Electric-Car Battery Venture Gets $600 Million Charge

State-owned automaker GAC Group and battery giant CATL will invest 4.2 billion yuan ($609 million) in their recently-formed electric vehicle (EV) battery venture, tapping into demand from the booming sector.

The investment will “further promote business development, consolidate our market status and meet customer demand,” Shenzhen-listed Contemporary Amperex Technology Co. Ltd. (CATL) said in a statement (link in Chinese) on Friday.

The joint venture was set up in July to produce and market batteries for EVs.

Founded in 2011 in southern China’s Fujian province, CATL has risen to become the world’s largest EV battery producer. It has piggybacked on generous government support as Beijing tries to shift away from fossil fuel cars in a broader drive to clean up the country’s air and develop technologies that can be exported.

That effort has helped China to become the world’s largest EV market, with sales set to pass the 1 million milestone this year. The nation had already logged more than 1 million new energy vehicle sales through the end of November, most of those pure electric vehicles, according to the latest industry statistics.

Guangzhou-based GAC Group is one of China’s major state-owned carmakers, with more than 2 million vehicles sold last year and foreign partners that include Honda.

CATL mostly supplies batteries to domestic buyers, but has increasingly attracted foreign customers. One of those, Germany’s BMW AG, earlier this year announced a plan to invest 2.85 billion yuan to take a stake in CATL by forming another joint venture.

The GAC Group and CATL partnership is also the latest in a trend of tie-ups between companies across the EV industry. In July, CATL rival BYD Co. Ltd. announced a tie-up with state-owned Chongqing Changan Automobile Co. Ltd. to produce EV batteries.

The move also comes ahead of a government quota policy requiring all traditional automakers to produce a certain amount of new-energy vehicles set to take effect from January.

Last month, GAC Group teamed up with Japan’s Honda Motor Co. to invest about 3.3 billion yuan to ramp up production of new-energy vehicles, a term used to describe pure-electric, fuel-cell and electric and gas-powered hybrid cars.

Contact reporter Mo Yelin (yelinmo@caixin.com)