CATL Confronts Challenge of Building Local Factories in Europe (AI Translation)

【周刊提前读】宁德时代押注欧洲 直面建厂挑战与日韩竞争

Contemporary Amperex Technology Co., Limited (CATL, 300750.SZ) is increasingly focusing its investments on Europe, a strategy exemplified by its substantial capital raise during its May 2025 Hong Kong Stock Exchange listing, where it garnered 40.6 billion HKD (approx. RMB 37.2 billion) — 90% of which will be allocated to its Hungary plant's first and second phases. The Hungarian facility, set to reach 100 GWh capacity upon completion, will become the largest battery plant in Europe. CATL's dominance in the global electric vehicle (EV) battery market relies heavily on its vast presence in China, but with rising global protectionism and localized supply chain demands, success in Europe is seen as pivotal to maintaining its industry leadership [para. 1][para. 2][para. 3][para. 4].

Global automotive supply chains have shifted post-pandemic from cost-driven globalization to regionalization due to increasing concerns about supply security. Trade tensions have further complicated the landscape, with U.S. President Donald Trump imposing a 25% tariff on imported vehicles and components in March 2025, driving automakers to diversify regional supply bases. Batteries, accounting for 30%-40% of EV costs, are now mandated by European automakers to be locally produced, with raw materials also sourced nearby where possible. CATL's major customers, including Mercedes-Benz and BMW, have demanded local production to meet these requirements [para. 5][para. 6][para. 7][para. 8].

While legacy automakers possess established overseas infrastructure and standards, Chinese battery companies such as CATL face the challenge of building plants abroad "from scratch" in nascent markets, often lacking in skilled labor and established industry ecosystems. Building local capacity is further complicated by stricter regulatory compliance, cultural differences, and higher operational costs. CATL's German plant, for example, faced workforce shortages and regulatory checks but has reached localized module and cell assembly, with full production expected in late 2025 [para. 9][para. 10][para. 11][para. 12][para. 13][para. 14][para. 15][para. 16][para. 17][para. 18][para. 19].

In addition to Germany and Hungary, CATL signed a joint venture with Stellantis in December 2024 to build a 40.38-billion-euro LFP battery plant in Spain, bringing its European investment to approximately 13.2 billion euros (RMB 108.3 billion). Contrastingly, CATL retreated from American manufacturing due to the U.S. Inflation Reduction Act's restrictions against "foreign entities of concern," effectively sidelining Chinese firms in the U.S. market [para. 23][para. 24][para. 25][para. 26][para. 27][para. 28][para. 29][para. 32].

Europe offers a more stable policy climate and strong demand for EVs, as the EU maintains aggressive zero-emission targets and supportive regulations. However, EU-led efforts to cultivate local battery champions, such as Northvolt, failed with the latter’s March 2025 bankruptcy, indirectly favoring Chinese entrants like CATL. Other Chinese battery producers, including EVE Energy, Sunwoda, Gotion High-tech, and Envision AESC, have accelerated their European expansion plans [para. 30][para. 31][para. 32][para. 33][para. 34][para. 35].

Nevertheless, construction timelines and costs in Europe are dramatically higher than in China, primarily due to stricter labor, environmental, and industrial standards. CATL’s project timelines are three times longer, and investments are open-ended due to unpredictable compliance barriers. Localization extends to the supply chain, prompting Chinese component suppliers to follow CATL into Europe, albeit with greater caution [para. 36][para. 37][para. 38][para. 39][para. 40][para. 41][para. 42][para. 43].

Importantly, Chinese battery firms now face intense competition and legal threats from entrenched Japanese and Korean companies. LG Energy Solution and Panasonic, for example, have accelerated LFP battery production and formed a "patent pool" to challenge Chinese rivals over intellectual property. Recent legal action against Sunwoda in Germany illustrates the high-stakes landscape. CATL, aware of these risks, is actively expanding its overseas patent portfolio, but may face disadvantages in international market and legal expertise compared to Japanese/Korean conglomerates [para. 44][para. 45][para. 46][para. 47][para. 48][para. 49][para. 50][para. 51][para. 52].

Moving forward, CATL’s continued success in Europe depends on overcoming not only technical and regulatory hurdles but also managing intense international competition and integrating into complex European industrial and political frameworks. Their experience may provide a blueprint for other Chinese technology firms seeking to internationalize [para. 53][para. 54][para. 55][para. 56][para. 57][para. 58].