China’s CATL offers suppliers financial support to drive battery innovation

SHANGHAI (Reuters) – China’s CATL has told suppliers it is willing to provide them with financial support to speed up technology innovation in battery materials and equipment, part of efforts to relieve stress on its supply chain amid a brutal EV price war.

It is willing to take on part of their R&D costs and make advance payments for projects to ensure technologies make progress, according to a CATL letter to suppliers seen by Reuters.

The world’s largest battery maker confirmed the letter, dated simply December 2024, was authentic but declined to comment further.

According to the letter, CATL also said it would help suppliers with certification work to accelerate the application and production of new battery materials and help them boost market share.

Over the past two years, fierce price competition in China – the world’s biggest and most advanced electric vehicle market – has meant automakers and suppliers alike are under great pressure to cut costs.

EV market leader BYD (SZ:) is poised to sell more cars than either Ford (NYSE:) or Honda (NYSE:) do globally, driving sales with relentless discounts in its home market where it sells 90% of its cars. It has asked some of its suppliers to cut their prices further next year, a sign that the price war will only escalate.

Industry executives and analysts have warned that the price war will force companies to reduce investment in R&D as their profitability weakens.

CATL Chairman Robin Zeng told Reuters in an interview in November that he recognised the importance of a profitable supply chain with every player receiving a reasonable share of profits for survival.

“As the big player in batteries, we want to maintain, or try our best to maintain oxygen for everyone,” Zeng said at the time.

CATL has extended its leadership in EV batteries with a global market share of 36.8% in the first 10 months of the year, increasing from 35.9% in the same period in 2023, according to SNE Research. South Korea’s LG Energy Solution saw its market share shrink to 11.8% from 13.9%.

This week CATL announced a third European factory to be built in a venture with Stellantis (NYSE:) in Spain. Zeng said its first two factories in Europe would be profitable in 2025 and 2026.