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Capital Markets

China clears EV battery leader for $2bn stock market debut

Fast-growing CATL looks to challenge Tesla partner Panasonic in global race

An electric vehicle gets recharged at a station in Liuzhou, China.   © Reuters

SHANGHAI -- Chinese authorities on Wednesday approved CATL's stock market listing, enabling the lithium-ion battery maker to finance a new factory that will expand its already vast capacity.

CATL, which faces competition in the global market from Tesla partner Panasonic, will raise 13.1 billion yuan ($2.07 billion) through its initial public offering in Shenzhen, of which 8.9 billion yuan will go to build a 24 gigawatt-hour production complex.

This, plus an expansion of existing facilities, will bring the company's total production capacity to 50GWh a year by 2020. The other 4.2 billion yuan in proceeds will go toward research and development.

China produced 44.5GWh of electric-vehicle batteries last year, according to Shenzhen Gaogong Industry Research, or GGII. CATL -- which stands for Contemporary Amperex Technology Co. Ltd -- sold 11.84GWh worth of batteries, giving it a nearly 30% market share.

While market share figures are inconsistent across research firms, this tally puts CATL ahead of onetime Chinese market leader BYD, and on par with Japan's Panasonic. CATL has a partnership with German automaker BMW, which is one of the ways the Ningde-based company is expanding its sales channels.

CATL's research and development center in China.   © Reuters

China has promoted the use of electric cars and other "new-energy vehicles" with buyer subsidies and other policies. Sales of new-energy vehicles jumped to 777,000 units last year from 75,000 in 2014. This soaring demand has fueled CATL's rapid growth.

GGII predicts that Chinese output of electric-vehicle batteries will climb to 146GWh in 2020, then to 215GWh in 2022.

But China is beginning to tighten standards for new-energy vehicle subsidies. If the growth in vehicle demand fades, CATL may become overextended in capacity.

Last year, CATL's sales increased 34% to 19.9 billion yuan, while net profit rose 31% to 3.9 billion yuan. CATL boasts a high profit margin, but the company also received more than 1 billion yuan in government subsidies over the past three years.

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