German automotive giant BMW has signed a contract worth more than US$1.16Bn with Chinese lithium-ion battery manufacturer Contemporary Amperex Technology (CATL). Under the terms of the agreement, CATL will provide lithium-ion battery cells for use in the BMW i range of hybrid and electric vehicles.
This is a positive deal for both parties.
BMW secured high quality battery cells at low costs for their ambitious EV plans.
CATL is lowering the risk of their investment in a battery cell manufacturing plant in Erfurt, Germany. This will reduce capital costs significantly and maybe even make the construction possible. It should be noted that CATL was founded in 2011 and show the highest growth among its peers. Aggressive growth always comes with financial risks.
In May, CATL signed a similar agreement with major German automotive company Daimler.
It is also a clear signal, that China has the world market in focus. Even though the Chinese market is the biggest in the world, China wants to dominate the whole industry.
The expansion of Chinese manufacturers to have European production facilities may limit the advantages of other European lithium-ion battery facilities in the pipeline, like Northvolt's in Sweden. But, the demand in Europe will grow exponentially, so there is room for other players and plants, too. I believe in the Northvolt project. It is innovative, they include cathode material production and it uses 100% electrical energy from renewable resources.
All in all, it is a clear sign that European OEM's believe in electric mobility and now have understood, that they need to act to keep their market positions.