- CATL is a huge part in
the EV revolution in China.
And it's important to
understand their relationship
with Tesla in depth.
- As Americans, it's really easy
for us to overlook the details
of what's happening in China.
However what's happening there
is arguably more important
for Tesla's future growth prospects
than what's happening here in the states.
Did you know that to date
CATL has only manufactured
prismatic cells?
- Did you know that CATL has
a company run dating service
that took credit for
52 marriages last year?
- But how about that CATL is the supplier
for your iPhone and your MacBook?
Or did you know that CATL
may also be setting up
to supply Tesla with cells at Giga Berlin
in addition to Giga Shanghai?
In this episode we'll give
you all of the information
you need to understand the Tesla
and CATL relationship in depth.
And we'll give you some fun facts
for user dinner parties and search.
(upbeat music)
CATL or Contemporary
Amperex Technology Limited
was founded in 2011 by Zeng Yuqun.
Because I'm certain I'm
pronouncing that wrong,
we'll stick with his
Western name, Robin Zeng.
CATL grew rapidly with the
help of government policies
and a defacto ban on foreign companies
selling batteries in China.
On the back of Chinese subsidies,
CATL developed into a dominant
battery supplier and by 2017,
they took the world number
one spot for the first time
unseating, LG Chem and Samsung SDI.
- Zeng actually worked
on lithium ion batteries
for consumer electronics
for most of his career.
- While president of just
Amperex technologies,
the consumer electronic battery division
Zeng took a huge gamble on the direction
of Chinese policy moving forward.
In 2011, there were only 1000
alternative energy vehicles sold in China.
However, Zeng decided to
spin off CATL from ATL
with the hope that the future
of lithium ion batteries
for the EV market would expand.
And expand it did
as government subsidies for the NEV
or new energy vehicle
market reached $12 billion
by 2016 and 17.
CATL also benefits from an
aggressive Chinese policy
where the government acquires lithium,
nickel and rare earths
and provides these minerals
to the battery manufacturers.
These Chinese mining companies
are responsible for 62%
of the global supply of cobalt.
Earlier this year in February,
Tesla and CATL signed a two year deal
in which CATL will provide Tesla
with batteries at Giga Shanghai.
The contract is set to run through 2022,
but it's a nonbinding
production pricing agreement,
which means it's unclear
how many batteries
Tesla will actually buy from CATL.
And one could argue this contract
is experimental in nature
as it's rumored that this deal with CATL
is significantly smaller than the deal
Tesla has in place with
LG Chem at Giga Shanghai.
- CATL will be making LFP batteries
without cobalt for Tesla
vehicles in Shanghai.
They should eventually supply batteries
for half the Shanghai plant output.
- If you're not familiar,
LFP stands for lithium iron phosphate.
These batteries are set to be anywhere
from 10 to 20% cheaper than
the NCA and NCM chemistries
that Tesla has used to date.
This could result in
Tesla's cost per car falling
from 600 to $1,200 per unit.
And yes, LFP technology
is less energy dense,
but one thing not enough
people are talking about
about CATL is their
cell to pack technology.
CATL has claimed this cell to pack tech
can increase energy density by 10 to 15%
and improve volume
utilization by 15 to 20%.
In total, it can reduce the parts needed
for the battery parts by 40%.
And guess who else is
moving towards cell to pack?
You got it, Tesla.
At Elon's interview with Third Row,
he explained how the four module system
being used in the model
of three is not necessary
as the modules are not
actually interchangeable.
He said quote, "The original reason
why the Roadster pack
had like 16 blades or modules
was that if one of them didn't work,
you could pull it out and put another in.
The modules in the model three
are not actually interchangeable,
so there's no point in
having modules really,
we should just have a pack," end quote.
Every model S and X built
today are actually capable
of swapping a battery pack,
but there are no stations
to perform this task.
- Tesla does actually
have a patent application
for this cell to pack technology.
- The patent describes a new approach
where battery pack parallel subgroups
are made integral to the cells themselves.
This is contrary to the old way
where single battery cells
come from the battery manufacturers
and are then placed
into modules separately.
The cell manufacturing plants
would become battery sub-module plants.
What comes out of the
plant will look like this.
A CATL cell to pack battery
can increase system energy density
from 180 watt hours per kilogram,
to more than 200 watt hours per kilogram.
And at the cell level,
the energy density has reached
240 watt hours per kilogram.
And by 2024, CATL aims to
increase their energy densities
to 350 watt hours per kilogram.
- With Tesla and CATL
working on this cell to pack technology,
there's a chance they work
together to further improve this.
- CATL is also right now
building a factory in Germany
and we know that Tesla will also be there.
The factory is set to be one
of the largest in Europe,
both in terms of size and
production capability.
It's assumed that this plant
is going to be predominantly
to help feed BMW.
CATL is definitely committed
to expanding outside of China
as to date almost 90% of their
revenue has come from China.
If Tesla and CATL can make
this partnership work,
there is huge opportunity
for global expansion with this model
as no one else outside of China
is using this low cost LFP technology
in a pure electric vehicle.
In a recent interview, Zeng said quote,
"We won't exclude the possibility
to supply Tesla's Berlin
Gigafactory," end quote.
Elon and Zeng have become friends.
And then he apparently
exchange text messages often.
They discuss innovations and
their overlapping technology,
responses to the current global issues,
and of course, cheaper
batteries and vehicles.
I really liked what Zeng
said about Elon recently.
Saying quote, "Elon talks
about costs all day long,
and I told him to be assured
that I would have solutions.
We get along well, he's
a fun guy," end quote.
- CATL is the perfect
fit to drive down cost.
They have spent a lot of time and energy
on research and development.
- CATL spending on R and D
jumped about 50% last year.
They have 5,400 employees
focused on research
making up over 1/5th of
their 24,000-person staff.
They recently broke ground on
a new lithium ion battery lab
called the 21C Lab
at its headquarters in Ninngde.
The $466 million investment
is scheduled to be an
operation at the end of 2021
and it will be focused on
metal lithium batteries,
solid state batteries,
and sodium ion batteries.
CATL spent $96 million on research
during the first half of last year alone,
which was about 11% of revenue.
BYD China's largest NEV makers
spent 6% of revenue on
their R and D for context.
John B. Goodenough even
sent a congratulatory letter
on the 21C project.
- As mentioned earlier,
CATL has focused mostly on
prismatic style battery cells.
- Earlier this year,
it was reported that
Tesla was set to deviate
for the first time from
their cylindrical cells,
which they've used exclusively to date.
They are set to be moving to the prismatic
LFP tech in the standard range
model three at Giga Shanghai.
As mentioned, this is shaping
up like a big experiment.
If Tesla can use CATLs new prismatic cells
with new LFP, cobalt for your chemistry,
with new cell to pack technology
and do so in a way that maintains
manufacturing efficiency,
this could open up the flood gates
to replicate this model in Giga Berlin,
and that all future sites
where Tesla will make a standard range,
low cost model free.
So while the Tesla and CATL
deal may be short in nature
and uncertain in value,
the potential is seemingly there
for a huge deal moving forward
if things break right.
In addition to eliminating
the most expensive raw material cobalt,
CATL also wants to eliminate
other costly metals,
such as nickel and manganese.
This is another step for Tesla
to localize its supply chain in Shanghai.
However, one of the
most overlooked aspects
of this relationship
is what it means for Tesla
and the Chinese government.
working with a domestic supplier like CATL
will further improve their relationship
with the Chinese authorities.
Zeng actually serves
on the Chinese People's Political
Consultative Conference,
the advisory body to
top Chinese officials.
This cannot be overstated
as China has ambitions to
dominate the global EV market
in both battery and vehicle technology.
They have one of the most
supportive governments
in the world and have been
committed to Tesla success.
Tesla giving back to the government
by employing a local battery supplier
will continue to strengthen
that relationship
and open up more opportunities for Tesla
to grab market share in China.
- And it wouldn't be a C-A-T-L video
without mentioning their
1 million mile battery.
- And I love Tesla, but honestly,
even I'm getting a little bit sick
of continually hearing about
this 1 million mile battery.
However, I wanted to point out again
that CATL does apparently have its own
inhouse 1.2 million mile battery
that will only cost 10% more
and is apparently ready to be sold.
So yes, this is completely separate
from Tesla's 1 million mile battery.
- NEC mentioned that
the Chinese NEB market
has been in free-for-all this year.
- Battery sales fail almost 35%
in the first five months of 2020,
according to SNE research.
Car purchases plunged in China,
amid the pandemic. trade war
and scaling back of government subsidies.
EV car sales have declined about 38%
from just one year ago.
Tesla cut the price of its made in China
model three standard
range to less than 42,000
in order to meet eligibility requirements
of China's NEV subsidies.
In April, China announced
that it will extend subsidies
for NEVs for two years,
but they will only apply to passenger cars
that cost less than $42,000.
It will be very important
to watch the sales
and production data out of Giga Shanghai
in the second half of 2020.
I do of course, think Giga Shanghai
will continue to rebound
as we saw from the Q2 data.
I think that the demand for Tesla
will also continue to outpace demand
for the greater EV market.
So while the overall EV market in China
may indeed continue to struggle
with less government support,
I still see a viable path
for Tesla to gain new market share
and to continue to expand rapidly.
Even Zeng himself has expressed doubt
about what will happen
when the Chinese government
subsidies go away.
He even said to his employees,
"Can pigs lifted by a typhoon really fly?"
And as always guys let us know
what you think about Tesla
and CATL and what it means for the future.
And in case you miss them,
you can check out this episode
about the new up and camera
in the EV space highly on,
or you can check out this one
about a potential Tesla stock split.
Thank you guys for watching,
I'll see you in the next episode.
