Three Chinese electric vehicle battery and materials companies are seeking investors for more than $10 billion in new funding as the country consolidates its dominance in global cleantech supply chains.
China’s Contemporary Amperex Technology, the world’s largest battery maker, completed the world’s second-largest equity market transaction this week as a wave of battery and rare-earth companies surge rushes to meet the booming demand.
The combined fundraising by the three Chinese groups – CATL, Tianqi Lithium and Huayou Cobalt – eclipses the hundreds of millions of dollars spent by Washington and its main American allies, including Australia and South Korea, to undermine the supremacy of China in the sector.
“China is trying to position itself as the Saudi Arabia of clean technology hardware, being the cheapest supplier and getting the highest market share,” said Neil Beveridge, principal analyst at Bernstein in Hong Kong. “This is a massive geostrategic competition between China and the West.”
Factories in China currently account for almost three-quarters of global electric vehicle battery production. The superpower has a 90% market share for processing rare-earth elements – the oxides, metals and magnets used in batteries – a level of dominance akin to its stronghold in the solar industry.
CATL, a key supplier to Tesla and local Chinese automakers such as Geely, launched its Rmb45 billion ($7 billion) private placement last week, pricing its shares at Rmb410 per share on Wednesday. Including the latest giant stock sale, CATL has raised about $13 billion since its IPO in Shenzhen in 2018, according to Financial Times calculations and data from Refinitiv.
Foreign investors were eager to participate. JPMorgan, Barclays, Morgan Stanley, Macquarie and HSBC all grabbed a slice of the giant sale, accounting for around 32% of the total shares on offer.
Shenzhen-listed Tianqi Lithium, one of the world’s leading producers of lithium chemicals for electric vehicle batteries, is aiming to raise $1 billion to $2 billion in a secondary listing in Hong Kong, according to an investor close to the company.
The fundraising will be the largest in the Hong Kong stock market this year, even in the lowest range, according to Dealogic. Mainland shares of Tianqi have jumped more than 21% since early June.
Hong Kong-listed Huayou Cobalt, another major Chinese commodity supplier, plans to raise up to Rmb 17.7 billion via a private replacement. Most of the new cash will be used to expand production at its joint venture in Indonesia, where it processes nickel, an essential material for electric vehicle batteries.
More than 90% of the world’s battery-grade lithium is also produced from refineries in China, which also process the vast majority of cobalt and nickel, other key battery materials, according to Trafigura.
The West has been slow to react to China’s dominance. Earlier this month, the US Department of Defense signed a $120 million deal with Australian company Lynas Rare Earths to build one of the first US heavy rare earth separation facilities. In February, the Australian government provided a $100 million loan to Hastings Technology Materials to develop a rare earths mine and refining plant in Western Australia.
As demand for electric vehicles grows, global battery capacity is expected to increase by 40% per year until 2025, reaching 3,252 GWh from 823 GHh in 2021, according to Bernstein’s forecast. China’s EV battery capacity market share will decline slightly as the United States and Europe offer generous subsidies to build factories closer to their automakers, but still sits at about two-thirds of that. 2025.
Europe’s footprint will expand to 20% from 15% today, and that of the US to 12% from 8%. CATL will maintain its current global market share of 20% until 2025.
However, China’s cost advantage is expected to improve. Factories built in China have a unit cost of around $60 million per gigawatt hour, thanks to their massive scale. But it will decline even further, to around $50 million/GWh in the coming years, as plant sizes increase rapidly.
This compares to a global average of approximately $78 million/GWh over the next 10 years. The cost of new European battery plants already exceeds $120 million/GWh.
Ross Gregory of consultancy New Electric Partners said competitors’ concerns about Chinese rivals extended beyond geopolitical risk to difficulties in competing with the country’s massive domestic demand for electric vehicle batteries.
“It’s not just a fear that China might act blatantly, it’s just a fact that they have huge local demand,” Gregory said.
South Korean companies, including CATL rivals LG, SK and Samsung, are among those working to reduce reliance on China for critical battery materials by more than 60% today. today.
But in a sign of the appeal of cheap Chinese batteries, Korean car group Hyundai’s Kia brand plans to use CATL batteries in a new electric vehicle, marking the first time non-Korean-made batteries will be used in the domestic market. .
Additional reporting by Song Jung-a in Seoul and Neil Hume in London