WEBVTT

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In 2011, BYD's Wang Chunfu was already a billionaire.

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Panasonic had been making lithium batteries since

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before your first smartphone. LG and Samsung

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had been in the EV battery game for over a decade.

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And in a small coastal city in Fujian province,

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a city most people outside of China have never

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heard of, a company quietly opened its doors.

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No customers, no track record, or not even a

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name anyone outside of the industry would recognize.

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Six years later, it was number one in the world.

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It has not given up that seat since then. Oh,

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and one more thing. The company's English name

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is CATL, which stands for Contemporary Emporex

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Technology Limited. Its Chinese name translates

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into the era of Ningde. Yes, and these two names

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have nothing to do with each other, which honestly

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tracks perfectly for a company that has made

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a habit of not doing what anyone has expected.

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If you want a shortcut for understanding what

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CATL is and why it matters, here's one. Think

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TSMC, but for batteries. CATL now powers roughly

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one in three electric vehicles on Earth. Its

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founder, Robin Zeng, a kid grew up hauling rice

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over mountain roads to pay for school, is worth

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$63 billion. The technology inside your EV, and

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probably the next five EVs after that, traces

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back to a decision made in a factory in Dongguan

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in the late 1990s. A licensed patent from the

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Bell Labs that nearly blew up in everyone's faces,

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and a Japanese company called DDK that unknowingly

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incubated its own biggest competitor. It's a

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story about skill, about government policy used

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as a competitive moat, about one scientist who

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spent 30 years building China's battery industry

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from scratch, and the student he mentored who

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took it planetary. And it's a story about what

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happens when you arrive last to the race and

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win it anyways. Let's get into it. I'm your host,

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Pan. And I'm Linda. Welcome to Ascent. Let's

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start the story as we have always done, which

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is all the way from the beginning. Robin was

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born in 1968 in a poor mountain village in Ningde,

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as they all are. 1968 China. Everyone was poor

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at the time in Fujian province. He majored in

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shipbuilding and marine engineering in Shanghai

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Jiao Tong University, and he graduated in 1989.

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Fun fact, he has an alum in the same university,

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Niu Shen, who later worked for Sequoia Capital.

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So this university is at a level where a lot

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of talents would gather. Yeah, Shanghai Jiao

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Tong University is one of the top, top tier universities

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in China. Absolutely. And right after he graduated,

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he got hired by a state -owned enterprise locally

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in Fujian, which is kind of the dream for all

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of the parents at the time. Your kid... would

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go into a state -owned enterprise and have a

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very stable job and have a very good benefits

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on a monthly basis. Unfortunately, that job was

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very poorly paid. It was only 98 kuai, about

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$10 at the time. Per month. Wow. And Robin was

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probably thinking the same. This is stable, but

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this is also not getting me anywhere. Why don't

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I try something else? So he went for a private

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enterprise that was located in Dongguan. which

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is in Guangdong province. And that company is

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called SAE Magnetics, which is a subsidiary in

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China of TDK, which is a Japanese company. It

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was the world's largest manufacturer of the read

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-write head for computer hard drives at the time.

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Sounds a little ancient, but that's kind of what

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they do at the time. So if you remember C drives

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in your computer, Windows 95, 98 XP. what's reading

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ancient terms what's reading and writing those

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c drives is what they're making right that little

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pin that's right sae magnetics was manufacturing

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the magneto resistant part and that is used in

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the computers. The core innovation for TDK very

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shortly is they commercialized a chemical component

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called ferrite, and that goes into all the drives.

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So if you have listened to cassette or tapes

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or like basically drive writers, that's... That's

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what they're doing. And that was in very high

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demand in the 90s. That's breaking edge technology

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back in the 90s. Yeah, definitely. For sure.

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It was computer related, right? Yes. And you

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might be wondering, why would Japanese companies

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or Japanese manufacturing exist in Guangdong,

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in cluster at the time? In the 90s, it was a

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very high time for foreign companies to come

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to China. And they all come as foreign direct

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investment and FDI. In the 80s, a lot of them

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came into China through joint ventures. And in

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the 90s, a new trend started, which is wholly

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foreign -owned companies. Japanese factory, they

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clustered in Guangdong, in that part of the area,

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because these places are made into key manufacturing

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hubs, the Pearl River Delta, which has Guangzhou,

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Shenzhen, and Dongguan, primarily focusing on

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consumer electronics, machinery. housing appliances,

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and computers. And those companies, you may ring

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a bell, which are Canon, Mitsubishi, and TDK

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was one of them. Oh, wow. Who landed there. And

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I think the proximity to Hong Kong probably also

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had something to do with the fact that they set

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up factories there. Absolutely. It's also a low

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-tax region, I think. Interesting. So Japan back

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then had a very high concentration in the electronics

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sector. And I think you said it right. Because

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of the manufacturing convenience and the financial

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convenience in Hong Kong, that's why they were

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able to all land it up in that region. And our

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Robin Zheng started in TDK as a rank and file

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engineer after he graduated. He started working

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in SAE TDK for a decade. While he was working

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in the company, He made a few friends who all

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later on became the first batch of founding fathers

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of the first company that we're going to discuss

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in just a bit, ATL. All right. Who are they?

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The founding fathers are, well, let's start with

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the person who got Robin into the company, which

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is the highest ranking Chinese in the company.

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And his name is Liang Shaokang. We call him Raymond.

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He's an HKU engineering grad, joined SAE after

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graduation and became a part of the senior leadership

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in 1999. So he spotted Robin. The next person

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would be someone who worked very closely with

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Robin and almost day to day. This Dr. Chen Tanghua,

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we call him TH, is the direct superior of Robin.

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The person who worked closest with Robin and

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he is a graduate of Taiwan University. chemistry

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department, got a PhD at UC Berkeley, went to

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IBM after graduation from UCB. He is well -educated

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in physics and chem. Since TDK is established

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in 1935, he was one of the most important non

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-Japanese executive director in the company.

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And he is... The most important mentor, would

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you say that, to Robin? Because he brought Robin

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so many opportunities to go out, see the world,

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to learn, pushed himself to become an engineering

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specialist. And if you were to be having a mentor

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slash boss like that, chances are you'll be doing

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great things. So hold on to people who are like

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that. For sure. And the last person is Mike.

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Zhang Yujie. He is also a graduate from Taiwan

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University, EE department. And he was an overseas

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returnee as well, studied in the US in Notre

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Dame. I finished his PhD, had experience working

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for Ford and IBM before starting his career in

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SAE. And a close friend of TH. That's right.

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In 1999, at the age of... 31, 10 years after

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Robin worked for SAE. Robin became the youngest

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director of engineering for SAE, which is great.

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10 years to director. It's a great career transition.

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He apparently was very talented and was able

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to resolve problems that other engineers cannot

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resolve. So, for example, like some of the most

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typical problems at the time, your hard drive

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has very limited density of storage. Therefore,

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by increasing the density of those storage, you

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basically improve your product to the next level.

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And Robin was actively resolving problems like

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that. So he had a very good hand with chemicals

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and working on the physics properties. with all

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the products that he had, got promoted. And his

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mentor, TH, continuously sent him overseas to

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study. Also in that period, that's how Robin

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got exposed to the world of rechargeable battery

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because he promoted so fast. And as we mentioned,

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TDK SAE was a wholly foreign -owned company.

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It's not a Chinese company. So what Robin faces

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was you hit a glass ceiling. Right. The bamboo

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ceiling. The bamboo ceiling that bamboo people

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created. Less of a bamboo ceiling because it's

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a Japanese company. You get what I mean. So structural

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limit and mainland Chinese employee could only

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advance so far. The real executive posts are

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for Japanese or maybe Hong Kong executives. So

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in the meantime, a Shenzhen company offered Robin

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a position as a general manager. It's a very

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senior leadership role with a clear path, safety,

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and prestige. And a raise. And a raise. And any

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Chinese parent would be like, Robin, go take

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the job. Make us proud. And Robin once again

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turned it down. He didn't want the stable job

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and he didn't want to be the GM for this Shenzhen

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company. And someone proposed to him a very interesting

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idea. So in 1999, our Raymond, the highest ranking

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executive officer, the president of SAE Magnetics,

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the highest ranking person of the three started

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to orchestrate a new company. He pitched a battery

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startup idea to Robin and TH and to Mike. He

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offered, you know, strategic vision and battery

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opportunities. Let's focus on consumer electronics.

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I'll help you get the money. Don't worry about

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it. You know, I got you. And he invited some

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of the employees that he had very close relationship

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with. And Raymond, for the startup, served as

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the chairman and CEO of the company. And when

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he said he will raise money, he really did get

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some money. He raised 2 .5 million US dollar

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paying capital. This company started running.

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And this company is... sort of the prequel of

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CATL. It's called ATL. And yes, you just cut

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the C off. It's Amperex Technology Limited. Exact

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same name, just without the contemporary. Yeah,

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just without the contemporary. TH is still the

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senior executive of the ATL company. He took

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the role of the president slash COO, handling

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the day -to -day operational side of things.

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And he asked Robin to take care of product development,

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which I guess Robin naturally falls onto because

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both men are senior than him, like literally

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older. So Robin will be the person who is younger

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and running on the ground and fixing all the

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problems and working with all of the factory

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employees. When your manager and your manager's

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manager asks you to start a company with them,

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I think you have to do a bit of the operations,

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of course. There's a lot of things you have to

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do. And he also saw Robin's potential in solving

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technical problems, which also falls under your

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narrative, which is if you're starting a company

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with your senior and your senior's senior, you

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will be doing a lot of job. You're the one that's

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solving problems. He's also very, very good at

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solving these kind of technical problems, as

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we'll see from time to time after he starts CTL

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as well. Yeah. You kind of want to prove yourself.

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Much. A bit. Yeah. So Robin, of course, solving

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all the problems, was named the head of R &D

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as a product manager. The youngest of the three.

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He really did above and beyond while working

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with the two others because he was the person.

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Well, he did two things. First, we're about to

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get to, which is he solved the Bell Labs license

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problem. And the second is, remember the company

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ATL started in 1999 and TH just one year before

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that sent Robin to study in the South China University

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of Technology. which is conveniently located

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just an hour away from where they work in Dongguan.

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South China University of Technology is in Guangzhou,

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which is basically one, two hours driving. It's

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not very far off. So you work and you study at

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the same time. And guess what did he send him

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to study in the university for a master's degree?

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You study electronics engineering in the Department

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of Applied Physics to understand how the future

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of batteries would be designed. Oh, interesting.

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Even though ATL is started in 1999. They're doing

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things by learning. I feel like it's somewhat.

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planned almost like you don't just you have to

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apply to school get in school right right and

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yeah and when when I say Raymond really had the

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vision here's what the vision is if we were to

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be that old in 1999 I was a kid in 1999 and me

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too but I experienced on the on the consumer

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end of things right and you lived there in 1999

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I lived there in 1999 I did oh my god I did live

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there geez You might have crossed paths with

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the three of them. Why that moment? When you

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want to start a company, you ask two questions.

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Why you? Why now? The why you problem was quite

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straightforward. You both had worked for foreign

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companies in a cluster of manufacturing companies.

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So you can see who's doing what better. You would

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get a good sense of what's going on. And why

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now is the market demand at the time. Consumer

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electronics market is about to skyrocket in China.

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Exactly at that time. The growth rate towards

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the end of 1990 is vertical. It's basically vertical.

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And to put it in human terms, you'll get a sense

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of what's going on. The consumer electronics

00:15:48.620 --> 00:15:53.059
ownership in China. A color television that you

00:15:53.059 --> 00:15:57.139
would own at home. A VCD or DVD player. We actually

00:15:57.139 --> 00:16:00.750
have one of those back home. A pager. mobile

00:16:00.750 --> 00:16:05.750
phone sony walkman laptop or desktop pc started

00:16:05.750 --> 00:16:08.009
to become a household thing like starting in

00:16:08.009 --> 00:16:10.950
1997. that's all around that time that's all

00:16:10.950 --> 00:16:14.950
around that time no wonder tdk was was putting

00:16:14.950 --> 00:16:17.389
in in dongguan because the need was very much

00:16:17.389 --> 00:16:19.769
not not only were they shipping overseas but

00:16:19.769 --> 00:16:25.149
china's own demand was also very high so based

00:16:25.149 --> 00:16:27.710
on the population size of china they they know

00:16:27.710 --> 00:16:30.429
if if everything's done correctly, this could

00:16:30.429 --> 00:16:32.990
be millions and billions of dollars. Right. And

00:16:32.990 --> 00:16:37.649
most of what TDK and ATL supplied at the time

00:16:37.649 --> 00:16:40.169
now become really big companies within China

00:16:40.169 --> 00:16:43.610
just because they existed at the time. So Raymond,

00:16:43.690 --> 00:16:47.590
as someone who was working for a company that

00:16:47.590 --> 00:16:52.129
provides like parts, he saw that the demand is

00:16:52.129 --> 00:16:55.269
going up very high. Let's do this. And one kind

00:16:55.269 --> 00:16:58.250
of interesting story about Raymond as well. SAE

00:16:58.250 --> 00:17:00.629
Magnetic was started by him, was co -founded

00:17:00.629 --> 00:17:04.509
by him, and was acquired by TDK in the 1980s.

00:17:04.509 --> 00:17:07.910
So it's not his first try as an entrepreneur.

00:17:08.029 --> 00:17:12.710
He was already successful in the sense that his

00:17:12.710 --> 00:17:15.690
previous company got acquired by such a large...

00:17:16.170 --> 00:17:18.549
institution so he has a very good entrepreneurial

00:17:18.549 --> 00:17:21.369
gut feeling right like so i want to start this

00:17:21.369 --> 00:17:23.930
we'll get acquired and you learn to and he really

00:17:23.930 --> 00:17:26.529
lived through a time where things are just going

00:17:26.529 --> 00:17:28.710
up yeah no matter what you do so the three of

00:17:28.710 --> 00:17:30.630
them actually was a perfect combination perfect

00:17:30.630 --> 00:17:34.650
combination now at this point atl was founded

00:17:34.650 --> 00:17:38.210
doing its business all right very clear on we

00:17:38.210 --> 00:17:41.630
want consumer electronics we want battery we'll

00:17:41.630 --> 00:17:45.680
be making some all right how however Someone

00:17:45.680 --> 00:17:48.799
else is in the battery market. They're not the

00:17:48.799 --> 00:17:51.539
first one who come in and say, hey, we have battery

00:17:51.539 --> 00:17:55.900
options for you. At the time, there were Japanese

00:17:55.900 --> 00:17:58.880
competitors, there were Korean competitors, and

00:17:58.880 --> 00:18:01.460
some of the most noticeable ones are like Panasonic.

00:18:02.349 --> 00:18:05.910
And you have Samsung SDI. There's also LG Cam.

00:18:06.930 --> 00:18:09.150
So no matter what you do, you're kind of late

00:18:09.150 --> 00:18:12.970
to the game. And cylindrical batteries are created.

00:18:13.130 --> 00:18:15.650
Prismatic cells were also created. And you're

00:18:15.650 --> 00:18:17.650
like, oh, in what other shape can I be creating

00:18:17.650 --> 00:18:20.369
batteries? As a new entrant, they need to find

00:18:20.369 --> 00:18:22.490
that niche that kind of works for them. Right.

00:18:22.650 --> 00:18:25.329
Cannot just go head to head with giants. Right,

00:18:25.349 --> 00:18:29.970
right. So what do they do? 2001, that's when

00:18:29.970 --> 00:18:32.650
they first started operating. They had a few

00:18:32.650 --> 00:18:36.890
deals, but those deals are related to the consumer

00:18:36.890 --> 00:18:39.509
products that we just talked about. And they

00:18:39.509 --> 00:18:43.069
are like Bluetooth headphones. There are some

00:18:43.069 --> 00:18:47.470
VCDs and DVDs. They're all great, but you're

00:18:47.470 --> 00:18:50.970
only being a battery supplier for them. You want

00:18:50.970 --> 00:18:54.890
one case that really makes you stand out so that

00:18:54.890 --> 00:18:58.339
you can win more. You're at the MVP stage. where

00:18:58.339 --> 00:19:02.359
you want more prestigious clients to come to

00:19:02.359 --> 00:19:05.140
you and find you. At least I think that's where

00:19:05.140 --> 00:19:08.279
they were going for. Yeah. Yeah. So who did they

00:19:08.279 --> 00:19:12.799
go to? So they spend a lot of money on one thing.

00:19:12.819 --> 00:19:18.000
Well, in the meantime, one order was kind of

00:19:18.000 --> 00:19:19.819
flirting with them, but they haven't secured

00:19:19.819 --> 00:19:22.700
it yet. They need to prove themselves to be good

00:19:22.700 --> 00:19:24.980
at battery making to be able to get the deal.

00:19:25.950 --> 00:19:28.150
We'll come to the name of the deal later, but

00:19:28.150 --> 00:19:31.650
let's just go to how much money that they've

00:19:31.650 --> 00:19:36.250
spent and why that order matters. So remember,

00:19:36.369 --> 00:19:41.029
they raised $2 .5 million in starting the company.

00:19:41.309 --> 00:19:44.630
And one day, this technical challenge comes about.

00:19:44.750 --> 00:19:48.170
You need to prove yourself. And to be able to

00:19:48.170 --> 00:19:50.190
tackle this technical challenge, you need to

00:19:50.190 --> 00:19:55.640
spend at least $1 million in licensing fee. Because

00:19:55.640 --> 00:19:57.539
they started with nothing, they need to first

00:19:57.539 --> 00:20:01.240
get or create a product, right? That's right.

00:20:01.720 --> 00:20:06.700
And this $1 million licensing fee is from Bell

00:20:06.700 --> 00:20:09.500
Labs. Linda has a story. Yes, go for it. What's

00:20:09.500 --> 00:20:12.500
the Bell Labs license story? Pan just mentioned

00:20:12.500 --> 00:20:17.220
that the market was already saturated with batteries

00:20:17.220 --> 00:20:20.079
that are cylindrical or prismatic, which is rectangular,

00:20:20.380 --> 00:20:29.059
right? called polymer lithium ion battery and

00:20:29.059 --> 00:20:33.400
the polymer allows the battery shape to be whatever

00:20:33.400 --> 00:20:36.660
they want so it's soft packaging i have a i have

00:20:36.660 --> 00:20:40.259
a joke here um there's cylindrical and then there's

00:20:40.259 --> 00:20:42.980
prismatic and this category would be called miscellaneous

00:20:42.980 --> 00:20:46.700
oh actually yes it is it is whatever you however

00:20:46.700 --> 00:20:48.720
you want to shape it exactly so they're like

00:20:48.720 --> 00:20:52.519
okay this is a niche nobody really got this tackled

00:20:52.519 --> 00:20:54.240
correctly yet because everything is customized

00:20:54.240 --> 00:20:56.940
it is and it's it's higher cost right because

00:20:56.940 --> 00:20:59.400
cylindrical batteries you can just like print

00:20:59.400 --> 00:21:01.359
and go print and go and you can like mass scale

00:21:01.359 --> 00:21:03.480
it so they're like okay we're gonna try this

00:21:03.480 --> 00:21:07.500
new thing out and so they and who has the technology

00:21:07.500 --> 00:21:10.740
bell labs and back then they had a bunch of other

00:21:10.740 --> 00:21:13.680
technology so when they reached out to bell labs

00:21:13.680 --> 00:21:16.500
they weren't they wasn't they weren't aware that

00:21:17.339 --> 00:21:20.240
20 other companies has already tried and tackled

00:21:20.240 --> 00:21:22.259
this technology and failed to commercialize.

00:21:23.700 --> 00:21:27.559
And so they spend a million, got the pads in,

00:21:27.640 --> 00:21:30.400
got the licensing. And so then the next step

00:21:30.400 --> 00:21:32.900
is for them to commercialize. And this is where...

00:21:33.420 --> 00:21:37.039
Zeng's technological expertise and expertise

00:21:37.039 --> 00:21:40.319
in problem solving comes in. Raymond's like,

00:21:40.440 --> 00:21:44.759
I'm going to pay and you figure this out. So

00:21:44.759 --> 00:21:47.579
Robin got the battery, got the, I guess, the

00:21:47.579 --> 00:21:51.539
elements and the manual back. Try to create the

00:21:51.539 --> 00:21:54.279
battery. Realize when you operate the battery,

00:21:54.359 --> 00:21:57.759
it bulges. It bloats. It bloats. And so when

00:21:57.759 --> 00:22:00.140
it bloats, there's a risk of it catching fire

00:22:00.140 --> 00:22:03.099
and blowing up. I mean, more obviously, when

00:22:03.099 --> 00:22:05.380
you're having a home of plans at home, like if

00:22:05.380 --> 00:22:07.819
you have a bloating battery, that's like a danger,

00:22:07.940 --> 00:22:10.420
a signal that you want to return this. It wouldn't

00:22:10.420 --> 00:22:13.500
sell. Right. And so they spent $1 million on

00:22:13.500 --> 00:22:16.519
something and realized that you can't commercialize

00:22:16.519 --> 00:22:20.920
it. Robin, being the technical expert that he

00:22:20.920 --> 00:22:24.980
is at that time, spent days trying to read the

00:22:24.980 --> 00:22:27.140
manual, trying to figure out what is making it

00:22:27.140 --> 00:22:30.380
blow, and ended up realizing that one of the

00:22:30.380 --> 00:22:34.279
components in the original manual has a very

00:22:34.279 --> 00:22:37.319
low boiling point. And that's what's making it

00:22:37.319 --> 00:22:40.680
blow because when the battery is operating, the

00:22:40.680 --> 00:22:43.359
temperature goes up. And so parts of it starts

00:22:43.359 --> 00:22:46.019
to blow because of the low boiling point. And

00:22:46.019 --> 00:22:48.640
so they then started testing on different components

00:22:48.640 --> 00:22:53.980
to raise the boiling point. Two weeks later,

00:22:54.160 --> 00:22:57.519
only two weeks later. So it wasn't too hard a

00:22:57.519 --> 00:22:59.940
problem to solve. But you would wonder why the

00:22:59.940 --> 00:23:01.819
other 20 companies who also bought the patent

00:23:01.819 --> 00:23:05.140
didn't get it commercialized, right? Didn't have

00:23:05.140 --> 00:23:09.799
Robin. I know, legend has it. Robin single -handedly

00:23:09.799 --> 00:23:13.680
solved this issue and very soon they were able

00:23:13.680 --> 00:23:17.039
to commercialize this technology. And that's

00:23:17.039 --> 00:23:21.059
what made ATL special. And now we can mention

00:23:21.059 --> 00:23:23.539
the name and that buyer isn't coming from anywhere.

00:23:23.720 --> 00:23:27.059
Why did they have to spend so much money on one

00:23:27.059 --> 00:23:29.160
license and have to solve the problem? Because

00:23:29.160 --> 00:23:33.039
it was Apple's iPod. They want to show themselves

00:23:33.039 --> 00:23:36.660
to the world that, hey, we are officially a battery

00:23:36.660 --> 00:23:40.920
supplier. For Apple, in 2003, Apple was preparing

00:23:40.920 --> 00:23:44.960
to launch the new version of iPod. And if you

00:23:44.960 --> 00:23:48.539
live in this day and age and know what iPod is,

00:23:49.309 --> 00:23:51.809
You might be a 90s baby, but for those who don't

00:23:51.809 --> 00:23:54.710
know what iPod is, it is the original version

00:23:54.710 --> 00:23:58.789
of an Apple's MP3 player. It's a music player.

00:23:58.990 --> 00:24:03.569
Yes. It was a hardware that can carry, you can

00:24:03.569 --> 00:24:06.490
download music. It's linked to Apple Store later

00:24:06.490 --> 00:24:09.549
on with the internet linked Wi -Fi version. But

00:24:09.549 --> 00:24:11.829
before it was basically you load music into it

00:24:11.829 --> 00:24:14.470
and then you listen to it. And it has a cute,

00:24:15.150 --> 00:24:18.309
has cute colors and has like very easy to use

00:24:18.309 --> 00:24:22.390
panel. yeah the scrolling was what made it viral

00:24:22.390 --> 00:24:25.269
exactly yeah the the scrolling where you just

00:24:25.269 --> 00:24:27.809
run your finger in circles and then it'll scroll

00:24:27.809 --> 00:24:30.269
instead of the previous kind of up and down you

00:24:30.269 --> 00:24:34.109
have to like tap a couple times right um but

00:24:34.109 --> 00:24:38.150
if you remember how thin it was right That is

00:24:38.150 --> 00:24:42.190
why Apple had to use this technology. A polymer

00:24:42.190 --> 00:24:45.470
battery. Exactly, because the typical cylindrical

00:24:45.470 --> 00:24:51.990
batteries, there's a minimum width and height

00:24:51.990 --> 00:24:56.509
that it needs to comply with. robin basically

00:24:56.509 --> 00:25:00.170
made this deal possible and that's how you can

00:25:00.170 --> 00:25:03.750
have a steve jobs design very thin beautiful

00:25:03.750 --> 00:25:06.450
looking product holding your hand without a swelling

00:25:06.450 --> 00:25:13.279
battery ATL has validated the idea. And later

00:25:13.279 --> 00:25:16.279
on, they won. Of course, they won more deals

00:25:16.279 --> 00:25:20.019
after the Apple attempt. Major customers like

00:25:20.019 --> 00:25:23.500
Samsung and Huawei, and whether it's a phone

00:25:23.500 --> 00:25:27.160
or an MP3 players, started to buy batteries from

00:25:27.160 --> 00:25:31.039
ATL. That's right. Doing great. So at this point,

00:25:31.079 --> 00:25:35.039
you raised $2 .5 million. And you have so many

00:25:35.039 --> 00:25:37.819
deals, like batteries still coming in, like there's

00:25:37.819 --> 00:25:41.000
a lot of orders. Technically, this is great.

00:25:41.119 --> 00:25:44.420
But hey, why did the VCs pull out? There was

00:25:44.420 --> 00:25:47.480
a story there, right? So after the initial 2

00:25:47.480 --> 00:25:50.329
.5 million funding. And after they figure out

00:25:50.329 --> 00:25:52.630
this whole polymer lithium ion battery technology,

00:25:53.109 --> 00:25:55.769
they actually have more investors knocking on

00:25:55.769 --> 00:25:59.589
their door at first in the 2002, 2003 period.

00:25:59.809 --> 00:26:02.069
Reasonable. Reasonable. Yeah. Right. And they

00:26:02.069 --> 00:26:03.890
wanted the funding because they want to scale

00:26:03.890 --> 00:26:07.369
their production line. And so Carlyle and 3i,

00:26:07.470 --> 00:26:11.250
both are very well -known VCs, together just

00:26:11.250 --> 00:26:15.309
gave them $30 million to scale it up. This is

00:26:15.309 --> 00:26:19.220
2000. So the money came in. Everything at the

00:26:19.220 --> 00:26:22.799
end of 2003. And then they had this Apple deal

00:26:22.799 --> 00:26:25.500
in 2004. And all of a sudden, one year later,

00:26:25.619 --> 00:26:29.720
the VCs are like, hey, we want to withdraw. We're

00:26:29.720 --> 00:26:31.980
going to cash out. Which is, you know, very weird.

00:26:32.039 --> 00:26:37.059
The decision was made because when they figured

00:26:37.059 --> 00:26:41.859
out the technology in 2001, all the way to 2005,

00:26:42.099 --> 00:26:46.769
in four years. Your competitors are now realizing

00:26:46.769 --> 00:26:49.130
that this is a great market. We're going to do

00:26:49.130 --> 00:26:52.890
polymer. We're going to come in too. And so eventually

00:26:52.890 --> 00:26:55.809
they will get more and more competition. So the

00:26:55.809 --> 00:26:59.369
VC thought, hey, if this is going to be the landscape

00:26:59.369 --> 00:27:02.569
where the demand, because the production technology

00:27:02.569 --> 00:27:06.430
is getting easier and easier. And so there's

00:27:06.430 --> 00:27:09.269
going to be, they anticipate a crowded marketplace.

00:27:09.509 --> 00:27:12.690
And so they said, okay, we've experienced the

00:27:12.690 --> 00:27:16.859
high growth. we expect the growth to kind of

00:27:16.859 --> 00:27:20.619
flatten because of competition. So as investors,

00:27:20.759 --> 00:27:23.759
this is a good time to pull out. Well, they anticipated

00:27:23.759 --> 00:27:26.119
the market rate, but they didn't anticipate ATL

00:27:26.119 --> 00:27:30.740
rate. Exactly, exactly. So decision in hindsight

00:27:30.740 --> 00:27:37.599
is much easier. But interestingly, at that time,

00:27:37.700 --> 00:27:41.660
2005, the VC, all three of them wants to pull

00:27:41.660 --> 00:27:45.519
out. So the initial VC, plus Carlisle on three

00:27:45.519 --> 00:27:48.819
I wanted to pull out. They did make a three -time

00:27:48.819 --> 00:27:51.359
gain. The latter two VC did make a three -time

00:27:51.359 --> 00:27:57.660
gain, but they lost out on the hundred. Or how

00:27:57.660 --> 00:27:59.700
many ever times gain that they were going to,

00:27:59.839 --> 00:28:03.960
if they had, they sticked around. So in 2005,

00:28:04.099 --> 00:28:08.339
they had to find someone to take over the VC's

00:28:08.339 --> 00:28:13.029
shares, which means... They had to go back to

00:28:13.029 --> 00:28:15.769
their original employee. And don't you think

00:28:15.769 --> 00:28:17.950
that this is very counterintuitive? Like you

00:28:17.950 --> 00:28:20.910
managed to solve the problems, right? And you've

00:28:20.910 --> 00:28:23.509
probably hit the biggest deal of all time. And

00:28:23.509 --> 00:28:26.430
a year later, you lose your funding source. However,

00:28:26.609 --> 00:28:28.569
someone else showed up and came to the rescue.

00:28:29.029 --> 00:28:32.349
And yes, it was where they were coming from.

00:28:32.509 --> 00:28:37.690
So TDK showed up. And TDK made a huge investment

00:28:37.690 --> 00:28:40.369
on them. So remember, 30 million got pulled out,

00:28:40.390 --> 00:28:45.369
but 100 million was being poured into ATL, the

00:28:45.369 --> 00:28:47.710
company. To buy out the VCs. Right, right. And

00:28:47.710 --> 00:28:51.630
so TDK was kind of their shining knight in armor.

00:28:51.789 --> 00:28:54.470
Who knew your original employer was the one that

00:28:54.470 --> 00:28:57.750
saved you from bankruptcy? Yeah. But I think

00:28:57.750 --> 00:29:00.109
TDK also made a very sensible decision, right?

00:29:00.190 --> 00:29:03.130
Because they probably were also eyeing more or

00:29:03.130 --> 00:29:05.849
less the same market, you know, because how many

00:29:05.849 --> 00:29:08.859
more, you know, drive readers are you going to

00:29:08.859 --> 00:29:11.220
make that is going to dominate the market consumer

00:29:11.220 --> 00:29:14.920
electronics battery is what was then the new

00:29:14.920 --> 00:29:17.160
sexy thing yes that was hitting the market so

00:29:17.160 --> 00:29:21.619
tdk wanted in made the shift invested in them

00:29:21.619 --> 00:29:24.160
and also retrospectively in hindsight i think

00:29:24.160 --> 00:29:27.319
tdk probably made the best acquisition at the

00:29:27.319 --> 00:29:33.119
time because without atl tdk wouldn't even be

00:29:33.119 --> 00:29:37.279
a contestant in the ev battery field industry

00:29:37.279 --> 00:29:39.559
right can we have a little spoiler here and say

00:29:39.559 --> 00:29:43.740
that atl is not the largest battery consumer

00:29:43.740 --> 00:29:48.680
electrics battery manufacturer and tdk's vast

00:29:48.680 --> 00:29:52.940
majority of tdk's current revenue and current

00:29:52.940 --> 00:29:57.559
profit comes from atl yeah so it was a very good

00:29:57.559 --> 00:30:01.900
buy yes yes it made tdk who they are All right.

00:30:01.940 --> 00:30:05.700
And I guess nowadays TDK are even more involved

00:30:05.700 --> 00:30:08.140
in the EV battery or the battery making field.

00:30:08.200 --> 00:30:10.940
And TDK is now officially a sponsor to Formula

00:30:10.940 --> 00:30:12.980
E. Why do we care? Because, you know, just fans.

00:30:14.539 --> 00:30:18.380
There was a really cool poster about TDK's name

00:30:18.380 --> 00:30:21.640
plastered on Porsche team's Formula E car. It

00:30:21.640 --> 00:30:24.359
was quite cool. Interesting. So they have completely

00:30:24.359 --> 00:30:28.579
pivoted from cassettes to drives and now to...

00:30:29.099 --> 00:30:32.480
Like sort of all in EV batteries. Yeah. All right.

00:30:32.500 --> 00:30:34.500
So now let's come back to the story a little

00:30:34.500 --> 00:30:40.579
bit. We're at the end of 2005. ATL is now 100

00:30:40.579 --> 00:30:48.859
% owned by TDK. The trio are now back to work.

00:30:48.940 --> 00:30:51.920
Back to work. With their old employer. Was their

00:30:51.920 --> 00:30:55.789
old employers... And they are continuously solving

00:30:55.789 --> 00:30:58.950
and meeting more demands that is coming from

00:30:58.950 --> 00:31:04.589
the consumer electronics field. In 2006, ATL

00:31:04.589 --> 00:31:08.170
was so popular that they were producing about

00:31:08.170 --> 00:31:12.250
150 million pieces of cell every single year,

00:31:12.349 --> 00:31:17.250
very large. And they had orders really coming

00:31:17.250 --> 00:31:20.940
from all the major cell phone makers. And it

00:31:20.940 --> 00:31:24.079
expanded so quickly to a point where Dongguan

00:31:24.079 --> 00:31:27.559
itself is not large enough for them. So the trio

00:31:27.559 --> 00:31:29.799
had an idea that, oh, maybe it's a good idea

00:31:29.799 --> 00:31:32.700
that we expand to other places. And Robin thinks,

00:31:32.799 --> 00:31:35.640
oh, like naturally we should do that. So they

00:31:35.640 --> 00:31:37.880
want to put down about 200 million US dollar

00:31:37.880 --> 00:31:42.059
into a new place. And of course, there were six,

00:31:42.220 --> 00:31:46.400
seven, a bunch of new provinces like lining up

00:31:46.400 --> 00:31:49.099
and say, hey. Can you put it at my place? This

00:31:49.099 --> 00:31:51.339
will be like great employment opportunity and

00:31:51.339 --> 00:31:53.640
also will get us a lot of money. Now the MVP

00:31:53.640 --> 00:31:55.480
has been approved and you're really good at making

00:31:55.480 --> 00:32:00.119
batteries. And TH's hometown, which is Nankang

00:32:00.119 --> 00:32:03.640
in Jiangxi, was also on the list wanting to.

00:32:03.680 --> 00:32:06.259
So it was not just one contestant. There were

00:32:06.259 --> 00:32:11.000
a number of them. Every municipality wanted ATL

00:32:11.000 --> 00:32:13.759
factory to be set up there. Yeah, that's right.

00:32:14.460 --> 00:32:20.119
In 2008, remember our Mike, Mike Zhang? He was

00:32:20.119 --> 00:32:23.920
a part of ATL now, and he was put on the project

00:32:23.920 --> 00:32:28.440
of where to locate, like evaluating the possibilities

00:32:28.440 --> 00:32:31.660
of... putting the factories in different locations

00:32:31.660 --> 00:32:34.339
and see which one is the most viable, most cost

00:32:34.339 --> 00:32:37.740
-efficient. He was sent to Ningde, of course,

00:32:37.740 --> 00:32:40.039
by Robin. He said, go evaluate this and see if

00:32:40.039 --> 00:32:42.559
it works. And obviously, like Robin, I think

00:32:42.559 --> 00:32:44.539
because of the local connection, he's from Ningde.

00:32:44.880 --> 00:32:49.220
And Ningde, as a municipality, also wanted the

00:32:49.220 --> 00:32:52.119
factories to be listed there. So Mike went there.

00:32:52.160 --> 00:32:56.680
Mike's like, cool, great. but need something

00:32:56.680 --> 00:32:58.779
that's more convincing. And Rob is like, if you

00:32:58.779 --> 00:33:00.460
don't put it there in Ningde, I'm going to quit.

00:33:01.079 --> 00:33:04.759
Not only me, but everyone from Ningde that currently

00:33:04.759 --> 00:33:08.259
works in ATL. Yeah. Seriously. Yeah, seriously.

00:33:08.900 --> 00:33:12.359
So with a... Well, obviously, I found this piece

00:33:12.359 --> 00:33:14.619
of information in a book that I do not trust

00:33:14.619 --> 00:33:16.700
100%. So let's just put it, it's a fun rumor.

00:33:16.859 --> 00:33:19.519
But of course, the stakes are very high. They

00:33:19.519 --> 00:33:22.619
ended up putting the factory in Ningde. But why

00:33:22.619 --> 00:33:26.119
Ningde? It's a small town. It's a very small

00:33:26.119 --> 00:33:29.599
town. It's pretty poor, like a lot of other places

00:33:29.599 --> 00:33:33.500
in China at the time. And before CATL landed

00:33:33.500 --> 00:33:37.819
in Ningde, its GDP per capita... is about $7

00:33:37.819 --> 00:33:43.259
,200 per year, which is about $1 ,000. And after

00:33:43.259 --> 00:33:48.980
CATL had landed in Ningde, let's just say now,

00:33:49.279 --> 00:33:57.259
2024 in Ningde's GDP per capita is $124. thousand

00:33:57.259 --> 00:34:01.480
RMB. Wow. Which is 20 times what it was before.

00:34:01.640 --> 00:34:04.099
This company single -handedly raised the GDP.

00:34:04.420 --> 00:34:08.539
Yeah, single -handedly. Well, I heard that even

00:34:08.539 --> 00:34:11.780
in 2004. the Ningde government actually reached

00:34:11.780 --> 00:34:15.159
out to Robin, expressing interest. Like, hey,

00:34:15.179 --> 00:34:18.019
think about us when you want to expand. So the

00:34:18.019 --> 00:34:20.940
relationship was built kind of in advance, but

00:34:20.940 --> 00:34:24.679
obviously there's a lot of convincing. So each

00:34:24.679 --> 00:34:27.619
municipality had to submit some kind of proposal

00:34:27.619 --> 00:34:30.420
because everyone wants this factory to be set

00:34:30.420 --> 00:34:33.179
up there. And so Ningde ended up giving them

00:34:33.179 --> 00:34:36.670
a lot of... tax subsidies makes sense as well

00:34:36.670 --> 00:34:39.510
as you know like we'll give you good land you

00:34:39.510 --> 00:34:41.730
know all kinds of stuff so they ended up agreeing

00:34:42.800 --> 00:34:45.679
obviously with robin pushing from the inside

00:34:45.679 --> 00:34:49.000
and also ningde government support from the outside

00:34:49.000 --> 00:34:51.300
that deal ultimately came through came through

00:34:51.300 --> 00:34:54.239
and as a comparison that we'll make later on

00:34:54.239 --> 00:34:56.559
in the episode i want to put it here just for

00:34:56.559 --> 00:34:59.480
now ningde is located at a very convenient location

00:34:59.480 --> 00:35:02.980
ningde is a coastal city and not only does have

00:35:02.980 --> 00:35:05.559
beautiful delicious seafood it also has ports

00:35:05.559 --> 00:35:08.880
which is very important for manufacturing and

00:35:08.880 --> 00:35:11.780
shipping exactly it's a strategic advantage if

00:35:11.780 --> 00:35:13.980
you want to the battery is out globally. Yeah.

00:35:14.139 --> 00:35:16.119
That's a good, it's a great thing. Exactly. Right.

00:35:16.179 --> 00:35:20.059
So a quick recap, 2008, what was in place so

00:35:20.059 --> 00:35:26.000
far? ATL established 1999, raised 2 .5 million,

00:35:26.139 --> 00:35:29.500
did a bunch of things and acquired by TDK with

00:35:29.500 --> 00:35:32.500
a hundred million, six years later, not bad,

00:35:32.699 --> 00:35:35.119
right? So for someone who is doing battery startups.

00:35:36.159 --> 00:35:38.099
They could be living very comfortable lives and

00:35:38.099 --> 00:35:41.380
just, you know, relax, sit back. But none of

00:35:41.380 --> 00:35:43.480
them have this personality. Yeah, but none of

00:35:43.480 --> 00:35:46.460
them. Because a few other things may have happened

00:35:46.460 --> 00:35:49.119
in 2008 around that time. Yeah, what happened?

00:35:49.340 --> 00:35:52.219
That made the trio think that, oh, there will

00:35:52.219 --> 00:35:56.360
be a long journey ahead of us. First, BYD was

00:35:56.360 --> 00:36:02.059
founded in 1995. In 2008, it was invested by

00:36:02.059 --> 00:36:05.219
Berkshire Hathaway. And Wang Chunfu was worth

00:36:05.219 --> 00:36:08.500
a billion of dollars. The CEO? Yes, the CEO.

00:36:08.679 --> 00:36:12.659
And was definitely one of the richest person

00:36:12.659 --> 00:36:15.260
in China for a while. So that happened around

00:36:15.260 --> 00:36:20.420
that time. And also in 2008 Olympics, CATL was

00:36:20.420 --> 00:36:23.039
invited to give it a try in supplying EV buses

00:36:23.039 --> 00:36:26.690
as a battery supplier. So it was kind of an attempt,

00:36:27.010 --> 00:36:31.030
a precursor to what they were doing. And if something

00:36:31.030 --> 00:36:33.929
is showed in an event like the Olympics, you

00:36:33.929 --> 00:36:36.550
know that this is not just a one -time thing.

00:36:36.730 --> 00:36:38.329
But the government cares about it. The government

00:36:38.329 --> 00:36:41.309
cares about it very deeply. And one other thing

00:36:41.309 --> 00:36:44.550
is Tesla Roadster, well, not yet on the road,

00:36:44.590 --> 00:36:48.530
but is unveiled in 2008. So that was also a very

00:36:48.530 --> 00:36:51.389
major catalyst. And the battery supplier was

00:36:51.389 --> 00:36:57.500
Panasonic. And it was a prismatic cell, 18650.

00:36:58.159 --> 00:37:03.219
However, Elon, Panasonic used the physical dimensions

00:37:03.219 --> 00:37:06.460
to categorize the batteries. Yeah, the length

00:37:06.460 --> 00:37:10.059
and the width of the battery. Right. So our Robin,

00:37:10.159 --> 00:37:13.840
our Robin wasn't just chilling there and doing

00:37:13.840 --> 00:37:18.119
nothing. In fact, at around the same time, he

00:37:18.119 --> 00:37:26.570
went to get a PhD. In between 2002 to 2006, he

00:37:26.570 --> 00:37:32.130
went to get a PhD from Professor Dr. Chen Lichen,

00:37:32.289 --> 00:37:38.510
who is likely the person who knows the most about

00:37:38.510 --> 00:37:42.550
EV batteries, aka lithium -ion batteries, inside

00:37:42.550 --> 00:37:46.409
of China. Wow, what a coincidence. What a coincidence.

00:37:48.539 --> 00:37:52.940
He totally planned this. Yeah. And Dr. Chen Lichuan

00:37:52.940 --> 00:37:57.079
is a bit older. Well, he was born in 1940. Very

00:37:57.079 --> 00:38:00.559
smart. He was just great at studying. He made

00:38:00.559 --> 00:38:06.179
it to... university in 1959. He went to China

00:38:06.179 --> 00:38:08.960
University of Science and Technology. And how

00:38:08.960 --> 00:38:11.599
good was he at studying science and technology?

00:38:11.900 --> 00:38:14.880
Your country sends you to another country to

00:38:14.880 --> 00:38:16.940
study science and technology. That's how good

00:38:16.940 --> 00:38:20.840
he was at the time. In 1959, that was a time

00:38:20.840 --> 00:38:23.139
that was prior to the Cultural Revolution. So

00:38:23.139 --> 00:38:27.139
he was able to study and he went to the Max Planck

00:38:27.139 --> 00:38:30.300
Institute. by the end of the Cultural Revolution,

00:38:30.420 --> 00:38:35.719
1976. And he did the solid state research, which

00:38:35.719 --> 00:38:40.099
is battery related. He was introduced to the

00:38:40.099 --> 00:38:43.699
lithium nitrate field of study while he was in

00:38:43.699 --> 00:38:48.099
the Max Planck Institute. And this society, this

00:38:48.099 --> 00:38:49.739
institute still exists today. It's called the

00:38:49.739 --> 00:38:52.300
Max Planck Society for the Advancement of Science

00:38:52.300 --> 00:38:56.760
in Germany. which I think roughly translate into

00:38:56.760 --> 00:39:00.739
the Academy of Science for whether it's the US

00:39:00.739 --> 00:39:05.199
or China, the centralized science institute that

00:39:05.199 --> 00:39:09.360
directs and organizes and accelerates the science

00:39:09.360 --> 00:39:13.599
growth of the country. And in the 70s, early

00:39:13.599 --> 00:39:15.980
70s, we all know that there was an oil crisis.

00:39:16.900 --> 00:39:22.289
That's why when Dr. Chen studied in... Germany,

00:39:22.329 --> 00:39:24.789
he really focused on the alternative energies

00:39:24.789 --> 00:39:27.590
and energy solutions and solid -state lithium

00:39:27.590 --> 00:39:30.690
batteries. But it was way too early, way too

00:39:30.690 --> 00:39:32.650
early for solid -state lithium batteries. It

00:39:32.650 --> 00:39:35.849
was like a myth or like a legend. He was studying

00:39:35.849 --> 00:39:38.150
something that was at least four decades ahead

00:39:38.150 --> 00:39:43.409
of time. That's right. So he studied under Werner

00:39:43.409 --> 00:39:46.050
Webner, this professor, and was focusing on the

00:39:46.050 --> 00:39:49.920
solid -state ionics. This is when lithium batteries

00:39:49.920 --> 00:39:52.699
were completely nascent. Came back to China in

00:39:52.699 --> 00:39:55.559
1978, convinced the Chinese Academy of Science,

00:39:55.780 --> 00:39:58.719
hey, this is important, or this is going to be

00:39:58.719 --> 00:40:03.340
important. In 30 years. Yeah, despite the Chinese

00:40:03.340 --> 00:40:05.940
Academy of Science at the time was really focusing

00:40:05.940 --> 00:40:09.199
on the traditional and the conventional energy

00:40:09.199 --> 00:40:11.840
of the time. Of course, naturally. So he had

00:40:11.840 --> 00:40:14.239
to advocate for himself that this is something

00:40:14.239 --> 00:40:16.699
that's worthy of. putting more resource into.

00:40:16.960 --> 00:40:21.780
And he was the first person in China to found

00:40:21.780 --> 00:40:27.519
a solid -state lithium iron lab in the 80s. And

00:40:27.519 --> 00:40:31.059
in 1987, as alternative energy becomes more important

00:40:31.059 --> 00:40:34.139
inside of China, he was then put in charge of

00:40:34.139 --> 00:40:37.820
the polymer lithium battery project for the country

00:40:37.820 --> 00:40:41.460
during the seventh five -year plan. In 1995...

00:40:42.170 --> 00:40:46.070
This lab, his team had produced the first liquid

00:40:46.070 --> 00:40:50.550
lithium iron battery in 1985. He's the first

00:40:50.550 --> 00:40:52.690
person who handmade a battery out of his lab.

00:40:52.889 --> 00:40:58.050
And in 1988, he built China's first pilot production

00:40:58.050 --> 00:41:00.369
line for the cylindrical lithium iron batteries.

00:41:01.329 --> 00:41:04.429
Basically set the foundation for the entire industry.

00:41:04.750 --> 00:41:11.909
And in 2001, he became a official member. of

00:41:11.909 --> 00:41:14.820
the Chinese Academy of Science. academician and

00:41:14.820 --> 00:41:17.139
this is when robin i guess started studying with

00:41:17.139 --> 00:41:21.300
him exactly in 2001 he became an official member

00:41:21.300 --> 00:41:24.719
and in 2002 like the chinese academy of science

00:41:24.719 --> 00:41:27.000
like oh you can officially take phd students

00:41:27.000 --> 00:41:29.239
right now and guess who he took but how do they

00:41:29.239 --> 00:41:32.340
know each other it's because of th like th pushed

00:41:32.340 --> 00:41:35.900
robin and say hey if we want to go deeper into

00:41:35.900 --> 00:41:38.559
the battery industry you must know how ev battery

00:41:38.559 --> 00:41:41.360
is done or how bigger battery is done robin to

00:41:41.360 --> 00:41:44.289
solve all the problems I'm too old for this,

00:41:44.349 --> 00:41:48.590
but you can go do it. So thanks to TH, Robin

00:41:48.590 --> 00:41:52.829
gets pushed into CAS. And that's when conveniently

00:41:52.829 --> 00:41:56.909
when Dr. Chen became a very big deal in China

00:41:56.909 --> 00:42:02.110
and Robin became his first and only PhD student,

00:42:02.170 --> 00:42:06.750
first batch. Oh, his young padawan. I know. And

00:42:06.750 --> 00:42:11.170
he was doing a part -time PhD in CAS from 2002

00:42:11.170 --> 00:42:20.369
to 2006. So Robin not only co -founded ATL, but

00:42:20.369 --> 00:42:25.679
was studying both a master degree and... A PhD.

00:42:25.920 --> 00:42:29.139
Oh, yeah. For the first seven years. His bosses

00:42:29.139 --> 00:42:32.500
push him really hard. They say, Robin, like,

00:42:32.539 --> 00:42:36.119
do not sleep. Go study and go fix problems. Wow.

00:42:36.199 --> 00:42:39.300
All right. Which made Robin who he is today,

00:42:39.400 --> 00:42:44.179
I guess. Back to 2008, you know, when a series

00:42:44.179 --> 00:42:46.739
of things happened and Robin now concluded with

00:42:46.739 --> 00:42:51.000
his PhD study. And he's so certain that, hey,

00:42:51.139 --> 00:42:53.889
guys. I don't know whether this is going to be

00:42:53.889 --> 00:42:56.289
put in EV, but this battery is going to be the

00:42:56.289 --> 00:42:59.989
future. So we should do this. We should definitely

00:42:59.989 --> 00:43:03.469
go all in on this. And he pitched Raymond and

00:43:03.469 --> 00:43:06.909
Mike. And do you think this is a good idea? We

00:43:06.909 --> 00:43:08.929
should be doing something that's EV battery related.

00:43:09.329 --> 00:43:11.289
And both of them said, oh, yes, we should definitely

00:43:11.289 --> 00:43:14.610
do that. But remember, he was pitching this when

00:43:14.610 --> 00:43:19.650
ATL was under TDK. TDK had an issue with it because

00:43:19.650 --> 00:43:23.429
as a publicly listed company, you need to focus

00:43:23.429 --> 00:43:25.630
on the high margin, high volume consumer electronics

00:43:25.630 --> 00:43:28.789
market, aka smartphones, laptops, and tablets.

00:43:28.989 --> 00:43:33.369
Makes sense. And EV at the time was very nascent.

00:43:33.369 --> 00:43:37.469
It was in the infancy of this industry. And it

00:43:37.469 --> 00:43:40.650
is extremely high risk. Think about this. If

00:43:40.650 --> 00:43:43.559
you were to go into, like no one knows. what

00:43:43.559 --> 00:43:45.900
the landscape of EV battery looked like at that

00:43:45.900 --> 00:43:48.239
point. Roaster hasn't even made sales yet at

00:43:48.239 --> 00:43:50.940
2008. Exactly. No one figured this out. Very

00:43:50.940 --> 00:43:54.159
high risk, small batches. If you went into the

00:43:54.159 --> 00:43:57.239
wrong field in a few years, you could be eliminated.

00:43:57.619 --> 00:44:02.219
So TDK, as a very responsible, risk -averse,

00:44:02.340 --> 00:44:05.329
publicly listed Japanese company. reasonably

00:44:05.329 --> 00:44:07.849
decided that hey we're not going to go crazy

00:44:07.849 --> 00:44:10.750
about this but we want you to continue on with

00:44:10.750 --> 00:44:14.070
what you do um try it out at small scale right

00:44:14.070 --> 00:44:19.090
so that's how they um yes try it out on a small

00:44:19.090 --> 00:44:23.809
scale tdk is still the parent company and now

00:44:23.809 --> 00:44:27.130
we know atl is holy for a note japanese company

00:44:27.130 --> 00:44:32.480
within atl under atl there is a new subsidiary

00:44:32.480 --> 00:44:35.679
that's been created. It's called ATL In. And

00:44:35.679 --> 00:44:38.320
this is a wholly foreign -owned subsidiary that

00:44:38.320 --> 00:44:40.980
only does the consumer electronics part, which

00:44:40.980 --> 00:44:43.659
doesn't give up the profit, doesn't give up the

00:44:43.659 --> 00:44:46.960
volume, and do exactly what is good for the business.

00:44:47.340 --> 00:44:54.119
So in 2008, ATL and Robin and team came to a

00:44:54.119 --> 00:44:57.000
compromise that you can actually start a subsidiary

00:44:57.000 --> 00:45:03.619
within ATL R &D for the EV batteries, but we're

00:45:03.619 --> 00:45:06.659
not going to support you fully in terms of production

00:45:06.659 --> 00:45:09.960
facility, manufacturing, etc. And so Robin and

00:45:09.960 --> 00:45:13.539
his team actually started working on the subsidiary,

00:45:13.559 --> 00:45:17.619
which is fully concentrated or fully focused

00:45:17.619 --> 00:45:21.260
on EV batteries. So that was a bit of a compromise,

00:45:21.480 --> 00:45:27.840
right? And then came around 2011. which is when

00:45:27.840 --> 00:45:30.599
a couple of things happened in between 2008 and

00:45:30.599 --> 00:45:35.159
2011. So first of all, after the Olympics, which

00:45:35.159 --> 00:45:37.960
kind of triggered this whole EV bus production,

00:45:38.079 --> 00:45:41.300
the Chinese automobile industry and the government

00:45:41.300 --> 00:45:45.920
set aside 10 billion RMB, so about 1 .5 billion

00:45:45.920 --> 00:45:49.539
US dollars of grants and discount loans. And

00:45:49.539 --> 00:45:52.920
they established a very large scale pilot program.

00:45:53.719 --> 00:45:57.500
which actually works on providing subsidies for

00:45:57.500 --> 00:46:01.559
EV buses, sanitation trucks, and taxis. Commercial

00:46:01.559 --> 00:46:05.340
vehicles. Commercial vehicles, civic use. And

00:46:05.340 --> 00:46:07.980
there's a plan or there's a scheme called 10

00:46:07.980 --> 00:46:12.820
Cities, 1 ,000 Vehicles, which is called 10 Cities,

00:46:12.940 --> 00:46:16.159
but ultimately 25 cities signed up. We like numbers

00:46:16.159 --> 00:46:20.780
in tens. So the 25 cities committed to 1 ,000

00:46:20.780 --> 00:46:24.469
EVs. also these civic EVs, not your sedans, not

00:46:24.469 --> 00:46:26.809
your passenger vehicles, for the next three years.

00:46:27.130 --> 00:46:32.210
And those are heavily subsidized by the government,

00:46:32.429 --> 00:46:36.070
right? And so then Robin saw this opportunity

00:46:36.070 --> 00:46:40.630
and kind of upped his EV department research.

00:46:41.869 --> 00:46:46.869
Then in 2010, something else happened, which

00:46:46.869 --> 00:46:51.320
is... TH now kind of heads up the Chinese ATL,

00:46:51.380 --> 00:46:54.260
right? Unfortunately, he passed away. And before

00:46:54.260 --> 00:46:58.039
he passed away, he actually wanted to IPO ATL.

00:46:58.719 --> 00:47:02.699
Reasonable? Reasonable because before 2005, so

00:47:02.699 --> 00:47:04.880
when they established ATL all the way back in

00:47:04.880 --> 00:47:07.960
1999, they actually had high hopes for the company

00:47:07.960 --> 00:47:11.719
and eventually want to IPO and, you know, earn

00:47:11.719 --> 00:47:14.920
a lot of money through various forms of investment.

00:47:14.940 --> 00:47:18.760
But because of the funding, that we talked about,

00:47:18.960 --> 00:47:22.400
they ended up working as employees again for

00:47:22.400 --> 00:47:25.059
their old employer. So there's always been hopes

00:47:25.059 --> 00:47:27.780
that they eventually kind of monetize on their

00:47:27.780 --> 00:47:30.340
startup. Getting to retirement. Not really. Getting

00:47:30.340 --> 00:47:33.659
to retirement again. Exactly. And so I guess

00:47:33.659 --> 00:47:37.280
there was an attempt. The attempt might, regardless

00:47:37.280 --> 00:47:39.639
of whether he passed away, I think it might be

00:47:39.639 --> 00:47:42.659
a long stretch. But because he passed away in

00:47:42.659 --> 00:47:47.559
2010, the amount of, I guess, say, in ATL as

00:47:47.559 --> 00:47:52.719
a company, and the direction also kind of died

00:47:52.719 --> 00:47:56.239
down a little bit with this. Obviously, Mike

00:47:56.239 --> 00:48:00.380
took up that role and really helped Robin later

00:48:00.380 --> 00:48:05.219
on spin off the subsidiary. Most importantly,

00:48:05.239 --> 00:48:11.460
in 2011, which is when CATL really spun off,

00:48:11.900 --> 00:48:15.440
the old battery division or EV battery division

00:48:15.440 --> 00:48:19.179
of ATL that Robin created in 2008 finally spun

00:48:19.179 --> 00:48:22.400
off three years later is because the Chinese

00:48:22.400 --> 00:48:27.539
government decided that any company with 50 %

00:48:27.539 --> 00:48:32.900
or more foreign invested share will not be able

00:48:32.900 --> 00:48:38.599
to sell to Chinese EV producers and acquire that.

00:48:39.000 --> 00:48:42.280
Subsidy. And so when the Chinese EV producers

00:48:42.280 --> 00:48:46.760
stop purchasing from ATL, that basically kills

00:48:46.760 --> 00:48:51.920
if there is no spinoff where the ownership of

00:48:51.920 --> 00:48:55.139
the new company is 50 % or more Chinese, the

00:48:55.139 --> 00:48:58.599
entire department will be gone. So TDK then had

00:48:58.599 --> 00:49:01.539
to make a decision of whether we continue or

00:49:01.539 --> 00:49:05.010
not. And obviously TDK as a company cannot continue,

00:49:05.170 --> 00:49:08.630
right? The most that they can do is have a 49

00:49:08.630 --> 00:49:12.250
% ownership of a new company that Robin or someone

00:49:12.250 --> 00:49:16.570
else heads up. And so Robin and Mike obviously

00:49:16.570 --> 00:49:19.590
wants this. Right. I've been working on this

00:49:19.590 --> 00:49:21.489
EV battery for three years. Just finished my

00:49:21.489 --> 00:49:24.309
PhD. Yeah, like not to give this up. This is

00:49:24.309 --> 00:49:27.030
an opportunity. Just like when they saw the opportunity

00:49:27.030 --> 00:49:31.010
with consumer portable electronics back in the

00:49:31.010 --> 00:49:33.769
90s, they're seeing this new opportunity coming

00:49:33.769 --> 00:49:36.489
up and they're at the best position to really

00:49:36.489 --> 00:49:39.190
benefit from this because of his PhD, his relationship

00:49:39.190 --> 00:49:43.510
and ATL's manufacturing expertise. So they really,

00:49:43.550 --> 00:49:47.860
really wanted this. And TDAK was like, not sure

00:49:47.860 --> 00:49:51.739
right because back then like you said the amount

00:49:51.739 --> 00:49:54.960
of battery that's actually been produced for

00:49:54.960 --> 00:49:59.039
consumer electronics is 30 gigawatt hours for

00:49:59.039 --> 00:50:02.659
ev it's like not even 10 1 10th of that right

00:50:02.659 --> 00:50:05.780
so should i invest this or should i just kill

00:50:05.780 --> 00:50:09.360
the project so mike actually had a lot to do

00:50:09.360 --> 00:50:13.119
with kind of working with the board in Japan

00:50:13.119 --> 00:50:16.179
to make this happen. So ultimately, in December

00:50:16.179 --> 00:50:20.199
of 2011, CATL is a company that's officially

00:50:20.199 --> 00:50:24.380
established. And the ownership structure is then

00:50:24.380 --> 00:50:30.219
15 % will be invested by ATL. which will be owned

00:50:30.219 --> 00:50:35.340
100 % by TVK. So 15 % Japanese and 85 % Chinese.

00:50:36.039 --> 00:50:39.940
Now we finally made it to the establishment of

00:50:39.940 --> 00:50:44.659
CATL. And it's an establishment by necessity

00:50:44.659 --> 00:50:48.460
because of this government policy. It's not effectively

00:50:48.460 --> 00:50:53.019
a bad divorce by any means. So in 2011, the new

00:50:53.019 --> 00:50:56.019
factory of CATL, the new location of CATL is

00:50:56.019 --> 00:50:59.780
right across the street from ATL. And for years,

00:50:59.900 --> 00:51:02.840
they actually share the same cafeteria. They

00:51:02.840 --> 00:51:05.539
share the same daycare. They share the same badging

00:51:05.539 --> 00:51:08.699
system. So they're effectively friends. Yes.

00:51:08.739 --> 00:51:13.940
And it almost sounds like that CATL was using

00:51:13.940 --> 00:51:17.840
either ATL's branding and name, but just existed

00:51:17.840 --> 00:51:21.039
in a... Chinese ownership format. Exactly. That

00:51:21.039 --> 00:51:24.440
was the only difference. Exactly. Even like CATL

00:51:24.440 --> 00:51:27.380
at first need to ramp up production, right? So

00:51:27.380 --> 00:51:30.000
at first it's still renting production facility

00:51:30.000 --> 00:51:33.719
from ATL. The only difference is that CATL produces

00:51:33.719 --> 00:51:37.280
EV batteries. ATL produces consumer electronics

00:51:37.280 --> 00:51:41.280
batteries. And that's been how it's going for

00:51:41.280 --> 00:51:44.360
years and years after that. Even mostly up to

00:51:44.360 --> 00:51:47.659
today, that's how it is. There's a lot of, so

00:51:47.659 --> 00:51:49.920
interestingly, they call it in India, they call

00:51:49.920 --> 00:51:52.980
it C factory and A factory. And there's a lot

00:51:52.980 --> 00:51:57.320
of C -A relationships and C -A marriages. So

00:51:57.320 --> 00:52:00.019
there's no secret between the two companies.

00:52:00.519 --> 00:52:04.360
And so it's by any means, they're on friendly

00:52:04.360 --> 00:52:07.099
terms. They're kind of targeting different customers,

00:52:07.219 --> 00:52:10.119
sharing the same technology development. I wonder

00:52:10.119 --> 00:52:12.659
how the NDAs are signed in between the employees

00:52:12.659 --> 00:52:15.280
of those two companies. Do not share, even if

00:52:15.280 --> 00:52:17.829
it's spouse. Do you not share with your husband

00:52:17.829 --> 00:52:23.030
some more? Now CATL is newly established, need

00:52:23.030 --> 00:52:25.550
to build my MVP again and need to find like the

00:52:25.550 --> 00:52:29.110
Apple iPod sort of supplier again. This time

00:52:29.110 --> 00:52:32.630
on top of the original trio, the team that they

00:52:32.630 --> 00:52:35.230
already have, well, trio missing one, but added

00:52:35.230 --> 00:52:41.369
more employees. Robin had wanted a new ad to

00:52:41.369 --> 00:52:44.449
the mix. He landed with a foreign employee and

00:52:44.449 --> 00:52:47.230
his name is Robert Gullion, which I think is

00:52:47.230 --> 00:52:49.590
very much related to the later BMW negotiation

00:52:49.590 --> 00:52:54.409
and securing a Western deal. Who's Robert? Our

00:52:54.409 --> 00:52:58.110
Bob. He had worked for General Motors for 21

00:52:58.110 --> 00:53:03.789
years. He had worked on a very cool, but a very

00:53:03.789 --> 00:53:07.190
tragically ended project. That's the EV1 project.

00:53:07.289 --> 00:53:11.849
That was GM's. first mass -produced EV car in

00:53:11.849 --> 00:53:15.469
the 1990s. It was in 1996, and it was very futuristic.

00:53:15.869 --> 00:53:21.929
Robin hired Bob as the CTO to bring what was

00:53:21.929 --> 00:53:25.230
used in the EV1 projects, all the automotive

00:53:25.230 --> 00:53:28.969
engineering and standards to a Chinese battery

00:53:28.969 --> 00:53:33.750
startup, and made CATL into a Tier 1 automotive

00:53:33.750 --> 00:53:37.179
-grade EV battery supplier. Bob officially retired

00:53:37.179 --> 00:53:39.880
in 2019 and is no longer working for CATL. He's

00:53:39.880 --> 00:53:41.920
still doing a lot of consulting about EV or EV

00:53:41.920 --> 00:53:44.739
battery -related subjects. And if you want to

00:53:44.739 --> 00:53:48.940
know more about EV1, it is the earliest EV in

00:53:48.940 --> 00:53:52.320
the US, but only on a leasing format. There's

00:53:52.320 --> 00:53:55.099
no purchase. The entire project was later on

00:53:55.099 --> 00:53:59.760
crushed and lobbied against. by the oil industry.

00:54:00.500 --> 00:54:03.300
And all the EVs are taken back and crushed into

00:54:03.300 --> 00:54:05.280
pieces. If you would like to know more, we won't

00:54:05.280 --> 00:54:07.179
deviate into that, but you can watch a documentary

00:54:07.179 --> 00:54:09.300
that's called Who Killed the Electric Car? So

00:54:09.300 --> 00:54:13.380
Rob, Robert Gullion was the person that Robin

00:54:13.380 --> 00:54:16.219
had hired into CATL for a while to set everything

00:54:16.219 --> 00:54:19.820
up. Very interesting. This is a little bit actually

00:54:19.820 --> 00:54:22.179
tragic if you, I don't want to use the word tragic,

00:54:22.260 --> 00:54:26.280
but if you think about how advanced US was when...

00:54:26.570 --> 00:54:30.469
This vehicle was produced, but without the government

00:54:30.469 --> 00:54:33.949
support, it just kind of died off. And if you

00:54:33.949 --> 00:54:36.389
look at the share of US versus Europe versus

00:54:36.389 --> 00:54:39.550
China, it's just vastly different. And this is

00:54:39.550 --> 00:54:41.929
actually one of the central theme in why CATL

00:54:41.929 --> 00:54:44.389
succeeded. We're going to talk about more later

00:54:44.389 --> 00:54:47.849
on is government support, right? Chinese government

00:54:47.849 --> 00:54:51.630
had a very large role to play in the success

00:54:51.630 --> 00:54:56.159
of this industry and in CATL. For sure. Going

00:54:56.159 --> 00:55:00.860
back to BMW, BMW's initial supplier had a long

00:55:00.860 --> 00:55:03.760
-term relationship with Samsung SDI, which was

00:55:03.760 --> 00:55:06.039
one of the top EV battery suppliers at the time.

00:55:06.280 --> 00:55:09.400
But it's looking for alternatives around that

00:55:09.400 --> 00:55:14.920
time, 2011. And so after a bit of searching in

00:55:14.920 --> 00:55:17.920
China, they've landed on ATL. At that time, it's

00:55:17.920 --> 00:55:22.420
still kind of ATLC, ATL. So they thought that

00:55:22.420 --> 00:55:25.500
ATL would be a good battery manufacturer. They

00:55:25.500 --> 00:55:29.159
know, they're fully aware that their production

00:55:29.159 --> 00:55:32.800
line needs to be upgraded in terms of producing,

00:55:32.880 --> 00:55:36.980
going from consumer electronic into EV. So they

00:55:36.980 --> 00:55:40.179
then started talking to then ATL, then continue

00:55:40.179 --> 00:55:44.599
the conversation with CATL. And Robin, at that

00:55:44.599 --> 00:55:47.619
time, because of the new CATL establishment,

00:55:49.610 --> 00:55:53.630
had a lot of say in the future of this EV company,

00:55:53.730 --> 00:55:57.309
in the newly established CATL. It's almost as

00:55:57.309 --> 00:56:00.789
if he has some level of autocracy. This is actually,

00:56:00.849 --> 00:56:03.550
in hindsight, quite important for all kinds of

00:56:03.550 --> 00:56:08.050
advanced manufacturing. Because if you look at

00:56:08.050 --> 00:56:12.789
Huawei, right, BYD, TSMC, all of them actually

00:56:12.789 --> 00:56:16.130
had this guy at the top that can make decisions.

00:56:16.230 --> 00:56:19.150
And this is not... I mean, it is autocracy, but

00:56:19.150 --> 00:56:21.389
it is high risk, right? Advanced manufacturing

00:56:21.389 --> 00:56:23.670
is high risk and you need to be fast paced. So

00:56:23.670 --> 00:56:25.809
having this guy is actually like just drawing

00:56:25.809 --> 00:56:27.829
parallels, but having someone who can make decisions,

00:56:27.909 --> 00:56:31.690
who has the power to make decisions for the entire

00:56:31.690 --> 00:56:35.590
company to kind of go toward is very important.

00:56:36.570 --> 00:56:40.090
And so back to Robin and his decision. BMW is

00:56:40.090 --> 00:56:44.369
a gamble. This order was never meant to be large

00:56:44.369 --> 00:56:49.579
scale. True. Right? The Zinoro 1E, which is the

00:56:49.579 --> 00:56:52.400
BMW EV brand, the first car that they wanted

00:56:52.400 --> 00:56:57.800
to make with CATL, never really sold. It actually

00:56:57.800 --> 00:57:01.059
was never sold. It was also the lease vehicle.

00:57:01.559 --> 00:57:05.059
And it was kind of a pilot model. And so when

00:57:05.059 --> 00:57:08.239
CATL took this on, they are fully aware that

00:57:08.239 --> 00:57:13.550
this is a small scale. high intensive r &b needed

00:57:13.550 --> 00:57:17.110
to a boutique project exactly so why did robin

00:57:17.110 --> 00:57:23.190
take this on because he can i don't know why

00:57:23.190 --> 00:57:26.150
did he take this on we're not sure fully we we're

00:57:26.150 --> 00:57:28.269
not you know we know we don't know the full story

00:57:28.269 --> 00:57:31.610
behind this but if you draw parallel to the apple

00:57:31.610 --> 00:57:36.360
story that we mentioned earlier i think He might

00:57:36.360 --> 00:57:40.280
have believed that having BMW's stamp of approval,

00:57:40.599 --> 00:57:43.300
especially as a Chinese company based in Ningde,

00:57:43.480 --> 00:57:46.699
that would matter later on. So that's playing

00:57:46.699 --> 00:57:50.280
the long game, right? Every other battery manufacturer

00:57:50.280 --> 00:57:53.320
in China actually decided to go with the Civic

00:57:53.320 --> 00:57:58.039
route because of the Chinese subsidies. While...

00:57:58.269 --> 00:58:00.650
he not only went with the civic route to benefit

00:58:00.650 --> 00:58:03.889
from the subsidies, he also decided to take on

00:58:03.889 --> 00:58:08.750
this other project with BMW to become more established

00:58:08.750 --> 00:58:11.510
in the international scene or even domestically.

00:58:11.670 --> 00:58:15.090
Because once you serve the top, all the other

00:58:15.090 --> 00:58:18.269
customers are like, okay, we trust that stamp

00:58:18.269 --> 00:58:20.960
of approval and we can now... make orders for

00:58:20.960 --> 00:58:22.760
me. And that's exactly what happened after BMW.

00:58:23.559 --> 00:58:26.440
I'm going to kind of lightly touch on this 800

00:58:26.440 --> 00:58:31.699
page German manual. Sounds like a lot. That's

00:58:31.699 --> 00:58:35.059
what BMW gave them. Here's a manual of our requirements.

00:58:35.619 --> 00:58:37.739
Please satisfy all of them. It's all in German.

00:58:38.659 --> 00:58:42.599
We will send you some engineers from our headquarters

00:58:42.599 --> 00:58:44.519
to help you, but you got to figure this out.

00:58:46.300 --> 00:58:51.639
So 2014, Xenero 1E was out in the market, didn't

00:58:51.639 --> 00:58:54.679
make a huge splash, but it gave CHL that stamp

00:58:54.679 --> 00:58:58.420
of approval. And on top of that, I think BMW

00:58:58.420 --> 00:59:03.099
also needed a Chinese supplier. It needed a local

00:59:03.099 --> 00:59:05.800
battery partner for the Chinese joint venture.

00:59:05.900 --> 00:59:08.159
It can't just find any other one if you want

00:59:08.159 --> 00:59:13.739
to be selling inside of China. So BMW was producing

00:59:13.739 --> 00:59:19.170
this small batch. first trial Zinoro 1E, but

00:59:19.170 --> 00:59:23.469
has super high standard because of the 800 pages

00:59:23.469 --> 00:59:26.610
German manual that they had give. And they also

00:59:26.610 --> 00:59:29.309
bring about a couple of very tough questions.

00:59:29.349 --> 00:59:31.610
And one of which, a technical issue that they

00:59:31.610 --> 00:59:35.969
want is most of EV manufacturers, they want a

00:59:35.969 --> 00:59:40.380
charging cycle of 2 ,000 to 3 ,000 times. BMW

00:59:40.380 --> 00:59:43.719
wanted 10 ,000 times charging circles. So it

00:59:43.719 --> 00:59:45.800
was a lot higher than before, even though you

00:59:45.800 --> 00:59:48.599
just have a very, you know, small order at the

00:59:48.599 --> 00:59:50.980
time, but the requirements are super high. And

00:59:50.980 --> 00:59:53.840
for all the other battery manufacturers, they're

00:59:53.840 --> 00:59:56.400
like, hmm, you know, like maybe not because it's

00:59:56.400 --> 00:59:59.340
not like highly profitable. But for Robin, as

00:59:59.340 --> 01:00:02.199
a PhD who newly graduated, oh, this is like paying

01:00:02.199 --> 01:00:06.239
me to study like what you have. I want this.

01:00:06.400 --> 01:00:09.179
So I think that also. probably played a part

01:00:09.179 --> 01:00:11.659
definitely in the it was it was definitely a

01:00:11.659 --> 01:00:14.099
two -sided decision making definitely definitely

01:00:14.099 --> 01:00:17.480
so that actually really benefited them in the

01:00:17.480 --> 01:00:20.849
long run and And I want to jump a little bit

01:00:20.849 --> 01:00:23.110
now to kind of go back to the whole EV landscape

01:00:23.110 --> 01:00:28.250
around this time. So kind of 2011 to 2014 era,

01:00:28.449 --> 01:00:31.710
this is really just small scale, high end production.

01:00:31.829 --> 01:00:36.670
It's not EV as we know it today, right? So 2011,

01:00:36.909 --> 01:00:39.989
when Seattle was first established, there was

01:00:39.989 --> 01:00:47.150
only 50 ,000 EVs delivered in the world. 0 .2

01:00:47.150 --> 01:00:50.880
% of all car sales. High -end luxury cars. Very

01:00:50.880 --> 01:00:54.119
high -end luxury cars. Roadster that year, which

01:00:54.119 --> 01:00:57.480
was probably the most sold number of EVs sold

01:00:57.480 --> 01:01:01.460
in terms of passenger vehicles, only a few hundred,

01:01:01.719 --> 01:01:08.860
right? And last year, that sale is 20 million

01:01:08.860 --> 01:01:12.619
cars, EVs. So you can see the scale at which

01:01:12.619 --> 01:01:17.280
EV as an industry is growing. And the time when

01:01:17.280 --> 01:01:21.400
CETL decided to really pivot is so early that

01:01:21.400 --> 01:01:23.800
they have, I guess, a first movers advantage,

01:01:24.280 --> 01:01:28.579
especially in China. By 2014, which is when they

01:01:28.579 --> 01:01:32.900
kind of delivered the BMW model, the major player

01:01:32.900 --> 01:01:37.980
in the world is Panasonic. Panasonic owned 40

01:01:37.980 --> 01:01:42.320
% of the market, being the sole supplier for

01:01:42.320 --> 01:01:47.510
Tesla. Other two major players are LG Chem or

01:01:47.510 --> 01:01:54.769
LG Energy and Samsung SDI. The two of them supplied

01:01:54.769 --> 01:01:59.349
a mixture of European and American manufacturers.

01:02:00.070 --> 01:02:03.489
Japan dominated the market with Panasonic and

01:02:03.489 --> 01:02:08.409
Tesla relationship. Korea followed with LG and

01:02:08.409 --> 01:02:13.619
with Samsung. BYD was the only domestic chinese

01:02:13.619 --> 01:02:18.440
manufacturer that actually had enough traffic

01:02:18.440 --> 01:02:22.320
i guess had enough orders and it was less than

01:02:22.320 --> 01:02:26.760
five percent of the entire market right so with

01:02:26.760 --> 01:02:32.480
government support interestingly from 2011 with

01:02:32.480 --> 01:02:37.199
the 50 50 at least 50 domestically owned to supply

01:02:37.199 --> 01:02:42.489
chinese evs and also a lot of subsidies going

01:02:42.489 --> 01:02:47.150
into the EV manufacturers. CATL's largest customer

01:02:47.150 --> 01:02:52.489
by 2014 is actually not BMW. It's a bus company

01:02:52.489 --> 01:02:55.550
called Yutong. And Yutong is the largest bus

01:02:55.550 --> 01:03:00.590
company, bus producer in China. And Yutong has

01:03:00.590 --> 01:03:03.809
sustained that top position with CATL all the

01:03:03.809 --> 01:03:07.289
way to 2017. Interesting, there's actually more

01:03:07.289 --> 01:03:10.030
EV buses made in China than EV passenger vehicles

01:03:10.030 --> 01:03:12.309
for those times because of the government -led

01:03:12.309 --> 01:03:17.710
initiative. So why did the Chinese government

01:03:17.710 --> 01:03:23.329
decide to supply subsidies to make buses rather

01:03:23.329 --> 01:03:28.869
than other passenger vehicles? It is because,

01:03:29.090 --> 01:03:34.039
again, remember when... ATL decided to work on

01:03:34.039 --> 01:03:36.440
the polymers rather than the cylindricals because

01:03:36.440 --> 01:03:40.460
they knew they couldn't compete. Same reason

01:03:40.460 --> 01:03:45.539
for China to decide on buses to compete and subsidize

01:03:45.539 --> 01:03:50.139
buses rather than passenger vehicles. It's because

01:03:50.139 --> 01:03:53.000
they realized they cannot compete immediately

01:03:53.000 --> 01:03:57.789
with passenger vehicle EVs. So a little bit of

01:03:57.789 --> 01:04:00.630
chemistry background, right? And I'm sorry if

01:04:00.630 --> 01:04:02.289
I explained this wrong because I'm really bad

01:04:02.289 --> 01:04:07.050
with chemistry. There is two types of EV batteries

01:04:07.050 --> 01:04:11.150
in mainstream, two types of EV batteries. And

01:04:11.150 --> 01:04:14.829
one is called NCM batteries, which stands for

01:04:14.829 --> 01:04:18.070
nickel, cobalt, and manganese. And that's the

01:04:18.070 --> 01:04:20.170
component where the cathode, which is one of

01:04:20.170 --> 01:04:22.150
the components, the positive end of the battery

01:04:22.150 --> 01:04:25.900
is made from. And this is what Tesla has been

01:04:25.900 --> 01:04:28.159
using, what most of the passenger vehicle has

01:04:28.159 --> 01:04:32.340
been using around that time. They're using this

01:04:32.340 --> 01:04:35.320
battery, although it's less stable, they're using

01:04:35.320 --> 01:04:39.039
this battery because it will provide you higher

01:04:39.039 --> 01:04:42.159
range. It has higher inner density, which means

01:04:42.159 --> 01:04:45.260
per every kilogram, you can store more energy.

01:04:45.639 --> 01:04:49.760
So back then, if you want the car to run for

01:04:49.760 --> 01:04:53.090
300 kilometers with one charge, In the ideal

01:04:53.090 --> 01:04:57.269
scenario, you need an NCM battery. Well, considering

01:04:57.269 --> 01:04:59.929
US consumers that are driving road trips and

01:04:59.929 --> 01:05:01.889
very long distance, that seems to be the right

01:05:01.889 --> 01:05:03.809
option. And you're comparing yourself to the

01:05:03.809 --> 01:05:07.630
gas, right? So filling gas, I can drive for 500

01:05:07.630 --> 01:05:10.690
kilometers. I need at least 300 kilometers out

01:05:10.690 --> 01:05:15.670
of an EV. So China doesn't have that technology

01:05:15.670 --> 01:05:18.809
and needs a bit of time to develop this. So they

01:05:18.809 --> 01:05:22.360
had their eye on something called the lithium

01:05:22.360 --> 01:05:27.940
iron phosphate, which in short is called LFP.

01:05:28.039 --> 01:05:32.400
And it's F rather than iron I is because in the

01:05:32.400 --> 01:05:38.559
periodic table, iron is Fe. Wow. Yes. Chemistry

01:05:38.559 --> 01:05:41.840
points. Yeah. Do you remember this lesson from

01:05:41.840 --> 01:05:47.219
high school? So LFP batteries are lowering energy

01:05:47.219 --> 01:05:52.510
density. By about 30, 40 % at the time. So you

01:05:52.510 --> 01:05:56.610
actually can only pack maybe 150 to 200 kilometer

01:05:56.610 --> 01:06:01.230
range in a normal sedan with its weight limitations.

01:06:02.210 --> 01:06:06.869
And so nobody wanted a car that can only run

01:06:06.869 --> 01:06:09.329
for 150 kilometers before you have to sit down

01:06:09.329 --> 01:06:11.130
and charge. And back then, charging time is high,

01:06:11.230 --> 01:06:16.650
right? And so China said, hey, we can do the

01:06:16.650 --> 01:06:20.500
lower end. density battery but we'll just run

01:06:20.500 --> 01:06:24.460
it on heavier vehicles because if the buses are

01:06:24.460 --> 01:06:27.159
heavier the amount of weight difference will

01:06:27.159 --> 01:06:30.320
matter less right so we can fit heavy battery

01:06:30.320 --> 01:06:33.360
into buses and the buses run on fixed routes

01:06:33.360 --> 01:06:36.880
so your charging station is more fixed and there's

01:06:36.880 --> 01:06:39.159
there's limited bus running at night so they

01:06:39.159 --> 01:06:41.860
all had a schedule so everything made it easier

01:06:41.860 --> 01:06:45.110
for that Development to go toward that direction,

01:06:45.409 --> 01:06:48.829
which is why China actually promoted the use

01:06:48.829 --> 01:06:52.130
of LFP batteries. So that's two different directions

01:06:52.130 --> 01:06:56.429
where your Panasonic, your Samsung and your LG

01:06:56.429 --> 01:07:02.210
is going all in for NCM and your BYD, your CATL.

01:07:02.230 --> 01:07:04.190
We'll talk about CATL later, but most of the

01:07:04.190 --> 01:07:07.650
Chinese EV battery manufacturers during the early

01:07:07.650 --> 01:07:13.280
days was going for LFP. This then made a difference

01:07:13.280 --> 01:07:19.000
when in 2015, a scandal broke out in China. So

01:07:19.000 --> 01:07:21.079
remember, Chinese government started to give

01:07:21.079 --> 01:07:24.320
out big subsidies, huge subsidies in the tens

01:07:24.320 --> 01:07:28.059
of billions of CNY, right? And a couple of years

01:07:28.059 --> 01:07:31.300
later, by the end of 2015, a study was done on

01:07:31.300 --> 01:07:36.239
subsidy frauds. So, you know, faking the fact

01:07:36.239 --> 01:07:40.079
that you produced an EV or recycle a battery

01:07:40.079 --> 01:07:43.400
and call it a new one to get the subsidies from

01:07:43.400 --> 01:07:48.840
the government. In one report, more than one

01:07:48.840 --> 01:07:52.420
quarter of the subsidy given are fraudulent.

01:07:52.619 --> 01:07:55.840
Wow. It's a huge size, right? So the Chinese

01:07:55.840 --> 01:07:59.269
government had a decision to make where... They

01:07:59.269 --> 01:08:01.289
had to think about, do we keep on giving out

01:08:01.289 --> 01:08:04.690
these subsidies or do we stop? And luckily, they

01:08:04.690 --> 01:08:09.300
decided to continue because. Yes, there's subsidy

01:08:09.300 --> 01:08:11.920
fraud, but we still want to support this industry.

01:08:12.019 --> 01:08:15.179
The industry in 2015 is nowhere near competitive

01:08:15.179 --> 01:08:19.939
compared to your global giants. And so we need

01:08:19.939 --> 01:08:22.640
to subsidize, but we need to then raise the bar

01:08:22.640 --> 01:08:26.920
to prevent these fraud and to concentrate or

01:08:26.920 --> 01:08:29.819
to knowingly help to concentrate the industry

01:08:29.819 --> 01:08:34.840
to give more resources to the big and good players.

01:08:35.390 --> 01:08:38.630
The tech heavy ones. The tech heavy ones that

01:08:38.630 --> 01:08:42.529
knows their stuff that are less likely to just

01:08:42.529 --> 01:08:45.449
benefit from subsidy fraud, right? So the serious

01:08:45.449 --> 01:08:48.489
ones. Right. Or to really go into the R &D bit,

01:08:48.689 --> 01:08:51.409
right? Like those will with like proper R &D

01:08:51.409 --> 01:08:54.550
departments. Right. And that's when the whole

01:08:54.550 --> 01:08:59.029
industry took a turn around this time. Soon enough,

01:08:59.210 --> 01:09:01.069
and this is the thing with Chinese policymaking,

01:09:01.149 --> 01:09:05.090
it's very fast. So early 2016, so they discovered

01:09:05.090 --> 01:09:07.689
this whole fraud. They did this whole study end

01:09:07.689 --> 01:09:11.970
of 2015. Early 2016, they're like, nope, now

01:09:11.970 --> 01:09:16.329
we're only going to subsidize if you buy your

01:09:16.329 --> 01:09:19.050
battery from these companies. These companies

01:09:19.050 --> 01:09:22.329
are known for investing in high energy density.

01:09:22.810 --> 01:09:25.850
They have less fraudulent activities going on

01:09:25.850 --> 01:09:30.090
and they have good R &D. So there's a list. So

01:09:30.090 --> 01:09:33.590
CATL obviously made it to that list being one

01:09:33.590 --> 01:09:39.130
of the best EV battery companies out there. At

01:09:39.130 --> 01:09:41.750
the same time, because of the subsidy fraud,

01:09:41.850 --> 01:09:43.850
the government did drop the absolute number of

01:09:43.850 --> 01:09:48.229
subsidies that are provided. So as a mix, a lot

01:09:48.229 --> 01:09:51.369
of EV battery suppliers died around those times.

01:09:52.239 --> 01:09:55.359
For a good reason. So it's government policy,

01:09:55.539 --> 01:09:58.520
again, trying to focus resources on a few big

01:09:58.520 --> 01:10:01.659
ones, which is what helps the ATL and BYD grow

01:10:01.659 --> 01:10:05.479
so big. I think a lot of people would think that

01:10:05.479 --> 01:10:08.659
the government subsidies would go in to the Chinese

01:10:08.659 --> 01:10:11.359
players as a way to fight the outsiders. But

01:10:11.359 --> 01:10:13.600
to be honest, I think the insider fight could

01:10:13.600 --> 01:10:15.800
be more intense than the outsider fight, because

01:10:15.800 --> 01:10:18.020
just think about how large that industry is in

01:10:18.020 --> 01:10:20.779
China and how many people can just fake a factory

01:10:20.779 --> 01:10:24.220
inside of China. So this act essentially cleaned

01:10:24.220 --> 01:10:27.819
up the market and leave the better ones competing

01:10:27.819 --> 01:10:34.789
in the market. the Chinese government has done

01:10:34.789 --> 01:10:38.789
with a lot of industries to force M &A activities,

01:10:38.869 --> 01:10:42.289
basically, so that the top can compete internationally.

01:10:42.949 --> 01:10:49.850
Makes sense. Yeah, so as a result, in 2016, CETL

01:10:49.850 --> 01:10:53.090
became the third largest EV battery manufacturer

01:10:53.090 --> 01:10:57.789
in the world, surpassing Samsung and LG. And

01:10:57.789 --> 01:11:00.189
obviously, Samsung and LG didn't make the whitelist

01:11:00.189 --> 01:11:03.069
because another, I guess, effect of the whitelist

01:11:03.069 --> 01:11:07.630
is to ensure that the EV manufacturer only purchased

01:11:07.630 --> 01:11:11.529
from domestic companies. So sadly, Samsung and

01:11:11.529 --> 01:11:13.630
LG actually, through their JVs, made a lot of

01:11:13.630 --> 01:11:17.189
investment early on in 2014. But because of the

01:11:17.189 --> 01:11:19.510
whitelisting process, that effectively protected

01:11:19.510 --> 01:11:24.250
the Chinese domestic battery manufacturers from...

01:11:24.750 --> 01:11:29.529
the likes of Japanese and Korean battery manufacturers.

01:11:30.130 --> 01:11:33.590
So it is a protective policy. But as we know,

01:11:33.630 --> 01:11:36.069
all countries use protective policies to grow

01:11:36.069 --> 01:11:40.069
their industry. And this is actually, if I were

01:11:40.069 --> 01:11:42.390
to think about it in hindsight, well played.

01:11:43.130 --> 01:11:47.989
One other thing happened in 2015. TDK, the old

01:11:47.989 --> 01:11:51.279
owner, actually had a strategic shift. Oh, of

01:11:51.279 --> 01:11:54.520
course. Why are they still in the story? They're

01:11:54.520 --> 01:11:58.180
about to be gone. So 2015, they actually voluntarily,

01:11:58.279 --> 01:12:01.479
remember they had a 15 % stake in CATL in the

01:12:01.479 --> 01:12:04.420
beginning when they established. They wanted

01:12:04.420 --> 01:12:06.899
to actually focus on their core industry, which

01:12:06.899 --> 01:12:10.159
is ATL, the Consumer Electronic Battery Manufacturing.

01:12:10.399 --> 01:12:14.850
In 2015, they said, hey, like... is anyone interested

01:12:14.850 --> 01:12:18.170
in buying out my 15 % share? I'm happily, I can

01:12:18.170 --> 01:12:23.590
shift, right? So then the owners of CATL then

01:12:23.590 --> 01:12:27.270
went around to ask, like, who's interested? So

01:12:27.270 --> 01:12:30.750
luckily, one of the owners had a classmate whose

01:12:30.750 --> 01:12:33.350
company just IPO'd and he has all this cash.

01:12:34.229 --> 01:12:37.729
His IPO company, this new investor's IPO company

01:12:37.729 --> 01:12:41.939
has nothing to do with EV or EV battery. um he's

01:12:41.939 --> 01:12:44.520
making like garments and fabrics advanced garments

01:12:44.520 --> 01:12:48.920
and fabrics for uh ers and for clean rooms but

01:12:48.920 --> 01:12:50.859
he had all this cash he said i'll take it over

01:12:50.859 --> 01:12:54.180
and that is the cash best investment this guy

01:12:54.180 --> 01:12:57.539
has ever made because if you look i looked into

01:12:57.539 --> 01:13:02.520
the forbes uh kind of like how much this guy

01:13:02.520 --> 01:13:06.439
currently owns right um i think one seventh or

01:13:06.439 --> 01:13:11.279
one six to one sixth of his uh absolute wealth

01:13:11.279 --> 01:13:15.039
is from his own company the one that i feel yeah

01:13:15.039 --> 01:13:18.420
and all the rest is from the chl 15 investment

01:13:18.420 --> 01:13:22.340
by a very random investment that your classmates

01:13:22.340 --> 01:13:26.239
classmates friend had asked you to put in to

01:13:26.239 --> 01:13:28.779
a company that you almost have no knowledge about

01:13:28.779 --> 01:13:34.000
i'm sure he did some kind of due diligence but

01:13:34.000 --> 01:13:38.770
yeah yeah effectively it is It might be a bit

01:13:38.770 --> 01:13:41.250
of a gamble, but, you know, we're glad it paid

01:13:41.250 --> 01:13:43.789
off. Oh, it paid off. Like, what if it didn't

01:13:43.789 --> 01:13:45.949
pay off? Like, he would have, well, he would

01:13:45.949 --> 01:13:47.270
still have his own company. He would still have

01:13:47.270 --> 01:13:49.090
his own company, but the story would be very

01:13:49.090 --> 01:13:54.050
different. Yeah. Yeah. So as of 2015, end of

01:13:54.050 --> 01:13:59.729
2015, see ATL is 100 % owned by Chinese companies

01:13:59.729 --> 01:14:04.470
or individuals. And, but it still has ties with

01:14:04.470 --> 01:14:11.899
ATL being neighbors, right? So by 2017, then,

01:14:12.039 --> 01:14:18.119
the CATL then became the number one largest battery

01:14:18.119 --> 01:14:22.100
manufacturer and moved past BYD and Panasonic.

01:14:22.159 --> 01:14:24.520
And this is where I jump back to the earlier

01:14:24.520 --> 01:14:29.159
chemistry lesson. The fact that CATL can surpass

01:14:29.159 --> 01:14:33.000
BYD because the whitelisting process only protected...

01:14:33.969 --> 01:14:36.470
Protected two things. One is protecting the domestic

01:14:36.470 --> 01:14:39.170
battery manufacturers from only whitelisting

01:14:39.170 --> 01:14:42.350
Chinese companies, but also raise the bar in

01:14:42.350 --> 01:14:45.029
terms of energy density, right? So by raising

01:14:45.029 --> 01:14:49.189
the bar of energy density, Yashi gave a bit more

01:14:49.189 --> 01:14:52.590
favoritism to CA tail because CA tail is the

01:14:52.590 --> 01:14:56.930
only company that invested both in NCM and LFP

01:14:56.930 --> 01:15:00.289
development. So when you raise the battery density

01:15:00.289 --> 01:15:03.909
requirement, The old LFP batteries are no longer

01:15:03.909 --> 01:15:07.310
as competitive. And the cars within the car manufacturers

01:15:07.310 --> 01:15:10.409
are like, okay, load me up on NCM batteries.

01:15:11.970 --> 01:15:14.829
And I think CATL made an accidental decision

01:15:14.829 --> 01:15:17.750
on making the NCM batteries. It wasn't, oh, well

01:15:17.750 --> 01:15:20.689
planned and intentional, but it was just my clients

01:15:20.689 --> 01:15:23.350
need NCM battery. Therefore, I must know how

01:15:23.350 --> 01:15:25.670
to do this. And therefore, they had both LFP

01:15:25.670 --> 01:15:30.100
and NCM batteries. Exactly. Because they... With

01:15:30.100 --> 01:15:32.920
the BMW relationship, even though the first car

01:15:32.920 --> 01:15:36.899
was an LFP car, because of all the foreign relationships

01:15:36.899 --> 01:15:41.340
they had and the higher demand of those car manufacturers,

01:15:41.760 --> 01:15:45.180
they had to invest a bit more R &D in all kinds

01:15:45.180 --> 01:15:49.100
of different diverse type of batteries. And so

01:15:49.100 --> 01:15:51.500
continuous research is something that they really

01:15:51.500 --> 01:15:58.220
required. So then 2017, six years. After their

01:15:58.220 --> 01:16:01.979
original separation from ATL, they became the

01:16:01.979 --> 01:16:04.239
number one largest battery manufacturer in the

01:16:04.239 --> 01:16:07.300
world. Pretty impressive. But we know that they

01:16:07.300 --> 01:16:09.600
can't do this just by establishing a company

01:16:09.600 --> 01:16:12.579
with six years experience. It basically took

01:16:12.579 --> 01:16:15.760
all the experience from ATL from the past 10

01:16:15.760 --> 01:16:20.680
years into making this, right? So by 2000, then

01:16:20.680 --> 01:16:24.220
jumping ahead to 2019. The government decided,

01:16:24.520 --> 01:16:27.180
hey, we gave you subsidies. We gave you protection.

01:16:27.399 --> 01:16:30.659
We did the whitelisting for so many years. Whitelisting

01:16:30.659 --> 01:16:34.680
for three years effectively banned Japanese and

01:16:34.680 --> 01:16:37.939
Korean companies from entering the market. I

01:16:37.939 --> 01:16:40.869
think we've done enough. We're going to exit.

01:16:41.510 --> 01:16:43.449
We're still going to give out subsidies, but

01:16:43.449 --> 01:16:44.909
we're not going to do the whitelisting process

01:16:44.909 --> 01:16:49.750
anymore. So Samsung and LG then had their eyes

01:16:49.750 --> 01:16:53.689
going back on the Chinese EV industry. And so

01:16:53.689 --> 01:16:57.069
there was a little bit of a competition brought

01:16:57.069 --> 01:17:00.390
back to the market. And CATL actually did something

01:17:00.390 --> 01:17:02.850
really well in protecting their market share.

01:17:09.250 --> 01:17:11.850
relationship breakdown i don't know if they fully

01:17:11.850 --> 01:17:14.069
realize but there has been a relationship breakdown

01:17:14.069 --> 01:17:18.149
i think i know what relationship is between tesla

01:17:18.149 --> 01:17:21.510
and panasonic what a happy marriage happy marriage

01:17:21.510 --> 01:17:26.289
a few years right yeah seven years itch um so

01:17:26.289 --> 01:17:29.869
panasonic has always been the battery manufacturer

01:17:29.869 --> 01:17:35.510
for tesla great relationship right but Elon is

01:17:35.510 --> 01:17:39.970
a guy who's... Had an affair. I guess you can

01:17:39.970 --> 01:17:42.529
put it that way. Was eyeing multiple pretty battery

01:17:42.529 --> 01:17:46.109
girls at the time. Yeah. So, you know, battery

01:17:46.109 --> 01:17:49.890
landscape change and things obviously develop.

01:17:50.130 --> 01:17:52.869
New R &D technology comes out. Price levels change.

01:17:54.909 --> 01:17:58.069
Tesla as a company had to look for other alternatives

01:17:58.069 --> 01:18:01.270
because it was struggling with the very high

01:18:01.270 --> 01:18:05.270
QA and the very high maintenance that's required

01:18:05.270 --> 01:18:08.909
for Panasonic to continue to produce NCM batteries

01:18:08.909 --> 01:18:11.029
for them. And so it's eyeing for alternatives.

01:18:11.470 --> 01:18:14.750
In 2019, actually, there was other technological

01:18:14.750 --> 01:18:18.609
breakthrough in battery making in the LFP end.

01:18:19.399 --> 01:18:22.359
And it's actually triggered by the Chinese companies,

01:18:22.539 --> 01:18:27.479
both BYD and CATL. Despite the NCM domination,

01:18:27.619 --> 01:18:30.079
actually, they continue to invest in improving

01:18:30.079 --> 01:18:34.420
the LFP technology to the sense that the new

01:18:34.420 --> 01:18:37.779
LFP batteries now have the same amount of energy

01:18:37.779 --> 01:18:41.840
density as the old NCM batteries. So they can

01:18:41.840 --> 01:18:45.460
now also do 300 kilometers per charge. The thesis

01:18:45.460 --> 01:18:49.329
between the... Panasonic and BYD and CATL was,

01:18:49.489 --> 01:18:52.289
if you were Panasonic and having NCM batteries,

01:18:52.430 --> 01:18:54.449
you need to effectively think about how to make

01:18:54.449 --> 01:18:57.670
it. like safer and cheaper. But if you're LFP,

01:18:57.810 --> 01:19:01.449
you need to pack more energy into the same volume.

01:19:01.770 --> 01:19:05.409
Exactly. You nailed it. Right. So the game was

01:19:05.409 --> 01:19:07.989
on and people didn't believe that LFP was an

01:19:07.989 --> 01:19:11.210
option. It was so low end. But BYD and CATL,

01:19:11.229 --> 01:19:12.729
and I've been waiting for this moment for a long

01:19:12.729 --> 01:19:17.489
time, made LFP great again. They indeed have.

01:19:17.710 --> 01:19:22.659
So they believed in LFP technology. The innovation

01:19:22.659 --> 01:19:25.739
is called cell to pack. So they basically packed

01:19:25.739 --> 01:19:29.920
more cells into the same space. NCM at that point

01:19:29.920 --> 01:19:32.079
is still developed further. So you can still

01:19:32.079 --> 01:19:34.760
pack more into an NCM battery, but it's good

01:19:34.760 --> 01:19:37.479
enough for your average consumer. And Tesla realized

01:19:37.479 --> 01:19:39.640
that it's good enough for your average consumer.

01:19:39.920 --> 01:19:45.399
And 2019 is also when Tesla decided to build

01:19:45.399 --> 01:19:51.579
a new gigafactory. In Shanghai. Remarriage. So

01:19:51.579 --> 01:19:56.960
then Robin went to Elon, went to Tesla and said,

01:19:57.180 --> 01:20:00.579
hey, here's our new technology. Here's how much

01:20:00.579 --> 01:20:05.340
we can sell it to you for. Maybe consider us

01:20:05.340 --> 01:20:07.560
when you build this new factory, we can be a

01:20:07.560 --> 01:20:11.779
new supplier for you. And Elon being very profit

01:20:11.779 --> 01:20:17.100
driven, agreed. So. The China production line

01:20:17.100 --> 01:20:20.880
is basically split in two. The regular Model

01:20:20.880 --> 01:20:27.460
S is produced with CATL's LFP technology. The

01:20:27.460 --> 01:20:30.880
more long -range versions are still using LG.

01:20:31.310 --> 01:20:35.369
And this is basically the split for a lot of

01:20:35.369 --> 01:20:37.710
car manufacturers. So Xiaomi, for example, which

01:20:37.710 --> 01:20:39.770
we covered in a previous episode, which you can

01:20:39.770 --> 01:20:45.569
review, plug. So Xiaomi, for example, now have

01:20:45.569 --> 01:20:49.689
four cars, four Su7 cars, four of their sedan

01:20:49.689 --> 01:20:54.590
cars. The regular Su7, the Pro Su7 uses LFP.

01:20:55.520 --> 01:21:00.439
The Max and Ultra uses NCM. Driving range. Exactly.

01:21:00.720 --> 01:21:03.760
And so there's still demand for both batteries.

01:21:03.880 --> 01:21:05.920
It's just really shifted. If you look at the

01:21:05.920 --> 01:21:10.899
chart, it's like 80 % NCM back in the days and

01:21:10.899 --> 01:21:15.020
then now 80 % LFP. Because of this breakthrough

01:21:15.020 --> 01:21:20.039
in energy density and packing more into one cell

01:21:20.039 --> 01:21:25.029
or into one pack. So then CETL is on the rise

01:21:25.029 --> 01:21:28.270
all the way to 2019, secured the Tesla deal.

01:21:29.289 --> 01:21:35.229
CETL now has 24 % of global EV battery manufacturing

01:21:35.229 --> 01:21:40.069
capacity. And guess where does that put Panasonic?

01:21:41.130 --> 01:21:44.409
At least not number two. I mean, number two seems

01:21:44.409 --> 01:21:48.069
to be BYD. Yes. So it has to be more than three.

01:21:50.520 --> 01:21:55.760
2020, it's number three. It's actually CATL LG

01:21:55.760 --> 01:22:00.319
and Panasonic because I think BYD, we're going

01:22:00.319 --> 01:22:03.640
to talk about this now, but BYD made another

01:22:03.640 --> 01:22:06.619
decision, which is we're going to supply our

01:22:06.619 --> 01:22:10.319
own cars rather than becoming the suppliers of

01:22:10.319 --> 01:22:14.439
other EVs, which actually really deteriorated

01:22:14.439 --> 01:22:18.770
their... their demand. But they later caught

01:22:18.770 --> 01:22:22.130
on because of their EV sales really skyrocketed.

01:22:22.409 --> 01:22:26.289
And so Panasonic at that time only has 15, 18%.

01:22:26.289 --> 01:22:30.569
Panasonic today only has 4 % of the market share.

01:22:30.670 --> 01:22:34.630
Wow. Yeah. So I think it made a huge gamble in

01:22:34.630 --> 01:22:38.569
Tesla, which ultimately didn't pay out. And they

01:22:38.569 --> 01:22:42.130
had, I guess, trouble finding diversifying their

01:22:42.130 --> 01:22:46.069
customer base. Okay, so everything is great for

01:22:46.069 --> 01:22:51.310
CATL. Their battery is basically ubiquitous at

01:22:51.310 --> 01:22:55.909
this point. At this point, number one. And it

01:22:55.909 --> 01:23:00.510
has 20 -something percent global market share.

01:23:00.630 --> 01:23:05.529
But within China, it is dominant with 50%. So

01:23:05.529 --> 01:23:09.050
almost half of all EVs are equipped with CATL

01:23:09.050 --> 01:23:15.069
batteries. And so... It commanded enough authority

01:23:15.069 --> 01:23:19.149
to start making demands on its customers. Oh,

01:23:19.149 --> 01:23:23.050
geez. Yeah. Which is why for the past few years,

01:23:23.130 --> 01:23:25.470
it's been making some headlines that are not

01:23:25.470 --> 01:23:28.789
super positive, despite being the first in the

01:23:28.789 --> 01:23:32.789
market. Right. So in 2019 is the same year where

01:23:32.789 --> 01:23:35.109
they started to ask guarantees from their customers.

01:23:35.529 --> 01:23:39.250
So they need all of their customers to tell them

01:23:39.250 --> 01:23:41.510
how much they're going to order in the next five

01:23:41.510 --> 01:23:46.609
to 10 years. and then pay a deposit, put a deposit

01:23:46.609 --> 01:23:51.310
into CATL to guarantee that level of order. And

01:23:51.310 --> 01:23:54.750
if you hit the level order, then you get the

01:23:54.750 --> 01:23:56.970
guarantee back. If you don't hit that level of

01:23:56.970 --> 01:23:59.840
order... they're gonna not give all the money

01:23:59.840 --> 01:24:04.100
back to you as a collateral sort of mindset exactly

01:24:04.100 --> 01:24:06.380
but they're a public company right now right

01:24:06.380 --> 01:24:08.300
so they have to have some sort of collateral

01:24:08.300 --> 01:24:11.819
if anyone defaults it's true but it's also very

01:24:11.819 --> 01:24:15.119
demanding because it's usually the car manufacturer

01:24:15.119 --> 01:24:18.140
that faces the consumer and just the marketing

01:24:18.140 --> 01:24:22.220
that demands from the suppliers but Because of

01:24:22.220 --> 01:24:24.859
CA tail's dominance in the China market and because

01:24:24.859 --> 01:24:28.579
BYD decided to only supply themselves or 80 %

01:24:28.579 --> 01:24:31.739
supply themselves, CA tail had that power to

01:24:31.739 --> 01:24:35.039
really like push. Command the customers. Command

01:24:35.039 --> 01:24:37.479
the customers. And they did other things to command

01:24:37.479 --> 01:24:41.039
the customers because of the EV sales increase

01:24:41.039 --> 01:24:48.159
in 2021 -22. Lithium battery became seven times

01:24:48.159 --> 01:24:53.180
as more expensive or lithium, Coal. Yes. Mining.

01:24:53.399 --> 01:24:56.579
Mining. The lithium is like the element became

01:24:56.579 --> 01:25:00.800
seven times as more expensive. And so CATL naturally

01:25:00.800 --> 01:25:06.619
had to push that cost to the customers. That

01:25:06.619 --> 01:25:09.939
actually drove a lot of small EV. manufacturers

01:25:09.939 --> 01:25:13.020
into bankruptcy oh yeah seven times more and

01:25:13.020 --> 01:25:16.500
battery is a very large chunk exactly so they

01:25:16.500 --> 01:25:18.800
couldn't really come in seven times as more but

01:25:18.800 --> 01:25:21.000
because of their market size they can push more

01:25:21.000 --> 01:25:24.020
of the cost increase toward the customers so

01:25:24.020 --> 01:25:25.920
there are things that they've did over the past

01:25:25.920 --> 01:25:28.439
few years that kind of signal that there are

01:25:28.439 --> 01:25:31.819
the battery manufacturer and they can do kind

01:25:31.819 --> 01:25:34.739
of things to their customers that their customers

01:25:34.739 --> 01:25:37.619
may not like. Despite that, their market share

01:25:37.619 --> 01:25:41.760
still increased. So last year it was 37 % already

01:25:41.760 --> 01:25:46.239
globally. Right. Yeah. But it sounds like the

01:25:46.239 --> 01:25:49.560
game hasn't ended yet. And especially in the

01:25:49.560 --> 01:25:52.260
EV battery making field, it doesn't matter how

01:25:52.260 --> 01:25:54.800
large your current market is, but if you were

01:25:54.800 --> 01:25:57.260
to have the right technology for the next generation

01:25:57.260 --> 01:26:01.739
of the EVs, you can really overtake quite fast.

01:26:01.779 --> 01:26:04.979
Exactly. That's probably how when no one thinks

01:26:04.979 --> 01:26:09.260
about LFP was a thing, they made a bet on LFP

01:26:09.260 --> 01:26:13.539
and BYD and CATL perfected it, basically made

01:26:13.539 --> 01:26:16.260
it into the, what BYD calls it, the blade battery,

01:26:16.439 --> 01:26:21.909
right? And CATL is a chilling battery. Are there

01:26:21.909 --> 01:26:24.409
any other new things that they're doing these

01:26:24.409 --> 01:26:27.109
days that would ensure that maybe five years

01:26:27.109 --> 01:26:29.210
from here that they will still be in the game

01:26:29.210 --> 01:26:31.689
for battery making? Yeah, I'm so glad you asked.

01:26:32.590 --> 01:26:35.470
So you're right in that they're under a lot of

01:26:35.470 --> 01:26:37.970
pressure to continuously innovate because if

01:26:37.970 --> 01:26:40.529
they don't innovate, then they're at the risk

01:26:40.529 --> 01:26:43.770
of one of their competitors jumping ahead. And

01:26:43.770 --> 01:26:46.409
this is what CHL did to a lot of their competitors.

01:26:46.569 --> 01:26:49.670
So they're constantly innovating to prevent that

01:26:49.670 --> 01:26:53.420
from happening. to them so like you said so one

01:26:53.420 --> 01:26:57.739
qilin is their ncm battery and they've developed

01:26:57.739 --> 01:27:01.359
that technology released it in 2022 they also

01:27:01.359 --> 01:27:06.359
continue to invest in lfp as well so the shenxing

01:27:06.359 --> 01:27:10.119
battery is released in 2023 and it's the world's

01:27:10.119 --> 01:27:13.939
first 4c rate charging battery and that means

01:27:14.760 --> 01:27:17.340
That battery you can charge for 10 minutes and

01:27:17.340 --> 01:27:20.920
get 400 kilometers of range. Jeez. Yes. Without

01:27:20.920 --> 01:27:23.500
exploding. It is like a phone. It is like a phone,

01:27:23.539 --> 01:27:26.039
right? Yeah. And other things they're investing

01:27:26.039 --> 01:27:29.939
more in the long term. One is the sodium iron

01:27:29.939 --> 01:27:33.079
batteries. So back to chemistry. Lithium iron

01:27:33.079 --> 01:27:38.500
batteries are generally lighter. but they also

01:27:38.500 --> 01:27:41.859
have limited supply. So lithium is obviously

01:27:41.859 --> 01:27:45.739
more limited than sodium, which is salt. Which

01:27:45.739 --> 01:27:51.079
is the entire ocean. And so a lot of companies

01:27:51.079 --> 01:27:53.380
actually started to invest in the next generation

01:27:53.380 --> 01:27:56.600
of batteries and sodium was one of the potential

01:27:56.600 --> 01:28:01.619
ideas. But sodium being a much larger molecule,

01:28:02.020 --> 01:28:06.489
there are some, I guess, R &D hindrances and

01:28:06.489 --> 01:28:09.289
how it can really go to market. But last year,

01:28:09.350 --> 01:28:13.770
2025, they actually, CATL released their first

01:28:13.770 --> 01:28:17.149
sodium -powered battery. Naxtra, it's called

01:28:17.149 --> 01:28:20.170
Naxtra. And they also released another battery

01:28:20.170 --> 01:28:23.789
called Freevoi. And Freevoi is a hybrid sodium

01:28:23.789 --> 01:28:27.289
-lithium battery. So it actually has a system

01:28:27.289 --> 01:28:31.720
where it turns lithium in, I guess, certain environment,

01:28:31.800 --> 01:28:34.300
and it converts to sodium power in certain other

01:28:34.300 --> 01:28:37.239
environments because sodium has a better temperature

01:28:37.239 --> 01:28:39.659
range. So, for example, if you go all the way

01:28:39.659 --> 01:28:44.180
to the... Siberia areas, you can use the sodium

01:28:44.180 --> 01:28:47.500
power part of this hybrid battery. Yeah. Interesting.

01:28:47.699 --> 01:28:49.979
So that's something they really want to mass

01:28:49.979 --> 01:28:52.920
commercialize in the future. Another thing that

01:28:52.920 --> 01:28:55.880
everyone, every battery manufacturer is investing

01:28:55.880 --> 01:28:59.079
in is called solid state battery. So currently

01:28:59.079 --> 01:29:02.359
all the battery, the inner cells, the electrolytes

01:29:02.359 --> 01:29:04.359
of the battery is either liquid or gel. right

01:29:04.359 --> 01:29:06.239
because it glues everything together it passes

01:29:06.239 --> 01:29:09.520
the the positive to the negative yeah it allows

01:29:09.520 --> 01:29:11.199
the transportation sorry as you can hear i'm

01:29:11.199 --> 01:29:16.060
also a chemistry major so then um for a solid

01:29:16.060 --> 01:29:20.090
state they They started development or R &D as

01:29:20.090 --> 01:29:22.189
well. They first actually released something

01:29:22.189 --> 01:29:24.670
called the semi -solid state. So like a mixture

01:29:24.670 --> 01:29:29.250
of gel and solid state in 2023. And it's called

01:29:29.250 --> 01:29:31.390
condensed matter. And then now they're developing

01:29:31.390 --> 01:29:33.949
more directly into solid state. But there is

01:29:33.949 --> 01:29:37.550
a lot of competitors in that field. So Panasonic

01:29:37.550 --> 01:29:40.750
is investing. Samsung is investing. So whoever

01:29:40.750 --> 01:29:43.029
gets to solid state first. And solid state has

01:29:43.029 --> 01:29:48.130
like a lot, a lot more energy density. So whoever

01:29:48.130 --> 01:29:52.229
gets to that first might really, again, jump

01:29:52.229 --> 01:29:57.510
ahead and take over in terms of shares. And if

01:29:57.510 --> 01:30:00.329
you achieve solid state or something with battery

01:30:00.329 --> 01:30:05.529
density of as high as, let's say, 500 watt hours

01:30:05.529 --> 01:30:10.050
per kg, you can then think about other vehicles

01:30:10.050 --> 01:30:15.939
that are much larger than cars. airplanes and

01:30:15.939 --> 01:30:21.880
marine ships yeah so interestingly actually a

01:30:21.880 --> 01:30:24.960
percentage a very small single digit percentage

01:30:24.960 --> 01:30:31.840
of seattail's current revenue is already on battery

01:30:31.840 --> 01:30:35.960
production for these kind of large transportations

01:30:35.960 --> 01:30:39.520
so that's definitely a place that they're going

01:30:39.520 --> 01:30:41.819
to pursue in the future It's only reasonable,

01:30:42.060 --> 01:30:44.899
right? You either develop the next generation

01:30:44.899 --> 01:30:47.020
of the technology or you try to put your batteries

01:30:47.020 --> 01:30:49.380
in more things. Exactly. And whatever thing that

01:30:49.380 --> 01:30:51.260
can carry a battery around, you're going to put

01:30:51.260 --> 01:30:53.600
it in. Yeah, and knowing how this group always

01:30:53.600 --> 01:30:57.739
thinks ahead, they need to be well prepared.

01:30:58.060 --> 01:31:00.699
Right. Okay, so something else that happened

01:31:00.699 --> 01:31:05.460
in 2025 last year is that CATL actually made

01:31:05.460 --> 01:31:10.529
it to the largest IPO. In the world, it raised

01:31:10.529 --> 01:31:14.630
4 .6 billion US dollars in the Hong Kong Stock

01:31:14.630 --> 01:31:20.149
Exchange. And in that year, its revenue still

01:31:20.149 --> 01:31:24.729
went up 17 % year over year. For a company that

01:31:24.729 --> 01:31:30.510
already made it to the top of the EV battery

01:31:30.510 --> 01:31:34.729
manufacturing market share in 2017, eight years

01:31:34.729 --> 01:31:36.989
later, they're still growing at double digits.

01:31:38.000 --> 01:31:41.020
And their profit is growing at even higher rates

01:31:41.020 --> 01:31:43.960
because of how much they can command and the

01:31:43.960 --> 01:31:46.380
fact that they entered into new businesses like

01:31:46.380 --> 01:31:48.960
the energy storage systems and battery recycling.

01:31:49.800 --> 01:31:54.260
And so with this IPO, it's actually not the first

01:31:54.260 --> 01:31:56.579
time they IPO -ed, it's actually the second time.

01:31:56.659 --> 01:32:00.000
The first time they IPO -ed is in the Shenzhen

01:32:00.000 --> 01:32:05.680
Stock Exchanges. It's called the... SheNex. SheNex

01:32:05.680 --> 01:32:09.130
mark, which is if you... Also, kind of referring

01:32:09.130 --> 01:32:14.010
back to our first episode on Insta360. It's similar

01:32:14.010 --> 01:32:18.569
to that. So it's for technology companies, up

01:32:18.569 --> 01:32:21.569
and rising companies to IPO. People call it the

01:32:21.569 --> 01:32:25.550
NASDAQ of China. Yes. And so back then it was

01:32:25.550 --> 01:32:29.729
2018. And the amount of money they raised is

01:32:29.729 --> 01:32:33.649
not as high, but it did make it to that board's

01:32:33.649 --> 01:32:38.829
top list immediately after it IPO'd. And so that

01:32:38.829 --> 01:32:44.729
was 2018 in Shenzhen and then 2025 again in Hong

01:32:44.729 --> 01:32:48.130
Kong. The 4 .6 billion they raised, a lot of

01:32:48.130 --> 01:32:52.170
it is actually going into a factory that they

01:32:52.170 --> 01:32:55.510
are building in Hungary. And this is one of the

01:32:55.510 --> 01:32:58.149
two factories they have built in Europe. And

01:32:58.149 --> 01:33:02.850
this is basically their ambition. to enter Europe

01:33:02.850 --> 01:33:04.949
or they already enter Europe their ambition to

01:33:04.949 --> 01:33:08.529
become the first battery manufacturing supplier

01:33:08.529 --> 01:33:13.789
everywhere else in the world right so while they

01:33:13.789 --> 01:33:16.649
are they have been first in China for a really

01:33:16.649 --> 01:33:20.289
long time they do have a lot of competition abroad

01:33:20.289 --> 01:33:26.670
and there actually has been one company in Europe

01:33:26.670 --> 01:33:31.060
that wanted to take CATL's place for a while

01:33:31.060 --> 01:33:36.899
and it bankrupted in 2014 2024 and that is called

01:33:36.899 --> 01:33:41.399
norfolds it basically had the investment of entire

01:33:41.399 --> 01:33:48.220
europe and the orders of almost every european

01:33:48.220 --> 01:33:53.380
ev manufacturer and because and we believe that

01:33:53.380 --> 01:33:57.420
because of um how fast is trying to kind of jump

01:33:57.420 --> 01:34:01.720
start right without Years of manufacturing expertise

01:34:01.720 --> 01:34:06.460
and operational management is what caused it

01:34:06.460 --> 01:34:09.920
to ultimately fail because it not only decided

01:34:09.920 --> 01:34:14.399
to start the facility in a city that doesn't

01:34:14.399 --> 01:34:17.020
have that much battery manufacturing history,

01:34:17.199 --> 01:34:20.380
it also decided to expand into different cities

01:34:20.380 --> 01:34:24.279
too quickly, too fast. And so Norfolk, unfortunately,

01:34:24.500 --> 01:34:29.840
last year ended up filing for Chapter 11. And

01:34:29.840 --> 01:34:33.420
throughout CETL's, I guess, lifetime, there has

01:34:33.420 --> 01:34:37.640
been a lot of competition as well. So not only

01:34:37.640 --> 01:34:42.100
Norfolk, but in Japan, Panasonic actually restarted

01:34:42.100 --> 01:34:46.899
a JV with Toyota, wanting to gain back its market

01:34:46.899 --> 01:34:52.800
share that it lost. And similarly, other EV manufacturers

01:34:52.800 --> 01:34:58.850
in China has been popping up as well. 15 EV car

01:34:58.850 --> 01:35:01.449
manufacturers sponsored or started investing

01:35:01.449 --> 01:35:04.590
in their own EV battery production. And this

01:35:04.590 --> 01:35:07.250
goes back to how, you know, the guarantee system

01:35:07.250 --> 01:35:11.689
and everything that Seattle has done to their

01:35:11.689 --> 01:35:14.229
customers has kind of angered some of them and

01:35:14.229 --> 01:35:17.989
they wanted an alternative. So it is not without

01:35:17.989 --> 01:35:20.930
threat that they're operating in this place.

01:35:21.609 --> 01:35:26.899
Yeah. But regardless. But regardless. Just a

01:35:26.899 --> 01:35:29.779
bit more on the Northvolt story, because why

01:35:29.779 --> 01:35:35.079
it was such an amazing attempt, but it failed.

01:35:35.140 --> 01:35:38.539
And I'm surprised at how long that it lasted

01:35:38.539 --> 01:35:40.859
before it finally fell for bankruptcy. It seems

01:35:40.859 --> 01:35:43.399
like a struggle, like a burn towards the end.

01:35:44.640 --> 01:35:47.979
First look at the company, the right people,

01:35:48.060 --> 01:35:50.979
maybe the right people, but definitely not the

01:35:50.979 --> 01:35:54.180
right location. Peter Carlson and Paolo Cerruti.

01:35:54.729 --> 01:35:58.810
Both of them are ex -Tesla. One was the VP for

01:35:58.810 --> 01:36:01.630
supply chain during Model S time. And prior to

01:36:01.630 --> 01:36:04.909
that, he was very involved in Sony Ericsson manufacturing

01:36:04.909 --> 01:36:07.810
and NXP Semiconductor, both in manufacturing.

01:36:08.470 --> 01:36:11.579
And Paolo... was working in the operations planning

01:36:11.579 --> 01:36:13.899
for Tesla. So supposedly these two people should

01:36:13.899 --> 01:36:17.020
know the most from within Tesla how batteries

01:36:17.020 --> 01:36:21.479
would work. They both left Tesla in 2015. And

01:36:21.479 --> 01:36:24.659
before Northvolt was called Northvolt, it's called

01:36:24.659 --> 01:36:29.579
SGF Energy. And obviously this dream is for Europe

01:36:29.579 --> 01:36:33.119
to build its own battery industry to avoid dependency

01:36:33.119 --> 01:36:36.779
completely on Asia, like Panasonic and BYD and

01:36:36.779 --> 01:36:38.899
CATL. So they had realized that and trying to

01:36:38.899 --> 01:36:41.279
replicate. But the location that they've picked

01:36:41.279 --> 01:36:45.779
is within the Arctic Circle. And the reason why

01:36:45.779 --> 01:36:47.960
they picked it in the Arctic Circle is because

01:36:47.960 --> 01:36:51.899
of its easy access to hydropower. complete clean

01:36:51.899 --> 01:36:55.020
energy which is okay but it wasn't valid enough

01:36:55.020 --> 01:36:58.699
for me and i will tell you why being in the arctic

01:36:58.699 --> 01:37:00.560
circle what made it very difficult to attract

01:37:00.560 --> 01:37:03.460
talents not like ningde ningde at least is still

01:37:03.460 --> 01:37:07.500
a coastal city has very easy convenience uh conveniently

01:37:07.500 --> 01:37:10.020
located in between like larger cities within

01:37:10.020 --> 01:37:13.140
fujian province and great seafood like it's kind

01:37:13.140 --> 01:37:16.630
of subtropical supporting functions, supporting

01:37:16.630 --> 01:37:18.869
companies are all based in those places. So there

01:37:18.869 --> 01:37:22.010
is a cluster of how the supply chain would work

01:37:22.010 --> 01:37:25.630
in a place like Ningde. And I was trying to think

01:37:25.630 --> 01:37:27.869
of the places that I've been to close to the

01:37:27.869 --> 01:37:30.489
Arctic Circle. The northmost place I've ever

01:37:30.489 --> 01:37:35.170
been to is Tromsø in Norway. And you can see

01:37:35.170 --> 01:37:38.189
like beautiful Aurora there. There's not much

01:37:38.189 --> 01:37:41.520
going on and it is really very cold. If you're

01:37:41.520 --> 01:37:43.220
in the manufacturing business, you're thinking

01:37:43.220 --> 01:37:46.520
logistics, easy logistics, easy in and easy out.

01:37:46.760 --> 01:37:49.359
So when you're putting it. putting all of our

01:37:49.359 --> 01:37:51.779
ingredients in the Arctic Circle and ship the

01:37:51.779 --> 01:37:54.039
final product out. It doesn't seem like that

01:37:54.039 --> 01:37:58.920
decision is well thought out of. And the last

01:37:58.920 --> 01:38:01.960
bit, I think, of how they failed would be the

01:38:01.960 --> 01:38:03.779
complete lacking of just manufacturer experience.

01:38:04.340 --> 01:38:07.819
It is more complicated than you think of making

01:38:07.819 --> 01:38:11.159
one piece of battery. Seems like only have four

01:38:11.159 --> 01:38:13.680
stages, but within that four stages, you have...

01:38:13.880 --> 01:38:17.260
really 20, 30 steps. And every single step requires

01:38:17.260 --> 01:38:21.300
very high precision. And each step is associated

01:38:21.300 --> 01:38:24.399
with a defect rate. If every single one of that

01:38:24.399 --> 01:38:28.020
step have a higher defect rate by 1%, let's just

01:38:28.020 --> 01:38:33.479
say 99%, 20 steps. you compound 99 % 20 times,

01:38:33.600 --> 01:38:39.199
you end up with 82%, right? So an 82 % in battery

01:38:39.199 --> 01:38:42.899
making for EVs, that means a lot of safety concern.

01:38:43.060 --> 01:38:45.119
That means unacceptable. That means unacceptable

01:38:45.119 --> 01:38:47.880
and people will die, right? To put it into perspective,

01:38:48.199 --> 01:38:52.260
the industry standard is parts per million cells

01:38:52.260 --> 01:38:57.920
and CATL is at parts per... billion that level

01:38:57.920 --> 01:39:00.920
of manufacturing. It means that they do not tolerate

01:39:00.920 --> 01:39:05.100
any mistakes and they have a hellish level for

01:39:05.100 --> 01:39:08.920
making factories work. And I haven't really personally

01:39:08.920 --> 01:39:12.199
been in a CATL factory, but just judging by the

01:39:12.199 --> 01:39:14.140
videos that I've seen of, you know, from the

01:39:14.140 --> 01:39:17.359
outside or parts of the factories, you can see

01:39:17.359 --> 01:39:20.500
that it is pristine. It is very well managed.

01:39:21.899 --> 01:39:25.819
to avoid any steam that is being brought into

01:39:25.819 --> 01:39:28.800
the factory because that also causes a... The

01:39:28.800 --> 01:39:31.539
battery defects, they essentially just make sure

01:39:31.539 --> 01:39:34.699
that you have enough masks that go onto every

01:39:34.699 --> 01:39:37.359
single employee's face. Oh, because you can't

01:39:37.359 --> 01:39:40.819
breathe? Breathing also affects your battery

01:39:40.819 --> 01:39:44.479
quality. So breathing is obviously allowed, but

01:39:44.479 --> 01:39:49.079
not encouraged, but it is well masked. So that's

01:39:49.079 --> 01:39:51.500
the level of CATLs management at the battery

01:39:51.500 --> 01:39:55.130
factories. For Northvolt. They obviously opened

01:39:55.130 --> 01:39:57.369
the factory, but because they were not able to

01:39:57.369 --> 01:40:01.000
deliver on time. If you're in the battery making

01:40:01.000 --> 01:40:03.300
business and EV making business, you cannot miss

01:40:03.300 --> 01:40:06.380
deadline and you have to be able to supply at

01:40:06.380 --> 01:40:08.560
the right quantity at the right time. And then

01:40:08.560 --> 01:40:11.600
they failed at that multiple times. So all of

01:40:11.600 --> 01:40:13.659
the European buyers, they started to withdraw

01:40:13.659 --> 01:40:16.239
and cancel their orders and ended up with not

01:40:16.239 --> 01:40:18.140
having any money in their account and have to

01:40:18.140 --> 01:40:21.140
file bankruptcy. Oh no. Yeah. One less competitor

01:40:21.140 --> 01:40:26.539
for CVTL going forward. Yeah. So why do you think

01:40:27.159 --> 01:40:30.560
CATL ascended. And I'm just, okay, before we

01:40:30.560 --> 01:40:36.340
talk about that, after their 2025, I guess, second

01:40:36.340 --> 01:40:40.640
IPO, their share price continued to rise. So

01:40:40.640 --> 01:40:46.119
right now their market cap is already 290 -ish,

01:40:46.180 --> 01:40:50.699
about to approach $300 billion US dollars. This

01:40:50.699 --> 01:40:55.460
makes them... Somewhere between 40 to 50 globally

01:40:55.460 --> 01:40:58.720
in terms of market share. I looked up the list

01:40:58.720 --> 01:41:03.859
yesterday. The company that's ahead of CATL is

01:41:03.859 --> 01:41:08.380
Morgan Stanley. The company that is below CATL

01:41:08.380 --> 01:41:12.060
is Novartis. So CATL is Novartis Morgan Stanley

01:41:12.060 --> 01:41:16.439
levels. And the only companies... at least the

01:41:16.439 --> 01:41:19.279
public ones that are larger than CTL in China,

01:41:19.460 --> 01:41:23.279
there's two types. The first one is Tencent Alibaba.

01:41:23.560 --> 01:41:28.279
Makes sense. Tech companies, basically. And the

01:41:28.279 --> 01:41:32.819
second type is bank and oil state -owned. Traditional,

01:41:32.960 --> 01:41:37.539
yes. Exactly. So as a battery manufacturer, making

01:41:37.539 --> 01:41:43.039
it to the top 10 in China, it's phenomenal. Not

01:41:43.039 --> 01:41:47.119
investment advice, but just cool facts. Cool

01:41:47.119 --> 01:41:50.920
facts. Cool facts. All right. So I guess at the

01:41:50.920 --> 01:41:53.439
end, we always ask ourselves, why did this company

01:41:53.439 --> 01:41:56.720
ascent? Why do we pick it? It's actually among,

01:41:56.859 --> 01:41:58.960
I was thinking back on this, it was actually

01:41:58.960 --> 01:42:01.180
among all of the companies that we picked prior.

01:42:01.539 --> 01:42:04.680
It's the only one that we can really claim to

01:42:04.680 --> 01:42:08.149
be the number one in the world. Even though all

01:42:08.149 --> 01:42:11.250
the other companies like Xiaomi ascended, Xiaomi

01:42:11.250 --> 01:42:14.029
was number three in terms of phone manufacturing

01:42:14.029 --> 01:42:17.329
and not there yet in terms of EV manufacturing.

01:42:17.569 --> 01:42:20.310
It did ascend, but Sea -U -Tail is absolute number

01:42:20.310 --> 01:42:23.430
one in all kinds of metrics in EV battery making

01:42:23.430 --> 01:42:27.069
for the past few years. Whether it's the market

01:42:27.069 --> 01:42:31.710
cap, the growth, the volume. Volume of batteries

01:42:31.710 --> 01:42:36.930
delivered, everything. Wow. And truthfully, this

01:42:36.930 --> 01:42:38.949
episode has been incredibly difficult to record

01:42:38.949 --> 01:42:40.890
just because how much information that we're

01:42:40.890 --> 01:42:43.750
able to find, whether it's online, offline, in

01:42:43.750 --> 01:42:46.310
Chinese and English and piecing everything together.

01:42:46.529 --> 01:42:49.770
And also given Robin has been doing so many things

01:42:49.770 --> 01:42:53.170
at the same time, we figured that while you think

01:42:53.170 --> 01:42:56.710
it is one person just chairing a company, he's

01:42:56.710 --> 01:42:58.449
actually living like two, three people's life

01:42:58.449 --> 01:43:00.810
at the same time. For sure. You know, he's easily

01:43:00.810 --> 01:43:04.550
managing more than one company and studying while...

01:43:05.000 --> 01:43:07.680
managing a couple of companies and being approached

01:43:07.680 --> 01:43:10.380
by a million government officials. That's true.

01:43:10.520 --> 01:43:16.699
Right. Yeah. So it seems like he himself never

01:43:16.699 --> 01:43:21.520
stopped pursuing and progressing within the battery

01:43:21.520 --> 01:43:26.239
industry. And from a very product driven point

01:43:26.239 --> 01:43:30.939
of view, he was always able to deliver the product

01:43:30.939 --> 01:43:36.239
that resolves. the client's pain point and he

01:43:36.239 --> 01:43:42.020
always made things better cheaper he just doesn't

01:43:42.020 --> 01:43:44.939
want an unperfect final product yeah i think

01:43:44.939 --> 01:43:49.279
that's why uh he was able to get to the market

01:43:49.279 --> 01:43:55.020
share uh as for now definitely been very demanding

01:43:55.020 --> 01:43:57.000
actually when you talked about the whole factory

01:43:57.000 --> 01:44:01.539
the amount of level of pristine is, right? The

01:44:01.539 --> 01:44:05.340
love of demand for a factory. He's always there

01:44:05.340 --> 01:44:08.779
to make sure that CATL is number one in all the

01:44:08.779 --> 01:44:12.399
steps along the way. Another thing I think he

01:44:12.399 --> 01:44:16.359
did really well or CATL did really well was eyeing

01:44:16.359 --> 01:44:20.159
for the largest, the most prestige customer.

01:44:20.520 --> 01:44:25.039
So with electric, portable electrics, they went

01:44:25.039 --> 01:44:28.359
for Apple and Apple helped sustain their orders

01:44:28.359 --> 01:44:33.319
going forward. And with CATL, the BMW relationship,

01:44:33.760 --> 01:44:35.760
even though it might not be as profitable or

01:44:35.760 --> 01:44:39.399
as many orders, that helped them, right? Just

01:44:39.399 --> 01:44:42.520
in terms of prestige. I think that going for

01:44:42.520 --> 01:44:46.359
a tough customer earlier on might not be economically

01:44:46.359 --> 01:44:49.840
beneficial, but in the long term, it will help

01:44:49.840 --> 01:44:53.000
you. So even though CATL arrived quite late to

01:44:53.000 --> 01:44:57.600
the battery race, right now it seems pretty obvious

01:44:57.600 --> 01:45:01.479
that it's... winning and it's founded in a second

01:45:01.479 --> 01:45:05.880
tier city but somehow it made sense and inside

01:45:05.880 --> 01:45:08.859
the company where it was originally owned by

01:45:08.859 --> 01:45:11.939
a Japanese conglomerate in a market where there

01:45:11.939 --> 01:45:14.539
were multiple players trying to get onto the

01:45:14.539 --> 01:45:18.640
game they still find their very unique value

01:45:18.640 --> 01:45:22.619
proposition always in the game. We talked about

01:45:22.619 --> 01:45:26.449
how I talked about how the government subsidies

01:45:26.449 --> 01:45:30.489
and the whitelist really helped Chinese EV battery

01:45:30.489 --> 01:45:33.810
manufacturers to develop during those years.

01:45:34.189 --> 01:45:39.949
But there are 100, if not more, manufacturings

01:45:39.949 --> 01:45:43.250
during that time. So it's not, even though the

01:45:43.250 --> 01:45:46.649
policy helped the industry to grow. how does

01:45:46.649 --> 01:45:49.149
CATL really stand out from the industry, right?

01:45:49.250 --> 01:45:51.569
It's because they diversified into a lot of path

01:45:51.569 --> 01:45:56.310
to pursue to ensure that they lower their risk

01:45:56.310 --> 01:45:58.810
in general. And so they're continuing, and we're

01:45:58.810 --> 01:46:00.310
seeing that they're continuing to do that with

01:46:00.310 --> 01:46:03.670
aviation, marine, sodium, and all kinds of other

01:46:03.670 --> 01:46:07.710
things that they're investing in. So diversifying

01:46:07.710 --> 01:46:11.850
and almost like not caring about the immediate

01:46:11.850 --> 01:46:14.430
returns, but look for the long run benefits.

01:46:15.949 --> 01:46:19.569
that's usually quite rare for a business especially

01:46:19.569 --> 01:46:22.649
i would say in china yeah because they're the

01:46:22.649 --> 01:46:26.310
market just demands short -term return so much

01:46:26.310 --> 01:46:31.050
yeah that's very true all right cool thumbs up

01:46:31.050 --> 01:46:37.310
yay we're done we're done and if catl story sparked

01:46:37.310 --> 01:46:39.229
something for you whether it's their business

01:46:39.229 --> 01:46:41.899
strategy or the battery science, I'm sorry if

01:46:41.899 --> 01:46:44.239
we poorly explained the science to you, or if

01:46:44.239 --> 01:46:48.239
it's Robin's character who always solved the

01:46:48.239 --> 01:46:50.380
hardest problem and refused to give up. If you

01:46:50.380 --> 01:46:53.380
like the story, share it with someone who deserves

01:46:53.380 --> 01:46:56.439
to understand how Asian business actually works,

01:46:56.500 --> 01:46:59.079
and not just the headline version, but the real

01:46:59.079 --> 01:47:01.960
version. Subscribe wherever you get your podcasts,

01:47:02.220 --> 01:47:05.619
and we shall see you in the next episode of Ascent.

01:47:06.039 --> 01:47:06.920
Bye everyone!