Chinese battery maker Contemporary Amperex Technology (CATL) [300750:CH] announced on February 25 to invest up to RMB10.5bn in the expansion project of its new energy vehicle (NEV) battery production lines in Jiangsu Province, as reported by Sina on the same day. Notably, this is the company’s third production capacity expansion plan in three months. The project will have two construction phases. The first phase will be completed within 15 months, after which the second phase is scheduled to start within one year. The total area of the expansion project is about 880 mu (around 58.67 hectares), including 425 mu in phase I and 455 mu in phase II.
For market demand and policy supports, the sustainable development of the NEV battery market can be expected. China’s NEV subsidy policy has promoted the NEV consumption in the past. According to China Association of Automobile Manufacturers (CAAM), the sales of NEVs in 2020 were 1.37m units with a YoY increase of 11%. Although there is 20% decline of the subsidy in 2021 compared with that of 2020 and the policy does not set up a corresponding transition period, the impact on some NEV makers with large market shares is relatively small. On the other hand, the phase-out subsidy policy promotes the competition in the domestic NEV market, where good companies with competitive advantages will survive.
CATL offers various battery products for multiple automobile models and other transportation vehicles, and can benefit from the policy and increasing demand for high-quality batteries. In the past several years, the company remains the largest NEV battery maker in the country in terms of installed battery capacity, with a 59% market share in 2020. In the past three months, CATL has announced a combined RMB78.5bn production expansion plan. According to GGII’s forecast, the annual growth rate of global lithium battery shipments in 2021-2022 is expected to be about 40%, reaching about 500GWh in 2022.