Tesla's Battery Supplier CATL Plans to Build a Major EV Battery Factory in China

author: Eric Walz   

Chinese battery manufacturer Contemporary Amperex Technology Limited (CATL) is planning to build a major new electric vehicle battery plant in Shanghai, as the company looks to become the world's biggest supplier of EV batteries, according to two people with knowledge of the deal. The company's plans were first reported by Reuters.

CATL has been in talks recently with the Shanghai government about building the battery plant. Locating its new EV battery factory in Shanghai will put it close to Tesla's factory. However it's not clear when an agreement might be reached or when CATL hopes to have its new plant up and running. 

CATL also aims to rapidly expand its partnership with Tesla and become its biggest battery supplier. The company is aiming to supply half of the battery cells Tesla uses globally in electric vehicles and roof energy storage, a senior source at the Chinese company said. 

CATL is also considering setting up a research center and a global sales and operational center in Shanghai due to difficulties in retaining and hiring staff in Ningde, the source told Reuters.

The new plant in Shanghai would be able to make 80 gigawatt-hours of battery cells a year, a second source said, which would come on top of 69.1GWh in current production capacity and another 77.5GWh that's currently under construction.

A production rate of 80GWh per year is enough batteries to power roughly 800,000 electric vehicles, analysts said.

CATL is already one of the largest global suppliers of electric vehicle batteries to the auto industry. In addition to supplying batteries to China's automakers, CATL has formed strategic partnerships with German automaker Volkswagen, General Motors and Mercedes-Benz to supply the batteries for millions of EVs the automakers plan to build over the next decade. 

In Feb 2020, CATL signed a two-year deal to supply batteries to Tesla for its Model 3s built in China, which began producing cars in late 2019. Previously, Tesla primarily worked with its U.S. battery partner Panasonic Corp. and South Korea's LG Chem, to supply the company with batteries. 

The lucrative deal between Tesla and CATL in 2020 followed months of negotiations, with Tesla Chief Executive Elon Musk traveling to Shanghai to meet with CATL's Chairman Zeng.

CATL said that it is in talks with Tesla about more collaboration and Tesla is seeking help from the company on battery solutions, but declined to comment on any plans for additional production capacity, Reuters reported.

CATL's expansion plans are likely to add to competitive pressure on Tesla's current battery suppliers Panasonic Corp and South and LG Energy Solution.

CATL Will Produce New "Cell to Chassis" Batteries

The new plant is likely to be located south of Tesla's Shanghai factory in Lingang, Pudong New Area, the source told Reuters, adding it will hire 5,000 workers and manufacture cell-to-chassis (CTC) batteries.

CATL announced last summer that it's working on a new battery technology that incorporates the battery cells directly into an electric vehicle's chassis. The technology increases the number of battery cells that can fit in an EV, while also eliminating the large battery cover that houses the individual cell and modules.

CATL's in-chassis battery technology is unprecedented in the auto industry.

Integrating cells directly into an electric vehicle's (EV) frame will allow more cells to be packed into an EV, which can greatly increase range. Extending the range of an EV to equal or greater than a combustion engine vehicle is one of the hurdles to widespread EV adoption.

However, incorporating batteries into a vehicle chassis during assembly would require CATL to work closely with Tesla or other automakers and participate in the vehicle's initial design process. Most automakers today source standard size batteries modules from suppliers and equip them to fit a car's mechanical design. 

CATL Chairman Zeng Yuqun has said electric vehicles could attain driving ranges of over 800 km (500 miles) with CTC technology, adding that CATL aims to launch the technology before 2030.

By comparison, CATL's cell-to-pack technology currently used in the Tesla's Model 3 in China gives the vehicles a driving range of around 468 km (290 miles) per charge.

CATL is also working on extending the service life of EV batteries.

In June 2020, CATL said its ready to build an EV battery with an expected lifespan of 1.2 million miles or 16 years before it needs replacement. In an interview with Bloomberg last year, CATL Chairman Zeng Yuqun said the company is ready to build it.

"If someone places an order, we are ready to produce," said Zeng to Bloomberg last year, without disclosing if any contracts for the long-life battery have been signed. 

Eric Walz

Originally hailing from New Jersey, Eric is a automotive & technology reporter covering the high-tech industry here in Silicon Valley. He has over 15 years of automotive experience and a bachelors degree in computer science. These skills, combined with technical writing and news reporting, allows him to fully understand and identify new and innovative technologies in the auto industry and beyond. He has worked at Uber on self-driving cars and as a technical writer, helping people to understand and work with technology.