Chinese Battery-Maker Might Win Huge Volkswagen Contract

Chinese battery-maker Contemporary Amperex Technology Co. Ltd. (CATL) is among the front-runners in a race for billions of dollars worth of contracts expected to be awarded by Volkswagen as the German automaker boosts electric vehicle output.

CATL is one of three to five battery-makers now competing for contracts tied to Volkswagen’s evolving MEB program for all-electric vehicle production, CATL’s European region chief Matthias Zentgraf told Caixin on Wednesday at the Frankfurt Auto Show in Germany. The automaker is expected to announce battery supplier decisions early next year, he added.

The MEB project could generate $60 billion worth of battery contracts, according to Volkswagen.

CATL is one of several Chinese companies now gaining ground in the market for vehicle batteries in China, where Volkswagen and its units such as Audi sell millions of vehicles every year.

Chinese battery makers have been winning market share from South Korean and Japanese players in recent years. And they got a boost in July 2016 when the Chinese government started excluding foreign players from a list of licensed battery suppliers from which automakers must choose to qualify for new energy subsidy programs.

The subsidies are part of a government drive to control carbon emissions and clean up the nation’s polluted air.

Unlike some competitors, Volkswagen has been relatively slow to ramp up battery-powered car production. MEB is designed to change that as part of a company strategy to rebuild consumer trust damaged by a diesel emissions scandal.

Volkswagen said it plans to invest up to $24 billion to produce more than 3 million electric vehicles per year by 2026.

Meeting the company’s annual electric vehicle production target will require purchasing about 150 gigawatt-hours worth of lithium batteries, Volkswagen said.

CATL is already cooperating with German automakers BMW and Daimler, the maker of Mercedes-Benz. Mercedes-Benz recently announced CATL had been chosen as one of its electric vehicle battery suppliers.

Contact reporter Mo Yelin (yelinmo@caixin.com)