The world’s largest EV battery manufacturer raises $1.5 billion for expansion in Europe

Chinese CATL, the world’s largest manufacturer of electric vehicle batteries, has been in talks with overseas sovereign wealth funds and private offices of the super-rich about raising a fund of $1.5 billion to build its global supply chain.

Offshore fund would enable CATL, based in Fujian and a supplier to Tesla, Volkswagen, and Ford, to finance the ecosystem of companies needed to help expand production in Europe and other foreign markets, anonymous sources told the Financial Times.

Chinese rules on foreign direct investment make it difficult for CATL to achieve a large number of international investments, despite having 289 billion Chinese yuan ($40 billion) in cash as of March 31, one of the anonymous sources said.

As part of China’s strict capital control system, Beijing requires companies to obtain government approval for foreign direct investments above a certain threshold, which is usually a laborious and months-long bureaucratic process.

The battery manufacturer plans to invest about 15 percent of the fund alongside global investors, FT reported, and the fund would primarily target companies that could supply CATL in Europe, which is suffering from a lack of suppliers.

The $1.5 billion fund will be managed by Lochpine Capital, based in Hong Kong, which was established in August 2023 under the name CATL Capital and changed its name in May.

According to FT, CATL has approached Mercedes-Benz and families behind other car manufacturers regarding investment in the fund. Mercedes-Benz did not respond to requests for comment from FT reporters.

CATL is reportedly in talks with sovereign wealth funds, family offices, oil and gas companies, and European manufacturers about potential investments.

– The purpose of the fund is to facilitate the global energy transition with the support of like-minded partners from around the world – announced CATL, adding that it intends to raise capital mainly from foreign investors.

‘How can bricks spy?’

Interestingly, CATL is expanding in Europe while tensions between Beijing and Washington threaten its growth plans in North America. Recall that in December, the company responded to accusations that it posed a national security threat after the American utility company Duke Energy disconnected CATL batteries installed at a North Carolina Marine base.

The goal of the fund is to ‘build supply chains outside of China, even with all the geopolitical barriers,’ one fund member told FT.

American lawmakers, including Republican Senator Marco Rubio, claimed last year that the battery manufacturer is close to the Chinese political leadership.

In March, CATL’s founder and CEO Robin Zeng told FT that it was ‘some kind of joke’ to suggest that batteries pose a security risk.

– Batteries are like stones or bricks, you buy them to build a house… how can bricks spy? – Zeng wondered.

The company held a 37 percent share of the global electric vehicle battery market last year, according to South Korea’s SNE Research consulting firm, and is building a new battery factory in Hungary worth €7.3 billion, which is expected to be operational by 2025.

CATL abandoned a major sale of shares in Switzerland last year after Chinese regulators expressed concerns about the process. The Chinese battery manufacturer is growing quite rapidly, specializing in cheaper lithium iron phosphate (LFP) batteries, and anonymous sources said that potential investments from the fund could also be directed towards mining. Of course, this would not surprise anyone, given that CATL is already a major shareholder in the Chinese miner CMOC.

The battery manufacturer’s plan to expand in Europe comes at a time when Brussels is planning tariffs on electric vehicles imported from China, a move that analysts say would encourage more local production by Chinese car manufacturers. The largest Chinese electric vehicle manufacturer BYD is also building a factory in Hungary.

– The (auto) supply chain is taking shape in Hungary, which is now a very important stronghold – said Yale Zhang, director of the Shanghai-based consulting firm Automotive Foresight.