Why is CATL Benefitting from Battery Power Policy Change?
Contemporary Amperex Technology Ltd. (CATL), a leading global manufacturer of lithium-ion batteries—and supplier of leading automotive companies Volkswagen and Geely Automobile Holdings, is benefitting from Beijing’s tightened restrictions on its technology industry by earning US$9bn worth of investments through a private placement. The company, listed at US$172bn, is taking advantage of a surge in stock prices and record issuance of stocks this year—compared to US$3bn in the previous year.
What is China’s ‘Big Tech Crackdown’?
China is carrying out a series of measures to manage various aspects of the technology industry, including antitrust probes, data security, and disorderly capital expansion. The ‘crackdown’ has been described as a clash between the Chinese government and the technology sector.
Contemporary Amperex Technology is Safe from ‘Crackdown’
It seems CATL is safe from the effects of policy changes—confirmed by its 40% increase in stock prices this year—as Chinese President Xi Jinping pushes for the implementation of battery-electric vehicles to drive decarbonisation across the country—not to mention the global demand for battery technology. The research organisation, Bernstein, estimates that the global demand for large batteries will expand from 166GWh to 933GWh by 2025. By that point, CATL will have increased its energy capacity five-fold to 400GWh—as estimated by S&P.
The company is somewhat safe from regulation changes that affect electric vehicle (EV) makers. It does not collect driver data—one of the major pain points driving regulatory pressure, which has adversely affected shares in Chinese internet champions, education technology companies and real estate developers.
CATL’s Success Provides Renewable Energy Expansion
CATL has made plans to put its stock market success to good use with the installation of an extra 137GWh of energy production capacity in China. The company also operates a facility in Germany and aims to expand its customer base outside of China. By leveraging low production costs and the company’s innate ability to raise capital, CATL certainly holds a competitive advantage in the battery production industry.
