The obligation to buy Chinese batteries, imposed four years ago, has made a decisive contribution to creating in China the strongest car battery manufacturing industry in the world, one of the most important sectors for the future of the automotive industry. At the moment China produces between 60 and 70 percent of all batteries in the world, but the largest producer is a Korean company, LG Chem (which owns several plants in China). By 2028, analysts expect it to be overtaken by China's leading battery manufacturer, the CATL company founded eight years ago by Robert Zeng.
Among the reasons for this overtaking, he wrote the Wall Street Journal in a recent article, there is the fact that LG Chem is not among the producers authorized by the Chinese government. In other words, if an electric car manufacturer wants to take advantage of the generous subsidies granted by the government, it must use a Chinese factory, like CATL, to buy its batteries. In theory the producers could decide to renounce the subsidies, but as several managers of automobile companies have told anonymously, Chinese officials have made it clear that exploiting different suppliers could lead to "complications".
In short, the big automotive groups, even if they are not happy to have to abandon their traditional suppliers, have little choice if they want to operate in a market where maintaining good relations with the government is at the same time fundamental and not always easy. The result is that today all the major electric car manufacturers in the world – Mercedes, Honda, Hyundai, Nissan, Toyota and Volkswagen – have a contract with CATL, the largest and most efficient Chinese battery manufacturer.
CATL is a company with a rather peculiar history. Robert Zeng, its founder, is a classic "self-made man", a man who made himself. He studied as a physicist and engineer and started doing business with a small smartphone battery factory that he supplied with Apple. With the money obtained from the sale of the company, he created CATL, which quickly became a world power in the battery industry. Practically a stranger until a few years ago, in 2018 Zeng appeared in the number 53 position in the list of the hundred richest men in China, with assets estimated at 5.8 billion dollars (mainly the result of the listing of his company on the stock exchange of Shanghai).
CATL, tells the Wall Street Journal, is a company built deliberately trying to imitate Huawei, the great Chinese new technology company (ended up in the midst of numerous controversies over allegations of links with the government). Imitate Huawei, continues the Wall Street Journal, meant to focus a lot on research and development, but also put under enormous pressure managers and employees, often stolen from competing companies by offering them high salaries. One of them recalled that when he was hired he was appointed manager of three different departments. "A lot of work, a lot of pressure" would be the true motto of the company, according to what he says.
If CATL does not have to be the place where it is more relaxing to work, with these methods the company has quickly managed to recover the quality gap in the products that until recently separated it from its competitors, the Korean LG Chem but also Samsung and Panasonic . Product quality aside though, CATL still seems to have several problems. Officially the big European brands say they are satisfied with the work of the company, but the Wall Street Journal has collected several anonymous opinions in which numerous executives complain about the still too high price of Chinese batteries and the slow delivery.
There is little to do, however, for those who want to continue to operate in the Chinese market. Although Zeng is a good manager, in fact, there is no doubt that the main reason for CATL's success is the support it has always enjoyed from the Chinese government which, starting in 2015, has forced more or less openly the foreign manufacturers to buy Chinese batteries. The government has also worked in other directions to ensure the success of this sector. Chinese companies have invested in numerous African cobalt mines, for example, an essential component in the production of batteries and on which China has almost a monopoly. More generally, China is believed to control between 50 and 70 percent of global supplies of raw materials needed for battery production.
In short, the Chinese government has positioned itself well and in time in one of the most promising markets. Much of the future of the automotive industry in the rest of the world will depend on the ability to do the same. In Europe, around 3 million workers are employed in this sector, concentrated mainly in Germany and Italy. The numerous estimates of their future made by governments and the European Commission tell us that in the worst case scenario the European Union could lose 1.8 million of these workers.
The loss will be compensated only if Europe succeeds in replacing the current production concentrated on petrol and diesel cars in the production of electric cars and, more importantly, if it will be able to start producing the batteries needed to make them work. In that case, the estimates say, employees in the automotive industry may even increase. There is still a long way to go, but for the moment something has started to move: the European Commission has launched the "European Battery Alliance", a plan that plans to invest one billion euros in a series of plants to start research and the development of new batteries.