China's CATL Offers Support to Suppliers Amid EV Price War

SHANGHAI (Reuters) – China's CATL has informed suppliers of its intention to provide financial support aimed at accelerating technology innovation in battery materials and equipment, as part of its strategy to alleviate supply chain pressures amid a severe EV price war.

The company is prepared to cover some of the research and development costs and make advance payments for relevant projects to ensure technological advancement, according to a letter from CATL to its suppliers, which was reviewed by Reuters.

CATL confirmed the authenticity of the letter, dated December 2024, but declined additional comments.

The letter also indicated CATL's commitment to assisting suppliers with certification procedures to expedite the application and production of new battery materials and enhance their market share.

In recent years, intense price competition in China — the largest and most sophisticated electric vehicle market — has exerted significant pressure on automakers and suppliers to reduce costs.

EV market leader BYD (SZ:002594) is on track to out-sell Ford (NYSE:F) and Honda (NYSE:HMC) globally, fueled by aggressive discounts in its home market, where it sells 90% of its vehicles. BYD has urged some suppliers to further reduce their prices for next year, signaling an escalation in the price war.

Industry leaders and analysts caution that the ongoing price competition may compel companies to slice their research and development budgets due to diminishing profitability.

CATL Chairman Robin Zeng emphasized in a November interview the necessity for a profitable supply chain where all players receive a fair share of profits to ensure survival. “As the major player in batteries, we aim to sustain, or do our best to sustain, oxygen for everyone,” Zeng stated at that time.

CATL has maintained a stronghold in the electric vehicle battery sector, achieving a global market share of 36.8% in the first ten months of the year, an increase from 35.9% during the same interval in 2023, according to SNE Research. In contrast, South Korea's LG Energy Solution experienced a decline in its market share, dropping from 13.9% to 11.8%.

Recently, CATL announced plans for a third European factory to be established in collaboration with Stellantis (NYSE:STLA) in Spain. Zeng mentioned that its first two European factories are expected to become profitable in 2025 and 2026.