Ningde Times signed another big deal recently, but this time it’s not for batteries – it’s for technology.
On October 27th, Ningde Times signed a technology license and cooperation agreement with Hyundai Mobis. Ningde Times will authorize Hyundai Mobis to use its CTP (Cell to Pack) technology and support the provision of CTP-related battery products in Korea and globally.
Hyundai Mobis is the world’s seventh-largest automotive parts supplier and a key supplier for Hyundai-Kia. Hyundai’s battery packs are also supplied by Mobis.
This move means that not only has Ningde Times’ product been recognized by international automakers, but its technology has also outshone its Korean peers to the point that Hyundai Mobis is willing to go to great lengths to get it.
For Korean power battery companies, this is a heavy blow, even a nail in the coffin. Moreover, Ningde Times has already become the main supplier of electric vehicle battery cells for Hyundai-Kia’s dedicated E-GMP. By winning the CTP technology license, Ningde Times has taken a leap forward into the heartland of Korean battery companies.
Ningde Times has just taken 31% of the global market share in the battery industry in the third quarter of this year. The Hyundai Mobis project is another “coronation” for Ningde Times. This is also a memorable moment in the history of Chinese power battery development – Chinese battery companies are starting to “pay tuition fees.”
CTP Battery: Big Improvements in Performance and Cost Reduction
Why does Hyundai Mobis want to obtain Ningde Times’ CTP technology license?
CTP has been around for more than two years. In 2019, Ningde Times publicly showcased its CTP (Cell to Pack) high-efficient grouping technology for the first time at the Frankfurt exhibition.
Compared with traditional battery packs, the performance of CTP battery packs has been significantly improved, while costs have been greatly reduced. In terms of performance, the average energy density of traditional battery packs is 140-150Wh/kg, while the system density of CTP battery packs in Ningde Times’ recent projects is expected to exceed 250Wh/kg, a significant lead over the industry’s average level, thanks to the high-energy density battery cells and other technologies.
In terms of cost, the number of components in CTP battery packs has been reduced by 40%, while production efficiency has been increased by 50%.The benefits of simplifying module structure are obvious, but some peers have concerns. For example, will safety be compromised with the increase of energy density after simplifying the module structure? By adopting CTP technology, do car companies have less say in the design of battery packs and are they willing to cooperate?
In fact, when simplifying the module structure, CATL (Contemporary Amperex Technology Co., Limited) fully considered issues such as structural strength and safety. Its battery pack case is injection molded and can accommodate multiple battery cells. Thermal conductive glue is filled inside the battery pack shell for easy heat dissipation. In addition, the battery cells and BMS are separately reinforced with protection levels, which can reduce the protection level of the battery pack shell.
From the perspective of CTP’s subsequent development, these concerns from peers have not become obstacles to its expansion. Before cooperating with Mobis, CATL’s CTP products had already had many customers domestically and internationally.
In China, BAIC New Energy was the first company to adopt this technology, and its best-selling model, the EU5, is equipped with this technology.
After that, new energy vehicle manufacturers such as NIO and Xpeng also launched models equipped with this technology, some of which were bestsellers.
Internationally, in October 2019, CATL signed a long-term strategic cooperation agreement with Volkswagen Caminhões e Ônibus, which includes the introduction of CTP technology.
In April 2020, CATL signed a cooperation agreement with VDL Bus & Coach in the Netherlands to supply the latter’s electric buses with battery systems based on CTP technology.
In August 2020, Mercedes-Benz announced that it had reached an agreement with CATL. Its EQ series light commercial vehicle products will use CATL’s battery cells and modules or a complete battery pack. The agreement includes CATL’s CTP design for some projects.
It can be said that CATL’s CTP products have been widely accepted by car companies. Before applying it to Mobis, CATL’s CTP products had already been tested in the market.
By adopting CATL’s CTP technology, Mobis’ battery pack can have better performance while ensuring safety and stability, to meet the demand for competitive electric vehicle models from customers such as modern cars.
Especially considering Mobis’ previous joint venture with LG for batteries, used in models like the Kona, which experienced fire problems and recalls, Mobis was eager to find a safe solution to regain confidence. CATL’s CTP technology can be said to have solved Mobis’ urgent needs.
Global Market Share: 31%CATL has taken the position of the leader in the global power battery competition since 2017, by continuously ranking first in global installed capacity of power batteries. This trend is continuing. According to SNE Research, the total installed capacity of electric vehicle batteries worldwide in the first three quarters of 2021 was 195.4 GWh. CATL’s installed capacity of power batteries reached 60.9 GWh, ranking first with a market share of 31%, leading the second place by nearly 7 percentage points.
Regarding global customers, CATL has almost included all first-line international brands, including Tesla, BMW, Volkswagen, General Motors, PSA, Hyundai, and Toyota since 2018. This year, CATL has deepened its collaboration with first-line automakers, including obtaining the main supply of Hyundai’s pure electric platform for 2023 and renewing a four-year supply agreement with Tesla.
In China, CATL’s leading advantage is even more apparent, and it has had half of the market share for almost two years. According to the data of China Automotive Power Battery Innovation Alliance, in the first nine months of this year, CATL’s market share of power batteries was 50.8%.
In terms of key customers, CATL supplies over 50% of the batteries for automakers such as NIO, Li Auto, BAIC New Energy, SAIC Motor, Great Wall Motor, Geely, Dongfeng, and Yutong, which are indispensable core suppliers among new energy vehicle companies.
CATL is accelerating the expansion of its production capacity towards the TWh era, with an annual production capacity of 131 GWh and 92.5 GWh under construction as of the first half of the year. According to its previously announced plan, CATL’s total planned production capacity is about 770GWh. According to the prediction of TF Securities, the actual product schedule of CATL’s production capacity will reach 125GWh, 197GWh, and 398GWh from 2021 to 2023.
CATL has not only accelerated its own production capacity layout but also gotten involved in the upstream, which is one of the battery companies with the deepest layout in the upstream. The existing production capacity and shipments, as well as the production capacity and raw material guarantees prepared for the future, all indicate that CATL hopes to maintain its leading position in the global competition and will not cooperate with others.
From Paying Tuition to Collecting Tuition
Undoubtedly, CATL faces enormous challenges.On the international front, Japan’s Matsushita and AESC, as well as South Korea’s LG, Samsung, and SKI, are all unsatisfied with the rise of China’s CATL, and new competitors are emerging, particularly car companies that produce batteries themselves or support companies that do so: Tesla will soon produce its own batteries, Mercedes-Benz will start producing batteries in 2023, and carmakers like Daimler, Volkswagen, BMW, and Renault are supporting Northvolt’s plan to start mass production this year…
On the domestic front, old rival BYD is trying to regain its leading position by riding the tide of lithium iron phosphate, and companies such as Heter Energy, AVIC Lithium Battery, EVE Energy, and Xinwanda are all trying to expand their market share, all targeting CATL’s customers.
Conquering the market is difficult, and defending the market is even more difficult. How will CATL resist the attack of its competitors?
Setting aside scale, cost, and supply chain advantages, CATL has clearly built a long and deep moat in research and development.
The development of the CTP technology by CATL is not accidental, as CATL has been continuously and heavily investing in research and development.
In 2016: 1.13 billion yuan; 2020: 3.57 billion yuan; in the first half of 2021 alone: 2.79 billion yuan… In recent years, CATL’s investment in research and development has grown visibly and rapidly, with the scale and proportion of investment ranking first in the power battery industry.
LG Chemical, one of CATL’s major international competitors, can be used as a comparison: LG Chemical’s research and development expenses were higher than CATL’s in 2016 and 2017, roughly on par with CATL in 2018, and surpassed by CATL in 2019. The proportion of LG Chemical’s research and development expenses has plummeted.
High investment also brings high returns. In terms of research and development patents, as of June 30, 2021, CATL has 3,357 domestic patents and 493 foreign patents, while 3,379 domestic and foreign patents are currently being applied for.
The recognition from peers is the most convincing, especially from the Japanese and Korean companies that were once considered the “teachers” of the Chinese battery industry.
In terms of technology output, Mobis is not the first one to receive technology transfer from CATL. Earlier, CATL obtained technology licenses from ATL, a subsidiary of TDK, which is a globally renowned Japanese electronic component enterprise. As early as 2012, ATL had already become the global leader in the field of polymer lithium-ion batteries, with a global market share of nearly 50%. CATL was originally the power battery department of ATL. CATL’s Chairman and CEO, Zeng Yuqun, also served as President of ATL.In May of this year, CATL signed a “Cross-Technology License Agreement” with ATL to cross-license lithium-ion battery-related technologies that each party has developed or obtained. During the license period of the agreement, ATL will pay CATL 150 million US dollars every 12 months.
ATL’s and Mobis’s purchase of CATL’s technology is also a moment worth recording in the Chinese battery industry. Chinese battery companies, including CATL, have paid considerable licensing fees for patents to Japanese and Korean companies in the past. Now, Chinese battery companies can also collect licensing fees from Japanese and Korean companies.
Some people keep asking if CATL’s current market share is sustainable. Looking back on CATL’s rise, many people may think that CATL relies solely on the cost advantage of “Made in China”. However, CATL’s relative advantage today can only be formed by combining effective cost control and efficient supply chain management with continuous investment in R&D.
Once this advantage is established, the scale effect and inertia effect become very significant. Therefore, despite previous attempts by various forces to challenge CATL’s position, CATL’s current advantage remains undiminished.
CATL’s R&D investment, R&D personnel, laboratories, R&D projects, patents, product schemes… These are CATL’s moats and strong support for its near half market share in China and nearly one-third market share worldwide. Any newcomers who attempt to challenge CATL must spend enough time and money in the field of R&D.
According to CATL’s announcement, only in the past 5 and a half years from 2016 to the first half of 2021, CATL needs 14.108 billion RMB.
This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.