<p>As the global pandemic hit, the world’s biggest maker of electric car batteries, a Chinese company now worth more than General Motors and Ford combined, suddenly faced its own crisis.</p>.<p>A rival had released a video suggesting that a technology used by the company, CATL, and other manufacturers could cause car fires. Imitating a Chinese government safety test, the rival had driven a nail through a battery cell, one of many in a typical electric car battery. The cell exploded in a fireball.</p>.<p>Chinese officials took swift action — by dropping the nail test, according to documents reviewed by<em> The New York Times</em>. The new regulation, released two months later, listed who had drafted it: First on the list, ahead of the government’s own vehicle testing agency, was CATL.</p>.<p>The shift did not expose the world to unsafe batteries — other countries do not require a nail test — but it showed China’s commitment to nurturing a corporate champion with a strong and growing sway over the future of driving. CATL has given China a commanding lead in electric car batteries, a technology central to the broader green revolution. The company already supplies batteries to almost all of the world’s automakers, including GM, Volkswagen, BMW and Tesla. CATL has emerged as one of the biggest winners of the electric car boom, along with Tesla.</p>.<p>The battery giant stands as a crucial link in a green-technology supply chain increasingly dominated by China. Chinese companies, particularly CATL, have secured vast supplies of the raw materials that go inside the batteries. That dominance has stirred fears in Washington that Detroit could someday be rendered obsolete and that Beijing could control American driving in the 21st century the way that oil-producing nations sometimes could in the 20th.</p>.<p><strong>Also read: <a href="https://www.deccanherald.com/city/longer-ev-rides-possible-with-more-charging-stations-1062074.html" target="_blank">Longer EV rides possible with more charging stations</a></strong></p>.<p>Chinese government officials made sure CATL’s business stayed in Chinese hands. They created a captive market of battery customers. And when CATL needed money, they doled it out.</p>.<p>“CATL definitely seems like it’s the concept and creation of a master plan,” said Michael Dunne, a former GM executive in Asia and now an analyst.</p>.<p>CATL isn’t government-owned, according to its filings, but investors with connections to Beijing have held stakes during its rise, according to a Times analysis of its filings. So did a Chinese investment firm that counted Hunter Biden, son of President Joe Biden, as a board member and shareholder.</p>.<p>From Detroit to Milan to Wolfsburg, Germany, auto executives who spent their careers trying to perfect pistons and fuel-injection systems are now obsessing about how to compete with a nearly invisible yet formidable industry giant.</p>.<p>“China’s problem with internal combustion engines was they were forever playing the game of catch-up,” said Bill Russo, a former chief of Chrysler in China who is now a Shanghai electric car consultant. “Now, the United States has to play the game of catch-up with electric vehicles.”</p>.<p><strong>Out of the shadows</strong></p>.<p>While Tesla and its garrulous chairman, Elon Musk, have epitomised the electric car boom, CATL — its legal name in English is Contemporary Amperex Technology Co. Ltd. — has stayed in the shadows.</p>.<p>Its founder and chairman, Robin Zeng, is one of the wealthiest men in Asia, with a fortune of about $60 billion. Its towering headquarters, shaped like an oversize lithium battery, and several of its biggest factories are in his hometown, Ningde, a former fishing village and military base in southeastern China. The municipal government has locked down access to a wide array of documents, particularly from the early days of CATL.</p>.<p>Zeng, 53, has built a senior management team of longtime employees, many of whom grew up in Ningde. For gifts during holidays, CATL sends lychee and loquat fruit grown on Ningde’s outskirts.</p>.<p>Xi Jinping, now China’s top leader, was the local Communist Party chief in Ningde from 1988 to 1990, though he shares no apparent connection with CATL.</p>.<p>After studying marine engineering at a Shanghai university, Zeng went to work on battery chemistry for TDK, a Japanese company, in China. In 1999, he joined fellow battery chemistry experts who set up their own company supplying lithium-cobalt batteries for mobile phones, camcorders and other portable consumer electronics. The team sold the company to TDK in 2005 for $100 million and continued to run it as a subsidiary.</p>.<p>The Chinese government, which has long identified batteries as a strategic industry, in 2011 took one of several steps to nurture a homegrown industry. It required that foreign automakers that want to sell electric cars in China transfer crucial technology to a local company. Only then would the government subsidise the sale of their autos, which could amount to up to $19,300 for car buyers.</p>.<p>TDK allowed a group of Chinese investors led by Zeng to acquire an 85% stake in its nascent electric car battery business at the end of 2011. They called it CATL. BMW, its first main customer, switched from A123, a battery supplier in Massachusetts and Michigan.</p>.<p>Four years later, a different group of Chinese investors bought the remaining 15% from TDK.</p>.<p>The financial terms of the sale aren’t clear, but Zeng and his partners reaped a windfall. TDK now has a market capitalisation of $16 billion. CATL? Almost $240 billion.</p>.<p>TDK referred questions to CATL, which, in turn, said only TDK could discuss how much had been paid.</p>.<p><strong>Beijing’s helpful hand</strong></p>.<p>Beijing’s rules helped CATL emerge as an independent company. Then, Beijing helped the company soar.</p>.<p>CATL’s batteries require ready supplies of lithium and cobalt. Chinese firms have rushed to secure cobalt in places like Congo, where huge deposits were once mined by an American company. This year, CATL acquired a quarter of the Kisanfu cobalt reserve, one of the world’s richest, in Congo for $137.5 million.</p>.<p>Zeng has also secured raw materials close to home.</p>.<p>Corporate records show that within a year of setting up CATL, Zeng had started a subsidiary in western China’s Qinghai province. Qinghai had something that Zeng needed: dried-out salt lake beds with thick underground brine laden with lithium. The government wanted development in the country’s poorer western regions. CATL locked in contracts for the most lithium-rich deposits, people familiar with the company said.</p>.<p>The Chinese government helped. In 2015, it unveiled the Made in China 2025 plan, a guide to achieving independence in major industries of the future, including electric cars, in a decade.</p>.<p>Chinese policy banks, which lend to government-endorsed projects that may be too risky for local banks, stepped in to provide more than $100 million to CATL projects in Qinghai, documents show. The provincial government of Qinghai offered roughly $33 million from 2015 through 2017, CATL filings showed. The Qinghai government did not respond to requests for comment.</p>.<p>In a written reply to questions, CATL said its investments “guarantee the stability of raw material supply, and avoid sharp price fluctuations.”</p>.<p>CATL benefited greatly from the government’s drive to get automakers in China to use only locally made batteries.</p>.<p>The government soon said electric car buyers could get subsidies only if the battery was made by a Chinese company. GM, which had not been notified of the rule, started shipping Buick Velite electric cars in 2016 with batteries made in China by LG, a South Korean company.</p>.<p>Angry consumers and dealers complained that local officials were denying them subsidies, people familiar with the episode said. GM switched heavily to CATL for the huge Chinese market.</p>.<p>With subsidies and a protected home market, CATL became extremely profitable. The auto industry considers after-tax profit margins of at least 5% of sales a success. CATL’s margin last year was 11.1%. Despite that profitability, the company continued to collect government subsidies last year equal to a fifth of its net income.</p>.<p>The effort has also made China a giant in electric car batteries. China has 14 times the electric car battery-making capacity of the United States, according to Benchmark Mineral Intelligence, a London consulting firm. It projects that China will keep the lead even after a US buildup, including projects like the planned North Carolina plant announced in early December by Toyota, and would have seven times the United States’ capacity in four years.</p>.<p><strong>Betting on batteries </strong></p>.<p>CATL’s initial public offering in 2018 made Zeng and two CATL vice chairmen, who together own a 40% stake, rich. Other early investors, some with deep political connections, did well, too.</p>.<p>The company’s success was never assured, but China had let the world know that it planned to dominate the electric vehicle industry. It said in a sweeping announcement in 2016 that a “third industrial revolution” focusing on digitization and “new energy” would allow China to take the lead in autos.</p>.<p>CATL invited a few outside investors to take pre-IPO stakes. Among them were Pei Zhenhua, a businessman who set up a lithium processing company with CATL, and Yu Yong, the biggest individual shareholder in China Molybdenum, a CATL partner in Congo. Yu’s holding company controls 1.69% of CATL, records show.</p>.<p>One investment fund, Guokai Boyu, invested more than $100 million and held a 1.2% stake. Guokai Boyu is controlled by a private equity firm co-founded by Alvin Jiang, a grandson of Jiang Zemin, China’s former Communist Party chief. The fund didn’t respond to requests for comment.</p>.<p>One of the fund’s partners in that investment was an affiliate of a financial company called National Trust. National Trust in the past teamed with the family of Wen Jiabao, the former premier, in other investments. It was partly owned by one close Wen family business associate and overseen by another. It isn’t clear whether the Wen family had a financial stake in CATL. National Trust’s phone rang unanswered, and the company didn’t respond to faxed questions.</p>.<p>An even earlier investor in CATL was a Chinese private equity company connected to Hunter Biden.</p>.<p>The firm, known as BHR, bought a 0.4% stake in 2016, paying roughly $15 million. In 2019, when BHR applied to sell the stake, it was valued at roughly $76 million.</p>.<p>Biden left BHR’s board in April 2020, according to Chinese corporate records, and no longer has any ownership interest in BHR, Chris Clark, his lawyer, said.</p>.<p>It isn’t clear what, if anything, Biden gained from the CATL deal, and Clark declined to comment further. Another BHR board member — who, like Biden, controlled a 10% stake in the firm — received a payout of about $230,000 from the deal, said the board member, who asked not to be identified in order to discuss internal business. Jonathan Li, BHR’s chief executive, didn’t respond to phone calls and emailed questions.</p>.<p>When asked about the investments, CATL referred to its IPO prospectus, saying, “All investors acquired their shares based on common rules for private equity fundraising activities.”</p>.<p><strong>Help with a fire </strong></p>.<p>CATL holds one-third of the global electric-car-battery market. Its biggest rival globally is LG, with a one-quarter share. At one time, CATL also faced a tough rival at home.</p>.<p>BYD, based in the city of Shenzhen, boasted a big-name backer, investor Warren Buffett. Unlike CATL, which has invested heavily in lithium-cobalt batteries, BYD bet on traditional lithium batteries.</p>.<p>Last year, BYD questioned the safety of cobalt batteries. It produced the video of a test resembling one used by Chinese regulators until recently to determine the safety of a battery cell by pounding a nail through it.</p>.<p>BYD declined to identify the manufacturer. The cell’s lithium-cobalt chemistry was similar to that used by CATL as well as South Korean companies.</p>.<p>Chinese regulators have not responded to requests for comment about why they dropped the nail test two months later. They replaced it with a test of whether an entire battery can contain a fire for five minutes — similar to what other countries do. CATL said that what counts is the safety provided by its entire battery system.</p>.<p>BYD is now exploring production of its own lithium-cobalt batteries. But CATL is also manufacturing more batteries now without cobalt, a metal sometimes called the “blood diamond of batteries” because of its high price and the perilous working conditions Congo’s miners face.</p>.<p>“We are looking for ways to improve the supply chain,” Zeng told investors last year.</p>.<p>For now, CATL is building a vast factory more than three times the size of Tesla and Panasonic’s electric car battery gigafactory in the Nevada desert. CATL’s giant factory in Fuding, a 90-minute drive northeast of downtown Ningde, is one of eight that CATL now has under construction, at a cost of more than $14 billion. The company has mustered small armies of construction workers to put up 50-foot-high, steel-walled buildings longer than five football fields.</p>.<p>Yu Bin, a cement worker in Fuding, said he had worked 20 hours straight recently to finish a roof. “The lights on the cranes,” he said, “lit up the night.”</p>
<p>As the global pandemic hit, the world’s biggest maker of electric car batteries, a Chinese company now worth more than General Motors and Ford combined, suddenly faced its own crisis.</p>.<p>A rival had released a video suggesting that a technology used by the company, CATL, and other manufacturers could cause car fires. Imitating a Chinese government safety test, the rival had driven a nail through a battery cell, one of many in a typical electric car battery. The cell exploded in a fireball.</p>.<p>Chinese officials took swift action — by dropping the nail test, according to documents reviewed by<em> The New York Times</em>. The new regulation, released two months later, listed who had drafted it: First on the list, ahead of the government’s own vehicle testing agency, was CATL.</p>.<p>The shift did not expose the world to unsafe batteries — other countries do not require a nail test — but it showed China’s commitment to nurturing a corporate champion with a strong and growing sway over the future of driving. CATL has given China a commanding lead in electric car batteries, a technology central to the broader green revolution. The company already supplies batteries to almost all of the world’s automakers, including GM, Volkswagen, BMW and Tesla. CATL has emerged as one of the biggest winners of the electric car boom, along with Tesla.</p>.<p>The battery giant stands as a crucial link in a green-technology supply chain increasingly dominated by China. Chinese companies, particularly CATL, have secured vast supplies of the raw materials that go inside the batteries. That dominance has stirred fears in Washington that Detroit could someday be rendered obsolete and that Beijing could control American driving in the 21st century the way that oil-producing nations sometimes could in the 20th.</p>.<p><strong>Also read: <a href="https://www.deccanherald.com/city/longer-ev-rides-possible-with-more-charging-stations-1062074.html" target="_blank">Longer EV rides possible with more charging stations</a></strong></p>.<p>Chinese government officials made sure CATL’s business stayed in Chinese hands. They created a captive market of battery customers. And when CATL needed money, they doled it out.</p>.<p>“CATL definitely seems like it’s the concept and creation of a master plan,” said Michael Dunne, a former GM executive in Asia and now an analyst.</p>.<p>CATL isn’t government-owned, according to its filings, but investors with connections to Beijing have held stakes during its rise, according to a Times analysis of its filings. So did a Chinese investment firm that counted Hunter Biden, son of President Joe Biden, as a board member and shareholder.</p>.<p>From Detroit to Milan to Wolfsburg, Germany, auto executives who spent their careers trying to perfect pistons and fuel-injection systems are now obsessing about how to compete with a nearly invisible yet formidable industry giant.</p>.<p>“China’s problem with internal combustion engines was they were forever playing the game of catch-up,” said Bill Russo, a former chief of Chrysler in China who is now a Shanghai electric car consultant. “Now, the United States has to play the game of catch-up with electric vehicles.”</p>.<p><strong>Out of the shadows</strong></p>.<p>While Tesla and its garrulous chairman, Elon Musk, have epitomised the electric car boom, CATL — its legal name in English is Contemporary Amperex Technology Co. Ltd. — has stayed in the shadows.</p>.<p>Its founder and chairman, Robin Zeng, is one of the wealthiest men in Asia, with a fortune of about $60 billion. Its towering headquarters, shaped like an oversize lithium battery, and several of its biggest factories are in his hometown, Ningde, a former fishing village and military base in southeastern China. The municipal government has locked down access to a wide array of documents, particularly from the early days of CATL.</p>.<p>Zeng, 53, has built a senior management team of longtime employees, many of whom grew up in Ningde. For gifts during holidays, CATL sends lychee and loquat fruit grown on Ningde’s outskirts.</p>.<p>Xi Jinping, now China’s top leader, was the local Communist Party chief in Ningde from 1988 to 1990, though he shares no apparent connection with CATL.</p>.<p>After studying marine engineering at a Shanghai university, Zeng went to work on battery chemistry for TDK, a Japanese company, in China. In 1999, he joined fellow battery chemistry experts who set up their own company supplying lithium-cobalt batteries for mobile phones, camcorders and other portable consumer electronics. The team sold the company to TDK in 2005 for $100 million and continued to run it as a subsidiary.</p>.<p>The Chinese government, which has long identified batteries as a strategic industry, in 2011 took one of several steps to nurture a homegrown industry. It required that foreign automakers that want to sell electric cars in China transfer crucial technology to a local company. Only then would the government subsidise the sale of their autos, which could amount to up to $19,300 for car buyers.</p>.<p>TDK allowed a group of Chinese investors led by Zeng to acquire an 85% stake in its nascent electric car battery business at the end of 2011. They called it CATL. BMW, its first main customer, switched from A123, a battery supplier in Massachusetts and Michigan.</p>.<p>Four years later, a different group of Chinese investors bought the remaining 15% from TDK.</p>.<p>The financial terms of the sale aren’t clear, but Zeng and his partners reaped a windfall. TDK now has a market capitalisation of $16 billion. CATL? Almost $240 billion.</p>.<p>TDK referred questions to CATL, which, in turn, said only TDK could discuss how much had been paid.</p>.<p><strong>Beijing’s helpful hand</strong></p>.<p>Beijing’s rules helped CATL emerge as an independent company. Then, Beijing helped the company soar.</p>.<p>CATL’s batteries require ready supplies of lithium and cobalt. Chinese firms have rushed to secure cobalt in places like Congo, where huge deposits were once mined by an American company. This year, CATL acquired a quarter of the Kisanfu cobalt reserve, one of the world’s richest, in Congo for $137.5 million.</p>.<p>Zeng has also secured raw materials close to home.</p>.<p>Corporate records show that within a year of setting up CATL, Zeng had started a subsidiary in western China’s Qinghai province. Qinghai had something that Zeng needed: dried-out salt lake beds with thick underground brine laden with lithium. The government wanted development in the country’s poorer western regions. CATL locked in contracts for the most lithium-rich deposits, people familiar with the company said.</p>.<p>The Chinese government helped. In 2015, it unveiled the Made in China 2025 plan, a guide to achieving independence in major industries of the future, including electric cars, in a decade.</p>.<p>Chinese policy banks, which lend to government-endorsed projects that may be too risky for local banks, stepped in to provide more than $100 million to CATL projects in Qinghai, documents show. The provincial government of Qinghai offered roughly $33 million from 2015 through 2017, CATL filings showed. The Qinghai government did not respond to requests for comment.</p>.<p>In a written reply to questions, CATL said its investments “guarantee the stability of raw material supply, and avoid sharp price fluctuations.”</p>.<p>CATL benefited greatly from the government’s drive to get automakers in China to use only locally made batteries.</p>.<p>The government soon said electric car buyers could get subsidies only if the battery was made by a Chinese company. GM, which had not been notified of the rule, started shipping Buick Velite electric cars in 2016 with batteries made in China by LG, a South Korean company.</p>.<p>Angry consumers and dealers complained that local officials were denying them subsidies, people familiar with the episode said. GM switched heavily to CATL for the huge Chinese market.</p>.<p>With subsidies and a protected home market, CATL became extremely profitable. The auto industry considers after-tax profit margins of at least 5% of sales a success. CATL’s margin last year was 11.1%. Despite that profitability, the company continued to collect government subsidies last year equal to a fifth of its net income.</p>.<p>The effort has also made China a giant in electric car batteries. China has 14 times the electric car battery-making capacity of the United States, according to Benchmark Mineral Intelligence, a London consulting firm. It projects that China will keep the lead even after a US buildup, including projects like the planned North Carolina plant announced in early December by Toyota, and would have seven times the United States’ capacity in four years.</p>.<p><strong>Betting on batteries </strong></p>.<p>CATL’s initial public offering in 2018 made Zeng and two CATL vice chairmen, who together own a 40% stake, rich. Other early investors, some with deep political connections, did well, too.</p>.<p>The company’s success was never assured, but China had let the world know that it planned to dominate the electric vehicle industry. It said in a sweeping announcement in 2016 that a “third industrial revolution” focusing on digitization and “new energy” would allow China to take the lead in autos.</p>.<p>CATL invited a few outside investors to take pre-IPO stakes. Among them were Pei Zhenhua, a businessman who set up a lithium processing company with CATL, and Yu Yong, the biggest individual shareholder in China Molybdenum, a CATL partner in Congo. Yu’s holding company controls 1.69% of CATL, records show.</p>.<p>One investment fund, Guokai Boyu, invested more than $100 million and held a 1.2% stake. Guokai Boyu is controlled by a private equity firm co-founded by Alvin Jiang, a grandson of Jiang Zemin, China’s former Communist Party chief. The fund didn’t respond to requests for comment.</p>.<p>One of the fund’s partners in that investment was an affiliate of a financial company called National Trust. National Trust in the past teamed with the family of Wen Jiabao, the former premier, in other investments. It was partly owned by one close Wen family business associate and overseen by another. It isn’t clear whether the Wen family had a financial stake in CATL. National Trust’s phone rang unanswered, and the company didn’t respond to faxed questions.</p>.<p>An even earlier investor in CATL was a Chinese private equity company connected to Hunter Biden.</p>.<p>The firm, known as BHR, bought a 0.4% stake in 2016, paying roughly $15 million. In 2019, when BHR applied to sell the stake, it was valued at roughly $76 million.</p>.<p>Biden left BHR’s board in April 2020, according to Chinese corporate records, and no longer has any ownership interest in BHR, Chris Clark, his lawyer, said.</p>.<p>It isn’t clear what, if anything, Biden gained from the CATL deal, and Clark declined to comment further. Another BHR board member — who, like Biden, controlled a 10% stake in the firm — received a payout of about $230,000 from the deal, said the board member, who asked not to be identified in order to discuss internal business. Jonathan Li, BHR’s chief executive, didn’t respond to phone calls and emailed questions.</p>.<p>When asked about the investments, CATL referred to its IPO prospectus, saying, “All investors acquired their shares based on common rules for private equity fundraising activities.”</p>.<p><strong>Help with a fire </strong></p>.<p>CATL holds one-third of the global electric-car-battery market. Its biggest rival globally is LG, with a one-quarter share. At one time, CATL also faced a tough rival at home.</p>.<p>BYD, based in the city of Shenzhen, boasted a big-name backer, investor Warren Buffett. Unlike CATL, which has invested heavily in lithium-cobalt batteries, BYD bet on traditional lithium batteries.</p>.<p>Last year, BYD questioned the safety of cobalt batteries. It produced the video of a test resembling one used by Chinese regulators until recently to determine the safety of a battery cell by pounding a nail through it.</p>.<p>BYD declined to identify the manufacturer. The cell’s lithium-cobalt chemistry was similar to that used by CATL as well as South Korean companies.</p>.<p>Chinese regulators have not responded to requests for comment about why they dropped the nail test two months later. They replaced it with a test of whether an entire battery can contain a fire for five minutes — similar to what other countries do. CATL said that what counts is the safety provided by its entire battery system.</p>.<p>BYD is now exploring production of its own lithium-cobalt batteries. But CATL is also manufacturing more batteries now without cobalt, a metal sometimes called the “blood diamond of batteries” because of its high price and the perilous working conditions Congo’s miners face.</p>.<p>“We are looking for ways to improve the supply chain,” Zeng told investors last year.</p>.<p>For now, CATL is building a vast factory more than three times the size of Tesla and Panasonic’s electric car battery gigafactory in the Nevada desert. CATL’s giant factory in Fuding, a 90-minute drive northeast of downtown Ningde, is one of eight that CATL now has under construction, at a cost of more than $14 billion. The company has mustered small armies of construction workers to put up 50-foot-high, steel-walled buildings longer than five football fields.</p>.<p>Yu Bin, a cement worker in Fuding, said he had worked 20 hours straight recently to finish a roof. “The lights on the cranes,” he said, “lit up the night.”</p>