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The weaponisation of trade has become a US speciality in recent years. In 2019, America targeted telecoms equipment maker Huawei and pressured its allies to follow suit. The export controls enforced by the US Commerce Department nearly killed Huawei. Now the world’s leading producer of electric-vehicle batteries could be the next target.
US power utility Duke Energy has disconnected batteries made by Chinese company Contemporary Amperex Technology Co Ltd at a US Marine base camp, following pressure from lawmakers fearing national security threats from Chinese government links. CATL has denied the accusations. It says its products have passed US security reviews.
Duke Energy’s decision is unusual as there is no official US ban. Any concern about Chinese batteries highlights a bigger issue: the country’s dominance of this storage market.
CATL and peer BYD account for nearly 60 per cent of the world battery market. The former is most of that. Add on smaller Chinese peers, including EVE Energy, REPT, Great Power and Guoxuan, and that share rises much further.
CATL itself could use a recharge. Its share price is down a quarter this year trading at 14 times forward earnings, about half that of a year ago. Investors fret about a slowdown in global EV demand. The US energy storage market, where installations hit a record last year, would offer a significant boost to CATL’s growth. Total US installations should reach almost 75 gigawatts of capacity between 2023 to 2027, from 4.8GW last year, says energy consultancy Wood Mackenzie.
That potential growth would be under threat should legislators seek to ban Chinese batteries from a wider range of US companies. CATL’s overseas revenues were a fifth of total last year, up from 4 per cent in 2019, according to S&P Capital. It has already signed deals with several US groups, including an affiliate of NextEra Energy, to supply energy storage projects. On the flipside, finding alternatives to Chinese suppliers could mean added costs for buyers.
Huawei’s situation differs from CATL in this respect. Huawei needed international market share. The latter already dominates its markets not just for energy storage systems but EV batteries, equipping makers such as Tesla, BMW and Volkswagen. Becoming the target of US restrictions would dent CATL’s prospects, though without the devastating impact that Huawei suffered.
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