP technology. CATL decided to focus on NMC batteries instead. At that time, car companies were mainly interested in range, which favored NMC. CATL quickly expanded its business in China and began to establish business relationships with automobile manufacturers in Europe. Within a few years, it surpassed BYD to become the largest battery manufacturer in China and the world.
When China announced the EV subsidies, it said they were only available for cars that use Chinese-made battery cells. These subsidies created a demand for electric cars that drove CATL forward. Zeng, like Elon Musk, is an advocate of vertical integration. According to Kevin Shang, a research analyst in Wood Mackenzie’s global energy storage team, CATL has been able to use profits from battery sales “to invest in the entire supply chain, from mining to materials production to battery cell manufacturing and even recycling.” Today, the company controls lithium supplies in China, South America and Indonesia.
Address industry concerns
Bill Russo is the former head of Chrysler’s Northeast Asia business in Beijing. He now runs the Shanghai-based consultancy Automobility. He says Wired“The policy of the auto industry for a long time has been to never single-source because that gives too much power in relation to the supplier.” Under Zeng, CATL built a reputation as a take-it-or-leave-it company. It is not willing to manufacture batteries according to customer specifications and insists on long-term commitments to its clients.
But in the world of business, nothing ever stays the same. Manufacturers hedge their bets by establishing relationships with other companies. Tesla will soon start using LFP batteries from CATL and BYD. Panasonic is also a major supplier to Tesla. General Motors is building battery factories with LG Energy Solution, while Ford is working with SK Innovation to build two new battery factories.
CATL and the Chinese syndrome
Even as automakers try to avoid becoming too dependent on a single supplier, Zeng’s most important thread may come from China itself. “In the West, the cult of personality leadership style is something that is valued, encouraged and celebrated. It’s dangerous in China,” says Bill Russo. “You can’t be bigger than Beijing. warns.
Zeng is the opposite of Elon Musk. He stays out of the limelight and rarely gives interviews. Insiders point out that Zeng operates in an environment where notoriety could hinder, not help, his business. An example is Jack Ma, the co-founder of Alibaba and one of the richest people in China. After giving a speech criticizing Chinese regulators for stifling innovation, Alibaba’s IPO was quickly canceled and it received a record $2.8 billion antitrust fine. Ma’s personal fortune has been cut by $10 billion since last year.
The Chinese government has implemented what it calls its “shared prosperity” policy, which encourages sharing the wealth the tech industry has created with everyone who has contributed, not just those in the C Suites. Chinese President Xi Jinping has described “shared prosperity” as one of the country’s most important goals in the next 15 years. In June, banks in China were told to cut executive pay.
CATL has already faced mild reprimand for its behavior. In November 2021, the Shenzhen Stock Exchange expressed concern about CATL’s “excessive” funding. A crackdown on China’s electric vehicle and battery industry could have a profound impact on an industry the world relies on for the green transition.
There have been concerns that Beijing would prefer to replace CATL and other battery giants with a network of SMEs. But experts are divided on how much risk CATL faces. Russo believes CATL’s risk depends on whether Zeng can continue to balance the relationship between the government and his public persona.
CATL may have been key in helping China develop its dominance in electric cars, but the recent tech crackdown is a warning that Beijing may suddenly reorganize its industries if they clash with broader political ambitions. “Too much dominance is a hindrance,” says Russo. “And that’s something neither the industry nor the government would want.”
Takeaway
CATL’s rise to become the world’s dominant battery maker has been meteoric, but staying on top in China isn’t always about shareholder value. The government is still controlled by the Communist Party, which has a historical interest in seeing workers benefit. It is clear that freedom of speech is not a Chinese value. In fact, it can be a one-way ticket to the unknown no matter how wealthy the individual may be.
There are lessons for the Jack Ma saga that should be taken as a warning to anyone who thinks they are bigger than the party. Elon Musk may think he’ll be able to dictate who has what to say on the internet after he buys Twitter, but he’s fooling himself. The tech industry has a history of bowing to the dictates of the Chinese government as a condition of doing business in the country.
For Zeng Luqun, the way forward is to never slow down. He has doubled the number of battery researchers at CATL and they are working hard to improve sodium ion batteries that will be the antidote to the high cost of lithium battery raw materials today. The company is also building its own battery exchange infrastructure in China.
CATL made a name for itself by having the best batteries at the best price at a time when NMC chemistry dominated. If sodium batteries or battery swapping are the future, Zeng Luqun-led CATL will be ready.
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