In 2011, BYD's Wang Chunfu was already a billionaire.
Panasonic had been making lithium batteries since
before your first smartphone. LG and Samsung
had been in the EV battery game for over a decade.
And in a small coastal city in Fujian province,
a city most people outside of China have never
heard of, a company quietly opened its doors.
No customers, no track record, or not even a
name anyone outside of the industry would recognize.
Six years later, it was number one in the world.
It has not given up that seat since then. Oh,
and one more thing. The company's English name
is CATL, which stands for Contemporary Emporex
Technology Limited. Its Chinese name translates
into the era of Ningde. Yes, and these two names
have nothing to do with each other, which honestly
tracks perfectly for a company that has made
a habit of not doing what anyone has expected.
If you want a shortcut for understanding what
CATL is and why it matters, here's one. Think
TSMC, but for batteries. CATL now powers roughly
one in three electric vehicles on Earth. Its
founder, Robin Zeng, a kid grew up hauling rice
over mountain roads to pay for school, is worth
$63 billion. The technology inside your EV, and
probably the next five EVs after that, traces
back to a decision made in a factory in Dongguan
in the late 1990s. A licensed patent from the
Bell Labs that nearly blew up in everyone's faces,
and a Japanese company called DDK that unknowingly
incubated its own biggest competitor. It's a
story about skill, about government policy used
as a competitive moat, about one scientist who
spent 30 years building China's battery industry
from scratch, and the student he mentored who
took it planetary. And it's a story about what
happens when you arrive last to the race and
win it anyways. Let's get into it. I'm your host,
Pan. And I'm Linda. Welcome to Ascent. Let's
start the story as we have always done, which
is all the way from the beginning. Robin was
born in 1968 in a poor mountain village in Ningde,
as they all are. 1968 China. Everyone was poor
at the time in Fujian province. He majored in
shipbuilding and marine engineering in Shanghai
Jiao Tong University, and he graduated in 1989.
Fun fact, he has an alum in the same university,
Niu Shen, who later worked for Sequoia Capital.
So this university is at a level where a lot
of talents would gather. Yeah, Shanghai Jiao
Tong University is one of the top, top tier universities
in China. Absolutely. And right after he graduated,
he got hired by a state -owned enterprise locally
in Fujian, which is kind of the dream for all
of the parents at the time. Your kid... would
go into a state -owned enterprise and have a
very stable job and have a very good benefits
on a monthly basis. Unfortunately, that job was
very poorly paid. It was only 98 kuai, about
$10 at the time. Per month. Wow. And Robin was
probably thinking the same. This is stable, but
this is also not getting me anywhere. Why don't
I try something else? So he went for a private
enterprise that was located in Dongguan. which
is in Guangdong province. And that company is
called SAE Magnetics, which is a subsidiary in
China of TDK, which is a Japanese company. It
was the world's largest manufacturer of the read
-write head for computer hard drives at the time.
Sounds a little ancient, but that's kind of what
they do at the time. So if you remember C drives
in your computer, Windows 95, 98 XP. what's reading
ancient terms what's reading and writing those
c drives is what they're making right that little
pin that's right sae magnetics was manufacturing
the magneto resistant part and that is used in
the computers. The core innovation for TDK very
shortly is they commercialized a chemical component
called ferrite, and that goes into all the drives.
So if you have listened to cassette or tapes
or like basically drive writers, that's... That's
what they're doing. And that was in very high
demand in the 90s. That's breaking edge technology
back in the 90s. Yeah, definitely. For sure.
It was computer related, right? Yes. And you
might be wondering, why would Japanese companies
or Japanese manufacturing exist in Guangdong,
in cluster at the time? In the 90s, it was a
very high time for foreign companies to come
to China. And they all come as foreign direct
investment and FDI. In the 80s, a lot of them
came into China through joint ventures. And in
the 90s, a new trend started, which is wholly
foreign -owned companies. Japanese factory, they
clustered in Guangdong, in that part of the area,
because these places are made into key manufacturing
hubs, the Pearl River Delta, which has Guangzhou,
Shenzhen, and Dongguan, primarily focusing on
consumer electronics, machinery. housing appliances,
and computers. And those companies, you may ring
a bell, which are Canon, Mitsubishi, and TDK
was one of them. Oh, wow. Who landed there. And
I think the proximity to Hong Kong probably also
had something to do with the fact that they set
up factories there. Absolutely. It's also a low
-tax region, I think. Interesting. So Japan back
then had a very high concentration in the electronics
sector. And I think you said it right. Because
of the manufacturing convenience and the financial
convenience in Hong Kong, that's why they were
able to all land it up in that region. And our
Robin Zheng started in TDK as a rank and file
engineer after he graduated. He started working
in SAE TDK for a decade. While he was working
in the company, He made a few friends who all
later on became the first batch of founding fathers
of the first company that we're going to discuss
in just a bit, ATL. All right. Who are they?
The founding fathers are, well, let's start with
the person who got Robin into the company, which
is the highest ranking Chinese in the company.
And his name is Liang Shaokang. We call him Raymond.
He's an HKU engineering grad, joined SAE after
graduation and became a part of the senior leadership
in 1999. So he spotted Robin. The next person
would be someone who worked very closely with
Robin and almost day to day. This Dr. Chen Tanghua,
we call him TH, is the direct superior of Robin.
The person who worked closest with Robin and
he is a graduate of Taiwan University. chemistry
department, got a PhD at UC Berkeley, went to
IBM after graduation from UCB. He is well -educated
in physics and chem. Since TDK is established
in 1935, he was one of the most important non
-Japanese executive director in the company.
And he is... The most important mentor, would
you say that, to Robin? Because he brought Robin
so many opportunities to go out, see the world,
to learn, pushed himself to become an engineering
specialist. And if you were to be having a mentor
slash boss like that, chances are you'll be doing
great things. So hold on to people who are like
that. For sure. And the last person is Mike.
Zhang Yujie. He is also a graduate from Taiwan
University, EE department. And he was an overseas
returnee as well, studied in the US in Notre
Dame. I finished his PhD, had experience working
for Ford and IBM before starting his career in
SAE. And a close friend of TH. That's right.
In 1999, at the age of... 31, 10 years after
Robin worked for SAE. Robin became the youngest
director of engineering for SAE, which is great.
10 years to director. It's a great career transition.
He apparently was very talented and was able
to resolve problems that other engineers cannot
resolve. So, for example, like some of the most
typical problems at the time, your hard drive
has very limited density of storage. Therefore,
by increasing the density of those storage, you
basically improve your product to the next level.
And Robin was actively resolving problems like
that. So he had a very good hand with chemicals
and working on the physics properties. with all
the products that he had, got promoted. And his
mentor, TH, continuously sent him overseas to
study. Also in that period, that's how Robin
got exposed to the world of rechargeable battery
because he promoted so fast. And as we mentioned,
TDK SAE was a wholly foreign -owned company.
It's not a Chinese company. So what Robin faces
was you hit a glass ceiling. Right. The bamboo
ceiling. The bamboo ceiling that bamboo people
created. Less of a bamboo ceiling because it's
a Japanese company. You get what I mean. So structural
limit and mainland Chinese employee could only
advance so far. The real executive posts are
for Japanese or maybe Hong Kong executives. So
in the meantime, a Shenzhen company offered Robin
a position as a general manager. It's a very
senior leadership role with a clear path, safety,
and prestige. And a raise. And a raise. And any
Chinese parent would be like, Robin, go take
the job. Make us proud. And Robin once again
turned it down. He didn't want the stable job
and he didn't want to be the GM for this Shenzhen
company. And someone proposed to him a very interesting
idea. So in 1999, our Raymond, the highest ranking
executive officer, the president of SAE Magnetics,
the highest ranking person of the three started
to orchestrate a new company. He pitched a battery
startup idea to Robin and TH and to Mike. He
offered, you know, strategic vision and battery
opportunities. Let's focus on consumer electronics.
I'll help you get the money. Don't worry about
it. You know, I got you. And he invited some
of the employees that he had very close relationship
with. And Raymond, for the startup, served as
the chairman and CEO of the company. And when
he said he will raise money, he really did get
some money. He raised 2 .5 million US dollar
paying capital. This company started running.
And this company is... sort of the prequel of
CATL. It's called ATL. And yes, you just cut
the C off. It's Amperex Technology Limited. Exact
same name, just without the contemporary. Yeah,
just without the contemporary. TH is still the
senior executive of the ATL company. He took
the role of the president slash COO, handling
the day -to -day operational side of things.
And he asked Robin to take care of product development,
which I guess Robin naturally falls onto because
both men are senior than him, like literally
older. So Robin will be the person who is younger
and running on the ground and fixing all the
problems and working with all of the factory
employees. When your manager and your manager's
manager asks you to start a company with them,
I think you have to do a bit of the operations,
of course. There's a lot of things you have to
do. And he also saw Robin's potential in solving
technical problems, which also falls under your
narrative, which is if you're starting a company
with your senior and your senior's senior, you
will be doing a lot of job. You're the one that's
solving problems. He's also very, very good at
solving these kind of technical problems, as
we'll see from time to time after he starts CTL
as well. Yeah. You kind of want to prove yourself.
Much. A bit. Yeah. So Robin, of course, solving
all the problems, was named the head of R &D
as a product manager. The youngest of the three.
He really did above and beyond while working
with the two others because he was the person.
Well, he did two things. First, we're about to
get to, which is he solved the Bell Labs license
problem. And the second is, remember the company
ATL started in 1999 and TH just one year before
that sent Robin to study in the South China University
of Technology. which is conveniently located
just an hour away from where they work in Dongguan.
South China University of Technology is in Guangzhou,
which is basically one, two hours driving. It's
not very far off. So you work and you study at
the same time. And guess what did he send him
to study in the university for a master's degree?
You study electronics engineering in the Department
of Applied Physics to understand how the future
of batteries would be designed. Oh, interesting.
Even though ATL is started in 1999. They're doing
things by learning. I feel like it's somewhat.
planned almost like you don't just you have to
apply to school get in school right right and
yeah and when when I say Raymond really had the
vision here's what the vision is if we were to
be that old in 1999 I was a kid in 1999 and me
too but I experienced on the on the consumer
end of things right and you lived there in 1999
I lived there in 1999 I did oh my god I did live
there geez You might have crossed paths with
the three of them. Why that moment? When you
want to start a company, you ask two questions.
Why you? Why now? The why you problem was quite
straightforward. You both had worked for foreign
companies in a cluster of manufacturing companies.
So you can see who's doing what better. You would
get a good sense of what's going on. And why
now is the market demand at the time. Consumer
electronics market is about to skyrocket in China.
Exactly at that time. The growth rate towards
the end of 1990 is vertical. It's basically vertical.
And to put it in human terms, you'll get a sense
of what's going on. The consumer electronics
ownership in China. A color television that you
would own at home. A VCD or DVD player. We actually
have one of those back home. A pager. mobile
phone sony walkman laptop or desktop pc started
to become a household thing like starting in
1997. that's all around that time that's all
around that time no wonder tdk was was putting
in in dongguan because the need was very much
not not only were they shipping overseas but
china's own demand was also very high so based
on the population size of china they they know
if if everything's done correctly, this could
be millions and billions of dollars. Right. And
most of what TDK and ATL supplied at the time
now become really big companies within China
just because they existed at the time. So Raymond,
as someone who was working for a company that
provides like parts, he saw that the demand is
going up very high. Let's do this. And one kind
of interesting story about Raymond as well. SAE
Magnetic was started by him, was co -founded
by him, and was acquired by TDK in the 1980s.
So it's not his first try as an entrepreneur.
He was already successful in the sense that his
previous company got acquired by such a large...
institution so he has a very good entrepreneurial
gut feeling right like so i want to start this
we'll get acquired and you learn to and he really
lived through a time where things are just going
up yeah no matter what you do so the three of
them actually was a perfect combination perfect
combination now at this point atl was founded
doing its business all right very clear on we
want consumer electronics we want battery we'll
be making some all right how however Someone
else is in the battery market. They're not the
first one who come in and say, hey, we have battery
options for you. At the time, there were Japanese
competitors, there were Korean competitors, and
some of the most noticeable ones are like Panasonic.
And you have Samsung SDI. There's also LG Cam.
So no matter what you do, you're kind of late
to the game. And cylindrical batteries are created.
Prismatic cells were also created. And you're
like, oh, in what other shape can I be creating
batteries? As a new entrant, they need to find
that niche that kind of works for them. Right.
Cannot just go head to head with giants. Right,
right. So what do they do? 2001, that's when
they first started operating. They had a few
deals, but those deals are related to the consumer
products that we just talked about. And they
are like Bluetooth headphones. There are some
VCDs and DVDs. They're all great, but you're
only being a battery supplier for them. You want
one case that really makes you stand out so that
you can win more. You're at the MVP stage. where
you want more prestigious clients to come to
you and find you. At least I think that's where
they were going for. Yeah. Yeah. So who did they
go to? So they spend a lot of money on one thing.
Well, in the meantime, one order was kind of
flirting with them, but they haven't secured
it yet. They need to prove themselves to be good
at battery making to be able to get the deal.
We'll come to the name of the deal later, but
let's just go to how much money that they've
spent and why that order matters. So remember,
they raised $2 .5 million in starting the company.
And one day, this technical challenge comes about.
You need to prove yourself. And to be able to
tackle this technical challenge, you need to
spend at least $1 million in licensing fee. Because
they started with nothing, they need to first
get or create a product, right? That's right.
And this $1 million licensing fee is from Bell
Labs. Linda has a story. Yes, go for it. What's
the Bell Labs license story? Pan just mentioned
that the market was already saturated with batteries
that are cylindrical or prismatic, which is rectangular,
right? called polymer lithium ion battery and
the polymer allows the battery shape to be whatever
they want so it's soft packaging i have a i have
a joke here um there's cylindrical and then there's
prismatic and this category would be called miscellaneous
oh actually yes it is it is whatever you however
you want to shape it exactly so they're like
okay this is a niche nobody really got this tackled
correctly yet because everything is customized
it is and it's it's higher cost right because
cylindrical batteries you can just like print
and go print and go and you can like mass scale
it so they're like okay we're gonna try this
new thing out and so they and who has the technology
bell labs and back then they had a bunch of other
technology so when they reached out to bell labs
they weren't they wasn't they weren't aware that
20 other companies has already tried and tackled
this technology and failed to commercialize.
And so they spend a million, got the pads in,
got the licensing. And so then the next step
is for them to commercialize. And this is where...
Zeng's technological expertise and expertise
in problem solving comes in. Raymond's like,
I'm going to pay and you figure this out. So
Robin got the battery, got the, I guess, the
elements and the manual back. Try to create the
battery. Realize when you operate the battery,
it bulges. It bloats. It bloats. And so when
it bloats, there's a risk of it catching fire
and blowing up. I mean, more obviously, when
you're having a home of plans at home, like if
you have a bloating battery, that's like a danger,
a signal that you want to return this. It wouldn't
sell. Right. And so they spent $1 million on
something and realized that you can't commercialize
it. Robin, being the technical expert that he
is at that time, spent days trying to read the
manual, trying to figure out what is making it
blow, and ended up realizing that one of the
components in the original manual has a very
low boiling point. And that's what's making it
blow because when the battery is operating, the
temperature goes up. And so parts of it starts
to blow because of the low boiling point. And
so they then started testing on different components
to raise the boiling point. Two weeks later,
only two weeks later. So it wasn't too hard a
problem to solve. But you would wonder why the
other 20 companies who also bought the patent
didn't get it commercialized, right? Didn't have
Robin. I know, legend has it. Robin single -handedly
solved this issue and very soon they were able
to commercialize this technology. And that's
what made ATL special. And now we can mention
the name and that buyer isn't coming from anywhere.
Why did they have to spend so much money on one
license and have to solve the problem? Because
it was Apple's iPod. They want to show themselves
to the world that, hey, we are officially a battery
supplier. For Apple, in 2003, Apple was preparing
to launch the new version of iPod. And if you
live in this day and age and know what iPod is,
You might be a 90s baby, but for those who don't
know what iPod is, it is the original version
of an Apple's MP3 player. It's a music player.
Yes. It was a hardware that can carry, you can
download music. It's linked to Apple Store later
on with the internet linked Wi -Fi version. But
before it was basically you load music into it
and then you listen to it. And it has a cute,
has cute colors and has like very easy to use
panel. yeah the scrolling was what made it viral
exactly yeah the the scrolling where you just
run your finger in circles and then it'll scroll
instead of the previous kind of up and down you
have to like tap a couple times right um but
if you remember how thin it was right That is
why Apple had to use this technology. A polymer
battery. Exactly, because the typical cylindrical
batteries, there's a minimum width and height
that it needs to comply with. robin basically
made this deal possible and that's how you can
have a steve jobs design very thin beautiful
looking product holding your hand without a swelling
battery ATL has validated the idea. And later
on, they won. Of course, they won more deals
after the Apple attempt. Major customers like
Samsung and Huawei, and whether it's a phone
or an MP3 players, started to buy batteries from
ATL. That's right. Doing great. So at this point,
you raised $2 .5 million. And you have so many
deals, like batteries still coming in, like there's
a lot of orders. Technically, this is great.
But hey, why did the VCs pull out? There was
a story there, right? So after the initial 2
.5 million funding. And after they figure out
this whole polymer lithium ion battery technology,
they actually have more investors knocking on
their door at first in the 2002, 2003 period.
Reasonable. Reasonable. Yeah. Right. And they
wanted the funding because they want to scale
their production line. And so Carlyle and 3i,
both are very well -known VCs, together just
gave them $30 million to scale it up. This is
2000. So the money came in. Everything at the
end of 2003. And then they had this Apple deal
in 2004. And all of a sudden, one year later,
the VCs are like, hey, we want to withdraw. We're
going to cash out. Which is, you know, very weird.
The decision was made because when they figured
out the technology in 2001, all the way to 2005,
in four years. Your competitors are now realizing
that this is a great market. We're going to do
polymer. We're going to come in too. And so eventually
they will get more and more competition. So the
VC thought, hey, if this is going to be the landscape
where the demand, because the production technology
is getting easier and easier. And so there's
going to be, they anticipate a crowded marketplace.
And so they said, okay, we've experienced the
high growth. we expect the growth to kind of
flatten because of competition. So as investors,
this is a good time to pull out. Well, they anticipated
the market rate, but they didn't anticipate ATL
rate. Exactly, exactly. So decision in hindsight
is much easier. But interestingly, at that time,
2005, the VC, all three of them wants to pull
out. So the initial VC, plus Carlisle on three
I wanted to pull out. They did make a three -time
gain. The latter two VC did make a three -time
gain, but they lost out on the hundred. Or how
many ever times gain that they were going to,
if they had, they sticked around. So in 2005,
they had to find someone to take over the VC's
shares, which means... They had to go back to
their original employee. And don't you think
that this is very counterintuitive? Like you
managed to solve the problems, right? And you've
probably hit the biggest deal of all time. And
a year later, you lose your funding source. However,
someone else showed up and came to the rescue.
And yes, it was where they were coming from.
So TDK showed up. And TDK made a huge investment
on them. So remember, 30 million got pulled out,
but 100 million was being poured into ATL, the
company. To buy out the VCs. Right, right. And
so TDK was kind of their shining knight in armor.
Who knew your original employer was the one that
saved you from bankruptcy? Yeah. But I think
TDK also made a very sensible decision, right?
Because they probably were also eyeing more or
less the same market, you know, because how many
more, you know, drive readers are you going to
make that is going to dominate the market consumer
electronics battery is what was then the new
sexy thing yes that was hitting the market so
tdk wanted in made the shift invested in them
and also retrospectively in hindsight i think
tdk probably made the best acquisition at the
time because without atl tdk wouldn't even be
a contestant in the ev battery field industry
right can we have a little spoiler here and say
that atl is not the largest battery consumer
electrics battery manufacturer and tdk's vast
majority of tdk's current revenue and current
profit comes from atl yeah so it was a very good
buy yes yes it made tdk who they are All right.
And I guess nowadays TDK are even more involved
in the EV battery or the battery making field.
And TDK is now officially a sponsor to Formula
E. Why do we care? Because, you know, just fans.
There was a really cool poster about TDK's name
plastered on Porsche team's Formula E car. It
was quite cool. Interesting. So they have completely
pivoted from cassettes to drives and now to...
Like sort of all in EV batteries. Yeah. All right.
So now let's come back to the story a little
bit. We're at the end of 2005. ATL is now 100
% owned by TDK. The trio are now back to work.
Back to work. With their old employer. Was their
old employers... And they are continuously solving
and meeting more demands that is coming from
the consumer electronics field. In 2006, ATL
was so popular that they were producing about
150 million pieces of cell every single year,
very large. And they had orders really coming
from all the major cell phone makers. And it
expanded so quickly to a point where Dongguan
itself is not large enough for them. So the trio
had an idea that, oh, maybe it's a good idea
that we expand to other places. And Robin thinks,
oh, like naturally we should do that. So they
want to put down about 200 million US dollar
into a new place. And of course, there were six,
seven, a bunch of new provinces like lining up
and say, hey. Can you put it at my place? This
will be like great employment opportunity and
also will get us a lot of money. Now the MVP
has been approved and you're really good at making
batteries. And TH's hometown, which is Nankang
in Jiangxi, was also on the list wanting to.
So it was not just one contestant. There were
a number of them. Every municipality wanted ATL
factory to be set up there. Yeah, that's right.
In 2008, remember our Mike, Mike Zhang? He was
a part of ATL now, and he was put on the project
of where to locate, like evaluating the possibilities
of... putting the factories in different locations
and see which one is the most viable, most cost
-efficient. He was sent to Ningde, of course,
by Robin. He said, go evaluate this and see if
it works. And obviously, like Robin, I think
because of the local connection, he's from Ningde.
And Ningde, as a municipality, also wanted the
factories to be listed there. So Mike went there.
Mike's like, cool, great. but need something
that's more convincing. And Rob is like, if you
don't put it there in Ningde, I'm going to quit.
Not only me, but everyone from Ningde that currently
works in ATL. Yeah. Seriously. Yeah, seriously.
So with a... Well, obviously, I found this piece
of information in a book that I do not trust
100%. So let's just put it, it's a fun rumor.
But of course, the stakes are very high. They
ended up putting the factory in Ningde. But why
Ningde? It's a small town. It's a very small
town. It's pretty poor, like a lot of other places
in China at the time. And before CATL landed
in Ningde, its GDP per capita... is about $7
,200 per year, which is about $1 ,000. And after
CATL had landed in Ningde, let's just say now,
2024 in Ningde's GDP per capita is $124. thousand
RMB. Wow. Which is 20 times what it was before.
This company single -handedly raised the GDP.
Yeah, single -handedly. Well, I heard that even
in 2004. the Ningde government actually reached
out to Robin, expressing interest. Like, hey,
think about us when you want to expand. So the
relationship was built kind of in advance, but
obviously there's a lot of convincing. So each
municipality had to submit some kind of proposal
because everyone wants this factory to be set
up there. And so Ningde ended up giving them
a lot of... tax subsidies makes sense as well
as you know like we'll give you good land you
know all kinds of stuff so they ended up agreeing
obviously with robin pushing from the inside
and also ningde government support from the outside
that deal ultimately came through came through
and as a comparison that we'll make later on
in the episode i want to put it here just for
now ningde is located at a very convenient location
ningde is a coastal city and not only does have
beautiful delicious seafood it also has ports
which is very important for manufacturing and
shipping exactly it's a strategic advantage if
you want to the battery is out globally. Yeah.
That's a good, it's a great thing. Exactly. Right.
So a quick recap, 2008, what was in place so
far? ATL established 1999, raised 2 .5 million,
did a bunch of things and acquired by TDK with
a hundred million, six years later, not bad,
right? So for someone who is doing battery startups.
They could be living very comfortable lives and
just, you know, relax, sit back. But none of
them have this personality. Yeah, but none of
them. Because a few other things may have happened
in 2008 around that time. Yeah, what happened?
That made the trio think that, oh, there will
be a long journey ahead of us. First, BYD was
founded in 1995. In 2008, it was invested by
Berkshire Hathaway. And Wang Chunfu was worth
a billion of dollars. The CEO? Yes, the CEO.
And was definitely one of the richest person
in China for a while. So that happened around
that time. And also in 2008 Olympics, CATL was
invited to give it a try in supplying EV buses
as a battery supplier. So it was kind of an attempt,
a precursor to what they were doing. And if something
is showed in an event like the Olympics, you
know that this is not just a one -time thing.
But the government cares about it. The government
cares about it very deeply. And one other thing
is Tesla Roadster, well, not yet on the road,
but is unveiled in 2008. So that was also a very
major catalyst. And the battery supplier was
Panasonic. And it was a prismatic cell, 18650.
However, Elon, Panasonic used the physical dimensions
to categorize the batteries. Yeah, the length
and the width of the battery. Right. So our Robin,
our Robin wasn't just chilling there and doing
nothing. In fact, at around the same time, he
went to get a PhD. In between 2002 to 2006, he
went to get a PhD from Professor Dr. Chen Lichen,
who is likely the person who knows the most about
EV batteries, aka lithium -ion batteries, inside
of China. Wow, what a coincidence. What a coincidence.
He totally planned this. Yeah. And Dr. Chen Lichuan
is a bit older. Well, he was born in 1940. Very
smart. He was just great at studying. He made
it to... university in 1959. He went to China
University of Science and Technology. And how
good was he at studying science and technology?
Your country sends you to another country to
study science and technology. That's how good
he was at the time. In 1959, that was a time
that was prior to the Cultural Revolution. So
he was able to study and he went to the Max Planck
Institute. by the end of the Cultural Revolution,
1976. And he did the solid state research, which
is battery related. He was introduced to the
lithium nitrate field of study while he was in
the Max Planck Institute. And this society, this
institute still exists today. It's called the
Max Planck Society for the Advancement of Science
in Germany. which I think roughly translate into
the Academy of Science for whether it's the US
or China, the centralized science institute that
directs and organizes and accelerates the science
growth of the country. And in the 70s, early
70s, we all know that there was an oil crisis.
That's why when Dr. Chen studied in... Germany,
he really focused on the alternative energies
and energy solutions and solid -state lithium
batteries. But it was way too early, way too
early for solid -state lithium batteries. It
was like a myth or like a legend. He was studying
something that was at least four decades ahead
of time. That's right. So he studied under Werner
Webner, this professor, and was focusing on the
solid -state ionics. This is when lithium batteries
were completely nascent. Came back to China in
1978, convinced the Chinese Academy of Science,
hey, this is important, or this is going to be
important. In 30 years. Yeah, despite the Chinese
Academy of Science at the time was really focusing
on the traditional and the conventional energy
of the time. Of course, naturally. So he had
to advocate for himself that this is something
that's worthy of. putting more resource into.
And he was the first person in China to found
a solid -state lithium iron lab in the 80s. And
in 1987, as alternative energy becomes more important
inside of China, he was then put in charge of
the polymer lithium battery project for the country
during the seventh five -year plan. In 1995...
This lab, his team had produced the first liquid
lithium iron battery in 1985. He's the first
person who handmade a battery out of his lab.
And in 1988, he built China's first pilot production
line for the cylindrical lithium iron batteries.
Basically set the foundation for the entire industry.
And in 2001, he became a official member. of
the Chinese Academy of Science. academician and
this is when robin i guess started studying with
him exactly in 2001 he became an official member
and in 2002 like the chinese academy of science
like oh you can officially take phd students
right now and guess who he took but how do they
know each other it's because of th like th pushed
robin and say hey if we want to go deeper into
the battery industry you must know how ev battery
is done or how bigger battery is done robin to
solve all the problems I'm too old for this,
but you can go do it. So thanks to TH, Robin
gets pushed into CAS. And that's when conveniently
when Dr. Chen became a very big deal in China
and Robin became his first and only PhD student,
first batch. Oh, his young padawan. I know. And
he was doing a part -time PhD in CAS from 2002
to 2006. So Robin not only co -founded ATL, but
was studying both a master degree and... A PhD.
Oh, yeah. For the first seven years. His bosses
push him really hard. They say, Robin, like,
do not sleep. Go study and go fix problems. Wow.
All right. Which made Robin who he is today,
I guess. Back to 2008, you know, when a series
of things happened and Robin now concluded with
his PhD study. And he's so certain that, hey,
guys. I don't know whether this is going to be
put in EV, but this battery is going to be the
future. So we should do this. We should definitely
go all in on this. And he pitched Raymond and
Mike. And do you think this is a good idea? We
should be doing something that's EV battery related.
And both of them said, oh, yes, we should definitely
do that. But remember, he was pitching this when
ATL was under TDK. TDK had an issue with it because
as a publicly listed company, you need to focus
on the high margin, high volume consumer electronics
market, aka smartphones, laptops, and tablets.
Makes sense. And EV at the time was very nascent.
It was in the infancy of this industry. And it
is extremely high risk. Think about this. If
you were to go into, like no one knows. what
the landscape of EV battery looked like at that
point. Roaster hasn't even made sales yet at
2008. Exactly. No one figured this out. Very
high risk, small batches. If you went into the
wrong field in a few years, you could be eliminated.
So TDK, as a very responsible, risk -averse,
publicly listed Japanese company. reasonably
decided that hey we're not going to go crazy
about this but we want you to continue on with
what you do um try it out at small scale right
so that's how they um yes try it out on a small
scale tdk is still the parent company and now
we know atl is holy for a note japanese company
within atl under atl there is a new subsidiary
that's been created. It's called ATL In. And
this is a wholly foreign -owned subsidiary that
only does the consumer electronics part, which
doesn't give up the profit, doesn't give up the
volume, and do exactly what is good for the business.
So in 2008, ATL and Robin and team came to a
compromise that you can actually start a subsidiary
within ATL R &D for the EV batteries, but we're
not going to support you fully in terms of production
facility, manufacturing, etc. And so Robin and
his team actually started working on the subsidiary,
which is fully concentrated or fully focused
on EV batteries. So that was a bit of a compromise,
right? And then came around 2011. which is when
a couple of things happened in between 2008 and
2011. So first of all, after the Olympics, which
kind of triggered this whole EV bus production,
the Chinese automobile industry and the government
set aside 10 billion RMB, so about 1 .5 billion
US dollars of grants and discount loans. And
they established a very large scale pilot program.
which actually works on providing subsidies for
EV buses, sanitation trucks, and taxis. Commercial
vehicles. Commercial vehicles, civic use. And
there's a plan or there's a scheme called 10
Cities, 1 ,000 Vehicles, which is called 10 Cities,
but ultimately 25 cities signed up. We like numbers
in tens. So the 25 cities committed to 1 ,000
EVs. also these civic EVs, not your sedans, not
your passenger vehicles, for the next three years.
And those are heavily subsidized by the government,
right? And so then Robin saw this opportunity
and kind of upped his EV department research.
Then in 2010, something else happened, which
is... TH now kind of heads up the Chinese ATL,
right? Unfortunately, he passed away. And before
he passed away, he actually wanted to IPO ATL.
Reasonable? Reasonable because before 2005, so
when they established ATL all the way back in
1999, they actually had high hopes for the company
and eventually want to IPO and, you know, earn
a lot of money through various forms of investment.
But because of the funding, that we talked about,
they ended up working as employees again for
their old employer. So there's always been hopes
that they eventually kind of monetize on their
startup. Getting to retirement. Not really. Getting
to retirement again. Exactly. And so I guess
there was an attempt. The attempt might, regardless
of whether he passed away, I think it might be
a long stretch. But because he passed away in
2010, the amount of, I guess, say, in ATL as
a company, and the direction also kind of died
down a little bit with this. Obviously, Mike
took up that role and really helped Robin later
on spin off the subsidiary. Most importantly,
in 2011, which is when CATL really spun off,
the old battery division or EV battery division
of ATL that Robin created in 2008 finally spun
off three years later is because the Chinese
government decided that any company with 50 %
or more foreign invested share will not be able
to sell to Chinese EV producers and acquire that.
Subsidy. And so when the Chinese EV producers
stop purchasing from ATL, that basically kills
if there is no spinoff where the ownership of
the new company is 50 % or more Chinese, the
entire department will be gone. So TDK then had
to make a decision of whether we continue or
not. And obviously TDK as a company cannot continue,
right? The most that they can do is have a 49
% ownership of a new company that Robin or someone
else heads up. And so Robin and Mike obviously
wants this. Right. I've been working on this
EV battery for three years. Just finished my
PhD. Yeah, like not to give this up. This is
an opportunity. Just like when they saw the opportunity
with consumer portable electronics back in the
90s, they're seeing this new opportunity coming
up and they're at the best position to really
benefit from this because of his PhD, his relationship
and ATL's manufacturing expertise. So they really,
really wanted this. And TDAK was like, not sure
right because back then like you said the amount
of battery that's actually been produced for
consumer electronics is 30 gigawatt hours for
ev it's like not even 10 1 10th of that right
so should i invest this or should i just kill
the project so mike actually had a lot to do
with kind of working with the board in Japan
to make this happen. So ultimately, in December
of 2011, CATL is a company that's officially
established. And the ownership structure is then
15 % will be invested by ATL. which will be owned
100 % by TVK. So 15 % Japanese and 85 % Chinese.
Now we finally made it to the establishment of
CATL. And it's an establishment by necessity
because of this government policy. It's not effectively
a bad divorce by any means. So in 2011, the new
factory of CATL, the new location of CATL is
right across the street from ATL. And for years,
they actually share the same cafeteria. They
share the same daycare. They share the same badging
system. So they're effectively friends. Yes.
And it almost sounds like that CATL was using
either ATL's branding and name, but just existed
in a... Chinese ownership format. Exactly. That
was the only difference. Exactly. Even like CATL
at first need to ramp up production, right? So
at first it's still renting production facility
from ATL. The only difference is that CATL produces
EV batteries. ATL produces consumer electronics
batteries. And that's been how it's going for
years and years after that. Even mostly up to
today, that's how it is. There's a lot of, so
interestingly, they call it in India, they call
it C factory and A factory. And there's a lot
of C -A relationships and C -A marriages. So
there's no secret between the two companies.
And so it's by any means, they're on friendly
terms. They're kind of targeting different customers,
sharing the same technology development. I wonder
how the NDAs are signed in between the employees
of those two companies. Do not share, even if
it's spouse. Do you not share with your husband
some more? Now CATL is newly established, need
to build my MVP again and need to find like the
Apple iPod sort of supplier again. This time
on top of the original trio, the team that they
already have, well, trio missing one, but added
more employees. Robin had wanted a new ad to
the mix. He landed with a foreign employee and
his name is Robert Gullion, which I think is
very much related to the later BMW negotiation
and securing a Western deal. Who's Robert? Our
Bob. He had worked for General Motors for 21
years. He had worked on a very cool, but a very
tragically ended project. That's the EV1 project.
That was GM's. first mass -produced EV car in
the 1990s. It was in 1996, and it was very futuristic.
Robin hired Bob as the CTO to bring what was
used in the EV1 projects, all the automotive
engineering and standards to a Chinese battery
startup, and made CATL into a Tier 1 automotive
-grade EV battery supplier. Bob officially retired
in 2019 and is no longer working for CATL. He's
still doing a lot of consulting about EV or EV
battery -related subjects. And if you want to
know more about EV1, it is the earliest EV in
the US, but only on a leasing format. There's
no purchase. The entire project was later on
crushed and lobbied against. by the oil industry.
And all the EVs are taken back and crushed into
pieces. If you would like to know more, we won't
deviate into that, but you can watch a documentary
that's called Who Killed the Electric Car? So
Rob, Robert Gullion was the person that Robin
had hired into CATL for a while to set everything
up. Very interesting. This is a little bit actually
tragic if you, I don't want to use the word tragic,
but if you think about how advanced US was when...
This vehicle was produced, but without the government
support, it just kind of died off. And if you
look at the share of US versus Europe versus
China, it's just vastly different. And this is
actually one of the central theme in why CATL
succeeded. We're going to talk about more later
on is government support, right? Chinese government
had a very large role to play in the success
of this industry and in CATL. For sure. Going
back to BMW, BMW's initial supplier had a long
-term relationship with Samsung SDI, which was
one of the top EV battery suppliers at the time.
But it's looking for alternatives around that
time, 2011. And so after a bit of searching in
China, they've landed on ATL. At that time, it's
still kind of ATLC, ATL. So they thought that
ATL would be a good battery manufacturer. They
know, they're fully aware that their production
line needs to be upgraded in terms of producing,
going from consumer electronic into EV. So they
then started talking to then ATL, then continue
the conversation with CATL. And Robin, at that
time, because of the new CATL establishment,
had a lot of say in the future of this EV company,
in the newly established CATL. It's almost as
if he has some level of autocracy. This is actually,
in hindsight, quite important for all kinds of
advanced manufacturing. Because if you look at
Huawei, right, BYD, TSMC, all of them actually
had this guy at the top that can make decisions.
And this is not... I mean, it is autocracy, but
it is high risk, right? Advanced manufacturing
is high risk and you need to be fast paced. So
having this guy is actually like just drawing
parallels, but having someone who can make decisions,
who has the power to make decisions for the entire
company to kind of go toward is very important.
And so back to Robin and his decision. BMW is
a gamble. This order was never meant to be large
scale. True. Right? The Zinoro 1E, which is the
BMW EV brand, the first car that they wanted
to make with CATL, never really sold. It actually
was never sold. It was also the lease vehicle.
And it was kind of a pilot model. And so when
CATL took this on, they are fully aware that
this is a small scale. high intensive r &b needed
to a boutique project exactly so why did robin
take this on because he can i don't know why
did he take this on we're not sure fully we we're
not you know we know we don't know the full story
behind this but if you draw parallel to the apple
story that we mentioned earlier i think He might
have believed that having BMW's stamp of approval,
especially as a Chinese company based in Ningde,
that would matter later on. So that's playing
the long game, right? Every other battery manufacturer
in China actually decided to go with the Civic
route because of the Chinese subsidies. While...
he not only went with the civic route to benefit
from the subsidies, he also decided to take on
this other project with BMW to become more established
in the international scene or even domestically.
Because once you serve the top, all the other
customers are like, okay, we trust that stamp
of approval and we can now... make orders for
me. And that's exactly what happened after BMW.
I'm going to kind of lightly touch on this 800
page German manual. Sounds like a lot. That's
what BMW gave them. Here's a manual of our requirements.
Please satisfy all of them. It's all in German.
We will send you some engineers from our headquarters
to help you, but you got to figure this out.
So 2014, Xenero 1E was out in the market, didn't
make a huge splash, but it gave CHL that stamp
of approval. And on top of that, I think BMW
also needed a Chinese supplier. It needed a local
battery partner for the Chinese joint venture.
It can't just find any other one if you want
to be selling inside of China. So BMW was producing
this small batch. first trial Zinoro 1E, but
has super high standard because of the 800 pages
German manual that they had give. And they also
bring about a couple of very tough questions.
And one of which, a technical issue that they
want is most of EV manufacturers, they want a
charging cycle of 2 ,000 to 3 ,000 times. BMW
wanted 10 ,000 times charging circles. So it
was a lot higher than before, even though you
just have a very, you know, small order at the
time, but the requirements are super high. And
for all the other battery manufacturers, they're
like, hmm, you know, like maybe not because it's
not like highly profitable. But for Robin, as
a PhD who newly graduated, oh, this is like paying
me to study like what you have. I want this.
So I think that also. probably played a part
definitely in the it was it was definitely a
two -sided decision making definitely definitely
so that actually really benefited them in the
long run and And I want to jump a little bit
now to kind of go back to the whole EV landscape
around this time. So kind of 2011 to 2014 era,
this is really just small scale, high end production.
It's not EV as we know it today, right? So 2011,
when Seattle was first established, there was
only 50 ,000 EVs delivered in the world. 0 .2
% of all car sales. High -end luxury cars. Very
high -end luxury cars. Roadster that year, which
was probably the most sold number of EVs sold
in terms of passenger vehicles, only a few hundred,
right? And last year, that sale is 20 million
cars, EVs. So you can see the scale at which
EV as an industry is growing. And the time when
CETL decided to really pivot is so early that
they have, I guess, a first movers advantage,
especially in China. By 2014, which is when they
kind of delivered the BMW model, the major player
in the world is Panasonic. Panasonic owned 40
% of the market, being the sole supplier for
Tesla. Other two major players are LG Chem or
LG Energy and Samsung SDI. The two of them supplied
a mixture of European and American manufacturers.
Japan dominated the market with Panasonic and
Tesla relationship. Korea followed with LG and
with Samsung. BYD was the only domestic chinese
manufacturer that actually had enough traffic
i guess had enough orders and it was less than
five percent of the entire market right so with
government support interestingly from 2011 with
the 50 50 at least 50 domestically owned to supply
chinese evs and also a lot of subsidies going
into the EV manufacturers. CATL's largest customer
by 2014 is actually not BMW. It's a bus company
called Yutong. And Yutong is the largest bus
company, bus producer in China. And Yutong has
sustained that top position with CATL all the
way to 2017. Interesting, there's actually more
EV buses made in China than EV passenger vehicles
for those times because of the government -led
initiative. So why did the Chinese government
decide to supply subsidies to make buses rather
than other passenger vehicles? It is because,
again, remember when... ATL decided to work on
the polymers rather than the cylindricals because
they knew they couldn't compete. Same reason
for China to decide on buses to compete and subsidize
buses rather than passenger vehicles. It's because
they realized they cannot compete immediately
with passenger vehicle EVs. So a little bit of
chemistry background, right? And I'm sorry if
I explained this wrong because I'm really bad
with chemistry. There is two types of EV batteries
in mainstream, two types of EV batteries. And
one is called NCM batteries, which stands for
nickel, cobalt, and manganese. And that's the
component where the cathode, which is one of
the components, the positive end of the battery
is made from. And this is what Tesla has been
using, what most of the passenger vehicle has
been using around that time. They're using this
battery, although it's less stable, they're using
this battery because it will provide you higher
range. It has higher inner density, which means
per every kilogram, you can store more energy.
So back then, if you want the car to run for
300 kilometers with one charge, In the ideal
scenario, you need an NCM battery. Well, considering
US consumers that are driving road trips and
very long distance, that seems to be the right
option. And you're comparing yourself to the
gas, right? So filling gas, I can drive for 500
kilometers. I need at least 300 kilometers out
of an EV. So China doesn't have that technology
and needs a bit of time to develop this. So they
had their eye on something called the lithium
iron phosphate, which in short is called LFP.
And it's F rather than iron I is because in the
periodic table, iron is Fe. Wow. Yes. Chemistry
points. Yeah. Do you remember this lesson from
high school? So LFP batteries are lowering energy
density. By about 30, 40 % at the time. So you
actually can only pack maybe 150 to 200 kilometer
range in a normal sedan with its weight limitations.
And so nobody wanted a car that can only run
for 150 kilometers before you have to sit down
and charge. And back then, charging time is high,
right? And so China said, hey, we can do the
lower end. density battery but we'll just run
it on heavier vehicles because if the buses are
heavier the amount of weight difference will
matter less right so we can fit heavy battery
into buses and the buses run on fixed routes
so your charging station is more fixed and there's
there's limited bus running at night so they
all had a schedule so everything made it easier
for that Development to go toward that direction,
which is why China actually promoted the use
of LFP batteries. So that's two different directions
where your Panasonic, your Samsung and your LG
is going all in for NCM and your BYD, your CATL.
We'll talk about CATL later, but most of the
Chinese EV battery manufacturers during the early
days was going for LFP. This then made a difference
when in 2015, a scandal broke out in China. So
remember, Chinese government started to give
out big subsidies, huge subsidies in the tens
of billions of CNY, right? And a couple of years
later, by the end of 2015, a study was done on
subsidy frauds. So, you know, faking the fact
that you produced an EV or recycle a battery
and call it a new one to get the subsidies from
the government. In one report, more than one
quarter of the subsidy given are fraudulent.
Wow. It's a huge size, right? So the Chinese
government had a decision to make where... They
had to think about, do we keep on giving out
these subsidies or do we stop? And luckily, they
decided to continue because. Yes, there's subsidy
fraud, but we still want to support this industry.
The industry in 2015 is nowhere near competitive
compared to your global giants. And so we need
to subsidize, but we need to then raise the bar
to prevent these fraud and to concentrate or
to knowingly help to concentrate the industry
to give more resources to the big and good players.
The tech heavy ones. The tech heavy ones that
knows their stuff that are less likely to just
benefit from subsidy fraud, right? So the serious
ones. Right. Or to really go into the R &D bit,
right? Like those will with like proper R &D
departments. Right. And that's when the whole
industry took a turn around this time. Soon enough,
and this is the thing with Chinese policymaking,
it's very fast. So early 2016, so they discovered
this whole fraud. They did this whole study end
of 2015. Early 2016, they're like, nope, now
we're only going to subsidize if you buy your
battery from these companies. These companies
are known for investing in high energy density.
They have less fraudulent activities going on
and they have good R &D. So there's a list. So
CATL obviously made it to that list being one
of the best EV battery companies out there. At
the same time, because of the subsidy fraud,
the government did drop the absolute number of
subsidies that are provided. So as a mix, a lot
of EV battery suppliers died around those times.
For a good reason. So it's government policy,
again, trying to focus resources on a few big
ones, which is what helps the ATL and BYD grow
so big. I think a lot of people would think that
the government subsidies would go in to the Chinese
players as a way to fight the outsiders. But
to be honest, I think the insider fight could
be more intense than the outsider fight, because
just think about how large that industry is in
China and how many people can just fake a factory
inside of China. So this act essentially cleaned
up the market and leave the better ones competing
in the market. the Chinese government has done
with a lot of industries to force M &A activities,
basically, so that the top can compete internationally.
Makes sense. Yeah, so as a result, in 2016, CETL
became the third largest EV battery manufacturer
in the world, surpassing Samsung and LG. And
obviously, Samsung and LG didn't make the whitelist
because another, I guess, effect of the whitelist
is to ensure that the EV manufacturer only purchased
from domestic companies. So sadly, Samsung and
LG actually, through their JVs, made a lot of
investment early on in 2014. But because of the
whitelisting process, that effectively protected
the Chinese domestic battery manufacturers from...
the likes of Japanese and Korean battery manufacturers.
So it is a protective policy. But as we know,
all countries use protective policies to grow
their industry. And this is actually, if I were
to think about it in hindsight, well played.
One other thing happened in 2015. TDK, the old
owner, actually had a strategic shift. Oh, of
course. Why are they still in the story? They're
about to be gone. So 2015, they actually voluntarily,
remember they had a 15 % stake in CATL in the
beginning when they established. They wanted
to actually focus on their core industry, which
is ATL, the Consumer Electronic Battery Manufacturing.
In 2015, they said, hey, like... is anyone interested
in buying out my 15 % share? I'm happily, I can
shift, right? So then the owners of CATL then
went around to ask, like, who's interested? So
luckily, one of the owners had a classmate whose
company just IPO'd and he has all this cash.
His IPO company, this new investor's IPO company
has nothing to do with EV or EV battery. um he's
making like garments and fabrics advanced garments
and fabrics for uh ers and for clean rooms but
he had all this cash he said i'll take it over
and that is the cash best investment this guy
has ever made because if you look i looked into
the forbes uh kind of like how much this guy
currently owns right um i think one seventh or
one six to one sixth of his uh absolute wealth
is from his own company the one that i feel yeah
and all the rest is from the chl 15 investment
by a very random investment that your classmates
classmates friend had asked you to put in to
a company that you almost have no knowledge about
i'm sure he did some kind of due diligence but
yeah yeah effectively it is It might be a bit
of a gamble, but, you know, we're glad it paid
off. Oh, it paid off. Like, what if it didn't
pay off? Like, he would have, well, he would
still have his own company. He would still have
his own company, but the story would be very
different. Yeah. Yeah. So as of 2015, end of
2015, see ATL is 100 % owned by Chinese companies
or individuals. And, but it still has ties with
ATL being neighbors, right? So by 2017, then,
the CATL then became the number one largest battery
manufacturer and moved past BYD and Panasonic.
And this is where I jump back to the earlier
chemistry lesson. The fact that CATL can surpass
BYD because the whitelisting process only protected...
Protected two things. One is protecting the domestic
battery manufacturers from only whitelisting
Chinese companies, but also raise the bar in
terms of energy density, right? So by raising
the bar of energy density, Yashi gave a bit more
favoritism to CA tail because CA tail is the
only company that invested both in NCM and LFP
development. So when you raise the battery density
requirement, The old LFP batteries are no longer
as competitive. And the cars within the car manufacturers
are like, okay, load me up on NCM batteries.
And I think CATL made an accidental decision
on making the NCM batteries. It wasn't, oh, well
planned and intentional, but it was just my clients
need NCM battery. Therefore, I must know how
to do this. And therefore, they had both LFP
and NCM batteries. Exactly. Because they... With
the BMW relationship, even though the first car
was an LFP car, because of all the foreign relationships
they had and the higher demand of those car manufacturers,
they had to invest a bit more R &D in all kinds
of different diverse type of batteries. And so
continuous research is something that they really
required. So then 2017, six years. After their
original separation from ATL, they became the
number one largest battery manufacturer in the
world. Pretty impressive. But we know that they
can't do this just by establishing a company
with six years experience. It basically took
all the experience from ATL from the past 10
years into making this, right? So by 2000, then
jumping ahead to 2019. The government decided,
hey, we gave you subsidies. We gave you protection.
We did the whitelisting for so many years. Whitelisting
for three years effectively banned Japanese and
Korean companies from entering the market. I
think we've done enough. We're going to exit.
We're still going to give out subsidies, but
we're not going to do the whitelisting process
anymore. So Samsung and LG then had their eyes
going back on the Chinese EV industry. And so
there was a little bit of a competition brought
back to the market. And CATL actually did something
really well in protecting their market share.
relationship breakdown i don't know if they fully
realize but there has been a relationship breakdown
i think i know what relationship is between tesla
and panasonic what a happy marriage happy marriage
a few years right yeah seven years itch um so
panasonic has always been the battery manufacturer
for tesla great relationship right but Elon is
a guy who's... Had an affair. I guess you can
put it that way. Was eyeing multiple pretty battery
girls at the time. Yeah. So, you know, battery
landscape change and things obviously develop.
New R &D technology comes out. Price levels change.
Tesla as a company had to look for other alternatives
because it was struggling with the very high
QA and the very high maintenance that's required
for Panasonic to continue to produce NCM batteries
for them. And so it's eyeing for alternatives.
In 2019, actually, there was other technological
breakthrough in battery making in the LFP end.
And it's actually triggered by the Chinese companies,
both BYD and CATL. Despite the NCM domination,
actually, they continue to invest in improving
the LFP technology to the sense that the new
LFP batteries now have the same amount of energy
density as the old NCM batteries. So they can
now also do 300 kilometers per charge. The thesis
between the... Panasonic and BYD and CATL was,
if you were Panasonic and having NCM batteries,
you need to effectively think about how to make
it. like safer and cheaper. But if you're LFP,
you need to pack more energy into the same volume.
Exactly. You nailed it. Right. So the game was
on and people didn't believe that LFP was an
option. It was so low end. But BYD and CATL,
and I've been waiting for this moment for a long
time, made LFP great again. They indeed have.
So they believed in LFP technology. The innovation
is called cell to pack. So they basically packed
more cells into the same space. NCM at that point
is still developed further. So you can still
pack more into an NCM battery, but it's good
enough for your average consumer. And Tesla realized
that it's good enough for your average consumer.
And 2019 is also when Tesla decided to build
a new gigafactory. In Shanghai. Remarriage. So
then Robin went to Elon, went to Tesla and said,
hey, here's our new technology. Here's how much
we can sell it to you for. Maybe consider us
when you build this new factory, we can be a
new supplier for you. And Elon being very profit
driven, agreed. So. The China production line
is basically split in two. The regular Model
S is produced with CATL's LFP technology. The
more long -range versions are still using LG.
And this is basically the split for a lot of
car manufacturers. So Xiaomi, for example, which
we covered in a previous episode, which you can
review, plug. So Xiaomi, for example, now have
four cars, four Su7 cars, four of their sedan
cars. The regular Su7, the Pro Su7 uses LFP.
The Max and Ultra uses NCM. Driving range. Exactly.
And so there's still demand for both batteries.
It's just really shifted. If you look at the
chart, it's like 80 % NCM back in the days and
then now 80 % LFP. Because of this breakthrough
in energy density and packing more into one cell
or into one pack. So then CETL is on the rise
all the way to 2019, secured the Tesla deal.
CETL now has 24 % of global EV battery manufacturing
capacity. And guess where does that put Panasonic?
At least not number two. I mean, number two seems
to be BYD. Yes. So it has to be more than three.
2020, it's number three. It's actually CATL LG
and Panasonic because I think BYD, we're going
to talk about this now, but BYD made another
decision, which is we're going to supply our
own cars rather than becoming the suppliers of
other EVs, which actually really deteriorated
their... their demand. But they later caught
on because of their EV sales really skyrocketed.
And so Panasonic at that time only has 15, 18%.
Panasonic today only has 4 % of the market share.
Wow. Yeah. So I think it made a huge gamble in
Tesla, which ultimately didn't pay out. And they
had, I guess, trouble finding diversifying their
customer base. Okay, so everything is great for
CATL. Their battery is basically ubiquitous at
this point. At this point, number one. And it
has 20 -something percent global market share.
But within China, it is dominant with 50%. So
almost half of all EVs are equipped with CATL
batteries. And so... It commanded enough authority
to start making demands on its customers. Oh,
geez. Yeah. Which is why for the past few years,
it's been making some headlines that are not
super positive, despite being the first in the
market. Right. So in 2019 is the same year where
they started to ask guarantees from their customers.
So they need all of their customers to tell them
how much they're going to order in the next five
to 10 years. and then pay a deposit, put a deposit
into CATL to guarantee that level of order. And
if you hit the level order, then you get the
guarantee back. If you don't hit that level of
order... they're gonna not give all the money
back to you as a collateral sort of mindset exactly
but they're a public company right now right
so they have to have some sort of collateral
if anyone defaults it's true but it's also very
demanding because it's usually the car manufacturer
that faces the consumer and just the marketing
that demands from the suppliers but Because of
CA tail's dominance in the China market and because
BYD decided to only supply themselves or 80 %
supply themselves, CA tail had that power to
really like push. Command the customers. Command
the customers. And they did other things to command
the customers because of the EV sales increase
in 2021 -22. Lithium battery became seven times
as more expensive or lithium, Coal. Yes. Mining.
Mining. The lithium is like the element became
seven times as more expensive. And so CATL naturally
had to push that cost to the customers. That
actually drove a lot of small EV. manufacturers
into bankruptcy oh yeah seven times more and
battery is a very large chunk exactly so they
couldn't really come in seven times as more but
because of their market size they can push more
of the cost increase toward the customers so
there are things that they've did over the past
few years that kind of signal that there are
the battery manufacturer and they can do kind
of things to their customers that their customers
may not like. Despite that, their market share
still increased. So last year it was 37 % already
globally. Right. Yeah. But it sounds like the
game hasn't ended yet. And especially in the
EV battery making field, it doesn't matter how
large your current market is, but if you were
to have the right technology for the next generation
of the EVs, you can really overtake quite fast.
Exactly. That's probably how when no one thinks
about LFP was a thing, they made a bet on LFP
and BYD and CATL perfected it, basically made
it into the, what BYD calls it, the blade battery,
right? And CATL is a chilling battery. Are there
any other new things that they're doing these
days that would ensure that maybe five years
from here that they will still be in the game
for battery making? Yeah, I'm so glad you asked.
So you're right in that they're under a lot of
pressure to continuously innovate because if
they don't innovate, then they're at the risk
of one of their competitors jumping ahead. And
this is what CHL did to a lot of their competitors.
So they're constantly innovating to prevent that
from happening. to them so like you said so one
qilin is their ncm battery and they've developed
that technology released it in 2022 they also
continue to invest in lfp as well so the shenxing
battery is released in 2023 and it's the world's
first 4c rate charging battery and that means
That battery you can charge for 10 minutes and
get 400 kilometers of range. Jeez. Yes. Without
exploding. It is like a phone. It is like a phone,
right? Yeah. And other things they're investing
more in the long term. One is the sodium iron
batteries. So back to chemistry. Lithium iron
batteries are generally lighter. but they also
have limited supply. So lithium is obviously
more limited than sodium, which is salt. Which
is the entire ocean. And so a lot of companies
actually started to invest in the next generation
of batteries and sodium was one of the potential
ideas. But sodium being a much larger molecule,
there are some, I guess, R &D hindrances and
how it can really go to market. But last year,
2025, they actually, CATL released their first
sodium -powered battery. Naxtra, it's called
Naxtra. And they also released another battery
called Freevoi. And Freevoi is a hybrid sodium
-lithium battery. So it actually has a system
where it turns lithium in, I guess, certain environment,
and it converts to sodium power in certain other
environments because sodium has a better temperature
range. So, for example, if you go all the way
to the... Siberia areas, you can use the sodium
power part of this hybrid battery. Yeah. Interesting.
So that's something they really want to mass
commercialize in the future. Another thing that
everyone, every battery manufacturer is investing
in is called solid state battery. So currently
all the battery, the inner cells, the electrolytes
of the battery is either liquid or gel. right
because it glues everything together it passes
the the positive to the negative yeah it allows
the transportation sorry as you can hear i'm
also a chemistry major so then um for a solid
state they They started development or R &D as
well. They first actually released something
called the semi -solid state. So like a mixture
of gel and solid state in 2023. And it's called
condensed matter. And then now they're developing
more directly into solid state. But there is
a lot of competitors in that field. So Panasonic
is investing. Samsung is investing. So whoever
gets to solid state first. And solid state has
like a lot, a lot more energy density. So whoever
gets to that first might really, again, jump
ahead and take over in terms of shares. And if
you achieve solid state or something with battery
density of as high as, let's say, 500 watt hours
per kg, you can then think about other vehicles
that are much larger than cars. airplanes and
marine ships yeah so interestingly actually a
percentage a very small single digit percentage
of seattail's current revenue is already on battery
production for these kind of large transportations
so that's definitely a place that they're going
to pursue in the future It's only reasonable,
right? You either develop the next generation
of the technology or you try to put your batteries
in more things. Exactly. And whatever thing that
can carry a battery around, you're going to put
it in. Yeah, and knowing how this group always
thinks ahead, they need to be well prepared.
Right. Okay, so something else that happened
in 2025 last year is that CATL actually made
it to the largest IPO. In the world, it raised
4 .6 billion US dollars in the Hong Kong Stock
Exchange. And in that year, its revenue still
went up 17 % year over year. For a company that
already made it to the top of the EV battery
manufacturing market share in 2017, eight years
later, they're still growing at double digits.
And their profit is growing at even higher rates
because of how much they can command and the
fact that they entered into new businesses like
the energy storage systems and battery recycling.
And so with this IPO, it's actually not the first
time they IPO -ed, it's actually the second time.
The first time they IPO -ed is in the Shenzhen
Stock Exchanges. It's called the... SheNex. SheNex
mark, which is if you... Also, kind of referring
back to our first episode on Insta360. It's similar
to that. So it's for technology companies, up
and rising companies to IPO. People call it the
NASDAQ of China. Yes. And so back then it was
2018. And the amount of money they raised is
not as high, but it did make it to that board's
top list immediately after it IPO'd. And so that
was 2018 in Shenzhen and then 2025 again in Hong
Kong. The 4 .6 billion they raised, a lot of
it is actually going into a factory that they
are building in Hungary. And this is one of the
two factories they have built in Europe. And
this is basically their ambition. to enter Europe
or they already enter Europe their ambition to
become the first battery manufacturing supplier
everywhere else in the world right so while they
are they have been first in China for a really
long time they do have a lot of competition abroad
and there actually has been one company in Europe
that wanted to take CATL's place for a while
and it bankrupted in 2014 2024 and that is called
norfolds it basically had the investment of entire
europe and the orders of almost every european
ev manufacturer and because and we believe that
because of um how fast is trying to kind of jump
start right without Years of manufacturing expertise
and operational management is what caused it
to ultimately fail because it not only decided
to start the facility in a city that doesn't
have that much battery manufacturing history,
it also decided to expand into different cities
too quickly, too fast. And so Norfolk, unfortunately,
last year ended up filing for Chapter 11. And
throughout CETL's, I guess, lifetime, there has
been a lot of competition as well. So not only
Norfolk, but in Japan, Panasonic actually restarted
a JV with Toyota, wanting to gain back its market
share that it lost. And similarly, other EV manufacturers
in China has been popping up as well. 15 EV car
manufacturers sponsored or started investing
in their own EV battery production. And this
goes back to how, you know, the guarantee system
and everything that Seattle has done to their
customers has kind of angered some of them and
they wanted an alternative. So it is not without
threat that they're operating in this place.
Yeah. But regardless. But regardless. Just a
bit more on the Northvolt story, because why
it was such an amazing attempt, but it failed.
And I'm surprised at how long that it lasted
before it finally fell for bankruptcy. It seems
like a struggle, like a burn towards the end.
First look at the company, the right people,
maybe the right people, but definitely not the
right location. Peter Carlson and Paolo Cerruti.
Both of them are ex -Tesla. One was the VP for
supply chain during Model S time. And prior to
that, he was very involved in Sony Ericsson manufacturing
and NXP Semiconductor, both in manufacturing.
And Paolo... was working in the operations planning
for Tesla. So supposedly these two people should
know the most from within Tesla how batteries
would work. They both left Tesla in 2015. And
before Northvolt was called Northvolt, it's called
SGF Energy. And obviously this dream is for Europe
to build its own battery industry to avoid dependency
completely on Asia, like Panasonic and BYD and
CATL. So they had realized that and trying to
replicate. But the location that they've picked
is within the Arctic Circle. And the reason why
they picked it in the Arctic Circle is because
of its easy access to hydropower. complete clean
energy which is okay but it wasn't valid enough
for me and i will tell you why being in the arctic
circle what made it very difficult to attract
talents not like ningde ningde at least is still
a coastal city has very easy convenience uh conveniently
located in between like larger cities within
fujian province and great seafood like it's kind
of subtropical supporting functions, supporting
companies are all based in those places. So there
is a cluster of how the supply chain would work
in a place like Ningde. And I was trying to think
of the places that I've been to close to the
Arctic Circle. The northmost place I've ever
been to is Tromsø in Norway. And you can see
like beautiful Aurora there. There's not much
going on and it is really very cold. If you're
in the manufacturing business, you're thinking
logistics, easy logistics, easy in and easy out.
So when you're putting it. putting all of our
ingredients in the Arctic Circle and ship the
final product out. It doesn't seem like that
decision is well thought out of. And the last
bit, I think, of how they failed would be the
complete lacking of just manufacturer experience.
It is more complicated than you think of making
one piece of battery. Seems like only have four
stages, but within that four stages, you have...
really 20, 30 steps. And every single step requires
very high precision. And each step is associated
with a defect rate. If every single one of that
step have a higher defect rate by 1%, let's just
say 99%, 20 steps. you compound 99 % 20 times,
you end up with 82%, right? So an 82 % in battery
making for EVs, that means a lot of safety concern.
That means unacceptable. That means unacceptable
and people will die, right? To put it into perspective,
the industry standard is parts per million cells
and CATL is at parts per... billion that level
of manufacturing. It means that they do not tolerate
any mistakes and they have a hellish level for
making factories work. And I haven't really personally
been in a CATL factory, but just judging by the
videos that I've seen of, you know, from the
outside or parts of the factories, you can see
that it is pristine. It is very well managed.
to avoid any steam that is being brought into
the factory because that also causes a... The
battery defects, they essentially just make sure
that you have enough masks that go onto every
single employee's face. Oh, because you can't
breathe? Breathing also affects your battery
quality. So breathing is obviously allowed, but
not encouraged, but it is well masked. So that's
the level of CATLs management at the battery
factories. For Northvolt. They obviously opened
the factory, but because they were not able to
deliver on time. If you're in the battery making
business and EV making business, you cannot miss
deadline and you have to be able to supply at
the right quantity at the right time. And then
they failed at that multiple times. So all of
the European buyers, they started to withdraw
and cancel their orders and ended up with not
having any money in their account and have to
file bankruptcy. Oh no. Yeah. One less competitor
for CVTL going forward. Yeah. So why do you think
CATL ascended. And I'm just, okay, before we
talk about that, after their 2025, I guess, second
IPO, their share price continued to rise. So
right now their market cap is already 290 -ish,
about to approach $300 billion US dollars. This
makes them... Somewhere between 40 to 50 globally
in terms of market share. I looked up the list
yesterday. The company that's ahead of CATL is
Morgan Stanley. The company that is below CATL
is Novartis. So CATL is Novartis Morgan Stanley
levels. And the only companies... at least the
public ones that are larger than CTL in China,
there's two types. The first one is Tencent Alibaba.
Makes sense. Tech companies, basically. And the
second type is bank and oil state -owned. Traditional,
yes. Exactly. So as a battery manufacturer, making
it to the top 10 in China, it's phenomenal. Not
investment advice, but just cool facts. Cool
facts. Cool facts. All right. So I guess at the
end, we always ask ourselves, why did this company
ascent? Why do we pick it? It's actually among,
I was thinking back on this, it was actually
among all of the companies that we picked prior.
It's the only one that we can really claim to
be the number one in the world. Even though all
the other companies like Xiaomi ascended, Xiaomi
was number three in terms of phone manufacturing
and not there yet in terms of EV manufacturing.
It did ascend, but Sea -U -Tail is absolute number
one in all kinds of metrics in EV battery making
for the past few years. Whether it's the market
cap, the growth, the volume. Volume of batteries
delivered, everything. Wow. And truthfully, this
episode has been incredibly difficult to record
just because how much information that we're
able to find, whether it's online, offline, in
Chinese and English and piecing everything together.
And also given Robin has been doing so many things
at the same time, we figured that while you think
it is one person just chairing a company, he's
actually living like two, three people's life
at the same time. For sure. You know, he's easily
managing more than one company and studying while...
managing a couple of companies and being approached
by a million government officials. That's true.
Right. Yeah. So it seems like he himself never
stopped pursuing and progressing within the battery
industry. And from a very product driven point
of view, he was always able to deliver the product
that resolves. the client's pain point and he
always made things better cheaper he just doesn't
want an unperfect final product yeah i think
that's why uh he was able to get to the market
share uh as for now definitely been very demanding
actually when you talked about the whole factory
the amount of level of pristine is, right? The
love of demand for a factory. He's always there
to make sure that CATL is number one in all the
steps along the way. Another thing I think he
did really well or CATL did really well was eyeing
for the largest, the most prestige customer.
So with electric, portable electrics, they went
for Apple and Apple helped sustain their orders
going forward. And with CATL, the BMW relationship,
even though it might not be as profitable or
as many orders, that helped them, right? Just
in terms of prestige. I think that going for
a tough customer earlier on might not be economically
beneficial, but in the long term, it will help
you. So even though CATL arrived quite late to
the battery race, right now it seems pretty obvious
that it's... winning and it's founded in a second
tier city but somehow it made sense and inside
the company where it was originally owned by
a Japanese conglomerate in a market where there
were multiple players trying to get onto the
game they still find their very unique value
proposition always in the game. We talked about
how I talked about how the government subsidies
and the whitelist really helped Chinese EV battery
manufacturers to develop during those years.
But there are 100, if not more, manufacturings
during that time. So it's not, even though the
policy helped the industry to grow. how does
CATL really stand out from the industry, right?
It's because they diversified into a lot of path
to pursue to ensure that they lower their risk
in general. And so they're continuing, and we're
seeing that they're continuing to do that with
aviation, marine, sodium, and all kinds of other
things that they're investing in. So diversifying
and almost like not caring about the immediate
returns, but look for the long run benefits.
that's usually quite rare for a business especially
i would say in china yeah because they're the
market just demands short -term return so much
yeah that's very true all right cool thumbs up
yay we're done we're done and if catl story sparked
something for you whether it's their business
strategy or the battery science, I'm sorry if
we poorly explained the science to you, or if
it's Robin's character who always solved the
hardest problem and refused to give up. If you
like the story, share it with someone who deserves
to understand how Asian business actually works,
and not just the headline version, but the real
version. Subscribe wherever you get your podcasts,
and we shall see you in the next episode of Ascent.
Bye everyone!