The overseas market is an important incremental market for CATL's future. In recent years, CATL has been conveying its determination to strengthen overseas layout, and the latest exposed No. 1 document has made CATL's overseas layout structure apparent. According to a report by LatePost, CATL's 2024 Presidential Office's No. 1 document is a mobilization letter for going overseas, and it was personally issued by CATL's chairman Zeng Yuqun.
Harvest overseas, break away from inward competition
According to the report, Zeng Yuqun expressed in the letter: The domestic market is becoming more and more competitive, CATL's overseas market share caught up with LG last year, and there is still more room for growth; in 2024, the international situation is rapidly changing, but the trend of new energy is an international consensus, and temporary uncertainties give more opportunities to those who are capable. According to statistics from SNE, CATL's overseas power battery market share in 2023 was 27.5%, an increase of 4.7% year-on-year. This is also directly reflected in performance. In 2023, CATL's overseas business grew rapidly, with overseas revenue reaching 130.992 billion yuan, a year-on-year increase of 70.29%, accounting for 32.67% of total revenue. However, on the contrary, CATL's domestic market share has dropped to 43.1%, facing a growth bottleneck. CATL has realized this change. In the 2023 annual report released in March, CATL stated that the company will further increase market promotion efforts, actively explore emerging markets, especially overseas markets, and try to reduce the impact of demand fluctuations from a single product and a single market. Zeng Yuqun's internal letter again mobilizes to go overseas, indicating that "harvesting" the overseas market is urgent. Therefore, Zeng Yuqun is personally in charge of CATL's overseas business, while Tan Libin, Huang Siying, Feng Chunyan, and Zeng Rong, the four co-presidents, are responsible for overseas sales, overseas infrastructure, overseas base operations, and overseas procurement, reporting directly to Zeng Yuqun.
Achieve complete localization
Developing the overseas market is not just simply exporting batteries. CATL's plan is to take the initiative and achieve complete localization of the supply chain. The report points out that CATL has already built and prepared and is building a total of 8 factories overseas, and at the end of last year, it contacted some material suppliers to go overseas to build factories. The details are as follows: The German factory was built in 2018 and achieved cell production in 2022, with a capacity of 14GWh; The Hungarian factory was built in 2022, with a capacity of 100GWh, originally planned to be completed in about 2 years; In Indonesia, it has created six industrial chain projects including "upstream material development - smelting - material - battery manufacturing - battery recycling", of which five projects are controlled by CATL; The Thai factory plan is expected to be announced in 2024; Plans to build a battery factory with an annual capacity of 1.5 million vehicles in a joint venture with Stellantis in Spain; Began considering building a battery cathode material factory in Morocco at the beginning of this year; The Michigan factory in the United States cooperates with Ford in a technology licensing model; The Nevada factory in the United States cooperates with Tesla in a technology licensing model. Judging from the above factory plans, CATL's goal is Europe, the United States, Southeast Asia, and Africa, with a combination of wholly-owned, joint ventures, and technology licensing models.
Although the planning has been accelerated, the actual situation is that the construction speed of CATL's (Contemporary Amperex Technology Co., Limited) factory projects in Europe is slower than expected. Reports indicate that CATL's German factory is still in the pilot production phase. Sources reveal that CATL plans to scale up production at the German factory when European car manufacturers demand localized production, which might be in 2026. The Hungarian factory has completed its construction, but the production equipment has not yet been installed. According to the original plan, the Hungarian factory was supposed to start production within 2025. However, due to slower-than-expected supply chain setup, the start of production at this factory may be delayed, with an estimated supply commencement in 2026. As for collaborating with material suppliers to build factories overseas, CATL is making efforts, but the results have not been satisfactory so far. The report points out, "In the third quarter of last year, one of CATL's cathode material suppliers, Huayou Cobalt, announced a joint venture with LG to build a factory in Morocco. Senior management at CATL was dissatisfied with this, as they believed Huayou Cobalt should prioritize cooperation with CATL." This may be one of the reasons why CATL is considering building a cathode material factory in Morocco on its own, which could also supply its various battery factories in Europe. After all, without autonomy, one has to bear higher costs. According to estimates by several supply chain insiders, the material procurement cost at CATL's German factory is about 40% higher than in China. Additionally, it is worth noting that insiders say CATL may also plan to build factories in Greece or Slovakia.
Technology Licensing Becomes a "Game-Changer"
The LRS (License Royalty Service) introduced by CATL, i.e., the technology licensing model, is a method where CATL uses licensing, authorization, and services to help vehicle manufacturers and even battery manufacturers quickly build battery factories. The capital expenditure for the factory is entirely borne by another manufacturer, and CATL does not hold shares in the cooperative factory but instead collects patent licensing fees and service fees. There is a story of wisdom behind the introduction of this technology licensing model. Originally, CATL planned to build its own battery factory in Mexico or Canada to serve American car manufacturers. However, due to changes in the political environment, especially the introduction of the US IRA (Inflation Reduction Act), CATL adjusted its strategy for entering the US market - opting for the technology licensing model instead. This model was first applied to the cooperation with Ford's Mexico factory project and was later cooperated with Tesla. Currently, CATL is negotiating with General Motors on a technology licensing cooperation model, planning to jointly build a lithium iron phosphate power battery factory in North America, which may be located in the United States or Mexico.
A model that was considered a compromise has become an important tool for CATL to quickly open up the overseas market. Moreover, CATL has taken the technology licensing model as the first practice case of open innovation and is negotiating similar cooperation with another 10-20 car manufacturers in the United States and Europe. Zeng Yuqun stated in an internal letter that technology licensing is crucial for CATL's overseas expansion in the next 5 to 10 years. Of course, car manufacturers will not be willing to be "lab rats" either. Reports say that to ensure attractiveness, CATL has included a "competitiveness clause" in the technology licensing cooperation, such as CATL's commitment that the purchase price of battery materials for car manufacturers cooperating with CATL will be consistent with CATL's own purchase price - about 10% lower than ordinary battery companies.
Author：Lithium Power Online
Link：https://mp.weixin.qq.com/s/PV5wA93gx9He-U39qcrK9A