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China’s CATL, the world’s biggest electric vehicle battery maker, has held talks with overseas sovereign wealth funds and the private offices of the super-rich about raising a $1.5bn fund to build out its global supply chain.
The offshore fund would help Fujian-based CATL, a supplier to Tesla, Volkswagen and Ford, to finance an ecosystem of companies needed to expand production in Europe and other foreign markets, two people with knowledge of the matter said.
China’s overseas direct investment rules make it difficult for CATL to make a large volume of international investments, despite it having Rmb289bn ($40bn) of cash as of March 31, said one person briefed on the fund.
As part of China’s strict system of capital controls, Beijing requires companies to get government approval for overseas direct investment above a certain threshold, which is typically an arduous and months-long bureaucratic process.
The battery maker plans to contribute about 15 per cent of the fund alongside global investors, said the people. The fund would primarily target companies that could supply CATL in Europe, they said.
CATL has “a big gap in supply . . . and it’s a good investment return”, said the person close to the fund, describing it as “a market solution to [the] problem” of not having sufficient suppliers in Europe and it being difficult to bankroll new ones directly.
The $1.5bn fund would be managed by Hong Kong-based Lochpine Capital, which was incorporated in August 2023 under the name CATL Capital and changed its name in May.
CATL has approached Mercedes-Benz and the families behind other automakers about investing in the fund, the people said. Mercedes-Benz did not respond to a request for comment.
It is holding talks with sovereign wealth funds, family offices, oil and gas companies and European manufacturers about potential investments, said one of the people.
“The purpose of the fund is to facilitate the global energy transition with support from like-minded partners from all over the world,” CATL said, adding that it “is intended to raise capital mainly from overseas investors”.
CATL is expanding in Europe as tensions between Beijing and Washington threaten its growth plans in North America. In December, the company hit back against accusations that it posed a national security threat, after US utility company Duke Energy disconnected CATL batteries installed at a North Carolina Marine Corps base.
The fund’s goal is “to build supply chains outside of China even with all the geopolitical barriers,” said another person involved with the fund.
US lawmakers including Republican senator Marco Rubio alleged last year that the battery maker was close to the Chinese leadership.
In March, CATL’s founder and chief executive Robin Zeng told the Financial Times it was “like a joke” to suggest batteries presented a security risk. “Batteries are like rocks or bricks, you buy them to build a house . . . how can bricks spy?” he said.
The company held a 37 per cent share of the global market for electric vehicle batteries last year, according to South Korea-based consultancy SNE Research, and is building a new €7.3bn Hungarian battery plant, which is expected to come online in 2025.
CATL backed away from a large share sale in Switzerland last year after Chinese regulators raised concerns about the process.
It has been growing rapidly by specialising in cheaper lithium iron phosphate (LFP) batteries. The person briefed on the fund’s mandate said potential investments could include mining.
CATL is already a large shareholder in Chinese miner CMOC.
The battery maker’s expansion plan for Europe comes as Brussels plans tariffs for electric vehicles imported from China, a move analysts said would encourage more local manufacturing by Chinese carmakers. China’s largest EV maker BYD is also building a factory in Hungary.
“The [auto] supply chain is taking shape in Hungary, which is now a very important fortress,” said Yale Zhang, managing director of Shanghai-based consultancy Automotive Foresight.