Tuesday, 07, July, 2020

The Chinese behemoth that makes electric car batteries for Tesla and Volkswagen has developed a power pack that lasts more than a million miles –  an industry landmark and a potential boon for carmakers trying to sway drivers to their electric vehicle (EV) models.

Contemporary Amperex Technology Co Ltd (CATL) is ready to produce a battery that lasts 16 years and 2 million kilometres (1.24 million miles), chairman Zeng Yuqun said in an interview at company headquarters in Ningde, in southeast China’s Fujian province. Warranties on batteries currently used in electric cars cover about 150,000 miles or eight years, according to BloombergNEF.

Extending that lifespan is viewed as a major advance because the pack could be reused in a second vehicle. That would lower the expense of owning an EV, a positive for an industry that is seeking to recover sales momentum lost to the coronavirus outbreak and the slumping oil prices that made petrol cars more competitive.

“If someone places an order, we are ready to produce,” said Zeng, 52, without disclosing if contracts for the long-distance product have been signed. It would cost about 10 per cent more than the batteries now inside EVs, said Zeng, whose company is the world’s largest maker of these batteries.

Concerns about batteries losing strength and having to be replaced after a few years is one factor holding back consumer adoption of EVs. Tesla last year flagged it expected to bring into production a battery capable of a million miles of operation, and General Motors last month said it is nearing the milestone. That distance is equivalent to circling the planet 50 times.

Anticipating a rapid return to growth for the EV industry, CATL is ploughing research-and-development dollars into advances in battery technology. While the coronavirus outbreak will drag down sales throughout this year, EV demand will pick up in early 2021, said Zeng, who founded CATL a decade ago.

Car buyers holding back during the pandemic is creating pent-up demand that will be unleashed starting next year, led by premium models, he said. CATL’s customers include BMW and Toyota Motor Corp.

Zeng’s comments strengthen views that EVs are set to weather the economic slowdown caused by the outbreak better than petrol cars. Battery-powered cars will swell to 8.1 per cent of all sales next year in China, which accounts for the largest share of global EV sales, and to 5 per cent in Europe, according to BloombergNEF.

“The pandemic may have a lasting effect throughout 2020, but won’t be a major factor next year,” Zeng said. “We have great confidence for the long run.”

CATL struck a two-year contract in February to supply batteries to Tesla, a major boon for the Chinese company as the US electric car leader has so far mainly worked with Japan’s Panasonic Corp and South Korea’s LG Chem. The deal followed months of negotiations, with Tesla chief executive Elon Musk travelling to Shanghai to meet with Zeng.

The CATL batteries are set to go into Model 3 cars produced at Tesla’s massive new Gigafactory in Shanghai, which started deliveries around the beginning of this year. Batteries are the costliest part of an EV, meaning suppliers of those components have a chance to reap a lion’s share of the industry’s profits.

Zeng said he often shares insights with Musk, with the two exchanging text messages about developments in technology and business. CATL is strengthening its relationship with Tesla, with matters such as cobalt-free batteries on their agenda, Zeng said.

Shares of CATL have advanced about six-fold in Shenzhen since its initial public offering in 2018, giving the company a market value of about US$47 billion. Tesla, by far the most valuable EV maker, has a market capitalisation of about US$160 billion.

A “trigger point” for electric cars will occur once they overtake petrol-fuelled vehicles around 2030-2035, Zeng said. That view is more ambitious than that of researchers such as BloombergNEF, which expects the shift to take place a few years later.

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