Economy

Zeng Yuqun: How the battery manufacturer should ensure Tesla’s success in China

CATL CEO Zeng Yuqun

CATL CEO Zeng Yuqun

picture alliance / ASSOCIATED PRESS | Jens Meyer

If Tesla is to dominate the world of electric cars, it needs to thrive in China, as the country has the highest sales in the electric car industry to date. After falling numbers last year, Tesla now wants to continue to fight its way to the top of the electric car industry in China. To do this, Tesla CEO Elon Musk turns to battery engineer Zeng Yuqun, the news company Bloomberg reported.

Zeng Yuqun is 52 years old and founded Contemporary Amperex Technology Co. Limited (CATL). In less than a decade, it became China’s largest battery maker, creating the world’s largest producer of rechargeable batteries for electric cars, which are considered the future of the automotive industry.

The products of his company CATL can be found in the vehicles of almost all major global car brands. Starting this month, they will also power Tesla’s electric cars currently being built at the Shanghai factory. The cooperation between Tesla and CATL has lucrative potential. The collaboration combines the most popular plug-in vehicle, the Tesla Model 3, with inexpensive batteries.

Batteries from CATL can bring decisive advantages to Tesla

According to Yuqun, there is already a developing partnership between the two company executives. In doing so, they will discuss the future cooperation and possible strategies for coping with the economic effects of the pandemic. The main focus is on the development of cheaper batteries and vehicles. “Elon talks about costs all day. I told him that he could be sure that I had solutions, ”Yuqun said in an interview with Bloomberg.

With a view to the future expansion of the electric vehicle industry, the batteries from CATL Tesla can offer decisive advantages. The cooperation has the prospect of increasing Tesla’s profit margins and lowering sales prices. CATL is expected to supply Tesla with lithium iron phosphate (LFP) batteries that use a cheaper mix of raw materials. These cost around 20 percent less to manufacture than other common types of batteries, according to Bloomberg.

picture alliance / dpa / dpa-Zentralbild | Martin Schutt

Working with a domestic battery supplier like CATL could greatly improve Tesla’s relationship with the Chinese authorities and ensure the company’s success in China. CATL boss Zeng Yuqun is a member of the advisory board of the top management and has direct influence on the authorities.

The cooperation comes at a crucial point in time for CATL as well. According to SNE Research, battery sales decreased by almost a third in the first five months of 2020. Due to the pandemic, the trade crisis and the cut in government subsidies, car purchases in China have plummeted. The battery’s domestic market share also declined when Tesla launched its first China-made Model 3s powered by LG and Panasonic batteries. According to the company Sanford C. Bernstein, CATL will supply components for around half of the production at the Shanghai plant from next year.

The collaboration with Tesla will boost domestic sales. However, CATL also needs to acquire additional customers to improve its prospects outside of China. The competing battery companies LG and Panasonic are currently positioning themselves there at a rapid pace. “CATL’s success is largely due to strong demand in China,” said BNEF analyst Daixin Li. “As the electric car markets outside of China are growing rapidly, the future will depend on how successfully CATL can secure demand outside of China in order to maintain or even increase its market share in the global market. “

The battery supplier is interested in expanding ties with Tesla. This also includes the first European Tesla factory, which is currently being built near Berlin. CATL is building its own battery factory in central Germany. “We will not rule out the possibility of supplying the Tesla factory in Berlin,” said Yuqun in an interview.

CATL is able to produce a battery that will last 16 years and two million kilometers

The battery supplier sees an advantage in accelerating research into low battery costs. In this way, electric cars can achieve the same price as gasoline vehicles in the near future and increasingly displace them from the market. To this end, CATL wants to bring new types of batteries onto the market that are manufactured without the extremely expensive raw material cobalt. Other expensive metals such as manganese and nickel are also to be eliminated from production. According to Yuqun, the company is capable of producing a long-lasting battery that will last up to 16 years and two million kilometers. It is intended for use in several vehicles and as an energy storage device. Such a development is an industry milestone that other companies such as Tesla and General Motors are also striving for.

The company is increasingly investing in research. Last year, research expenditure rose by 50 percent to almost 385 million euros. High-quality factories and laboratories are being built for this purpose. More than 5,400 employees work in the company’s research and development department alone. The whole company is geared towards “innovating the structure and chemical system that will enable Tesla cars to drive a longer range at a lower cost,” said CATL CEO Zeng Yuqun. “That’s probably why Tesla likes us.” Using LFP batteries could cut costs by between 500 and 1,000 euros per car.

So far, however, the LFP batteries produced by CATL are not as powerful as more expensive alternatives. But technology is on the rise. “It could be pretty explosive if you get this in the international market because no one else is using LFP outside of China in all-electric cars,” said Mark Newman, a Hong Kong-based senior analyst at Bernstein. This could give Tesla a significant advantage in the electric vehicle industry.

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