CATL’s “Left Hand Fighting Right Hand”: A Deeper Strategy Unfolds

After causing a stir in the battery industry with its “Lithium Mine Rebate” plan earlier this year, CATL (Contemporary Amperex Technology Co. Limited) is once again setting the industry agenda. On the evening of April 16, CATL announced the debut of its sodium-ion battery, which will first be used in Chery’s vehicles. After more than a year and a half since the release of its first-generation sodium-ion products, the world’s leading power battery manufacturer has finally achieved industrialization of its sodium-ion battery. Despite the fact that sodium-ion batteries are still in the innovation phase, this move is expected to spark a new wave of transformation and upgrading across the entire electric vehicle (EV) industry chain.Sodium-ion batteries operate on principles similar to those of the widely used lithium-ion batteries, though there are some key differences in the materials used for the anode and cathode. The most significant advantage of sodium-ion batteries is that they do not require lithium, cobalt, or other elements that have traditionally been essential to power batteries. As a result, sodium-ion batteries are much cheaper to produce, as sodium salts – the primary raw material for sodium-ion batteries – are abundant and inexpensive in China, with lower mining and processing costs compared to lithium.

Additionally, considering China’s limited domestic lithium resources and high dependence on foreign imports, sodium-ion batteries also play a crucial role in stabilizing the supply chain.According to a report by securities firms, the material costs of sodium-ion batteries could decrease by up to 40% compared to lithium-ion batteries. Furthermore, sodium-ion batteries do not suffer from the over-discharge characteristics seen in lithium-ion batteries and can be discharged down to zero volts, thus improving driving range. In terms of energy density, sodium-ion batteries are already nearing the levels of lithium iron phosphate (LFP) batteries.When CATL launched its first-generation sodium-ion battery on July 29, 2021, it announced that the cell’s energy density had reached 160 Wh/kg. Charging for 15 minutes at room temperature could deliver over 80% charge, and even at -20°C, the battery maintained a discharge retention rate of over 90%. The company also highlighted that the system integration efficiency of the battery could reach more than 80%. At the time, CATL’s plan was for the second generation of sodium-ion batteries to exceed 200 Wh/kg. Huang Qisen, Vice President of CATL’s Research Institute, stated at an industry forum last November that in passenger vehicle applications, sodium-ion batteries could typically meet the needs of vehicles with a range of up to 400 kilometers.

CATL’s innovative “AB Battery System Integration Technology” allows for a sodium-lithium hybrid battery, combining the strengths of both technologies to increase the energy density of the battery system. This makes it possible to use sodium-ion batteries in models with a range of up to 500 kilometers. Huang also stated that “this range will cover 65% of the market, offering tremendous application prospects.”The sodium-ion battery product released by CATL on April 16 uses “AB Battery Technology” to mix sodium and lithium batteries in a set ratio. According to relevant materials, the product, called ENER-Q, focuses on the “cost-effective” concept and offers features such as “-30°C operation,” “8-year/800,000 km ultra-long lifespan,” and “24-hour full-condition active monitoring.” CATL describes the sodium-ion battery as “a high-cost performance solution that breaks through the resource bottleneck.”In reality, the promotion and application of sodium-ion batteries are closely related to the price of lithium carbonate. During the pre-event activities of the 2023 World Power Battery Conference held on April 15, Chinese Academy of Sciences academician Ouyang Minggao pointed out that, in order to secure domestic lithium resource supply, China should first encourage the recycling of lithium batteries; second, diversify development, such as by developing sodium batteries. He believes that a reasonable lithium price cannot be too low, as extremely low prices would hinder the recycling of lithium-ion batteries and the development of sodium-ion batteries.

A lithium carbonate price range of 100,000-200,000 RMB/ton is considered reasonable.Since last year, the rapid growth of new energy vehicles (NEVs) has driven a sharp increase in the demand for power batteries. As a result, the price of battery-grade lithium carbonate surged. However, after peaking at nearly 600,000 RMB/ton in November 2022, lithium prices began to fall, especially after CATL introduced its “Lithium Mine Rebate” plan in February this year. According to the latest data released by Shanghai Steel Union on April 18, lithium prices dropped by another 2,500 RMB/ton to 185,000 RMB/ton, representing a nearly 70% drop from the peak five months ago.Wang Yu, CEO of Fulin Technology, remarked at the 2023 B100 Forum on April 2 that the supply of lithium carbonate is abundant, and its production challenges are minimal. He expects prices to return to normal ranges, as the actual cost of lithium carbonate is around 30,000 RMB/ton, with no reason for it to rise to 500,000 or 600,000 RMB/ton. Preliminary estimates suggest that the vehicle and battery industries contributed at least 100 billion RMB in profits to the lithium industry last year. However, due to the complete phase-out of government subsidies and the overall economic environment, this year’s NEV sales growth has significantly slowed. Zhang Xiaocong, Vice President of Marketing at Ruipu Lanjun, also noted at the B100 Forum that after three years of rapid growth, China’s NEVs have encountered significant challenges this year, and the entire battery industry is facing an unexpected winter.

Both raw material companies and battery manufacturers are facing high inventories. Zhang predicted that in 2022, the total industry inventory of power batteries reached 100 GWh, which, based on an average consumption of 50 kWh per vehicle, could equip 2 million NEVs – nearly one-third of last year’s total NEV sales. The high inventory levels are placing enormous downward pressure on lithium prices.As lithium prices continue to plummet, CATL revealed during its annual report conference call on March 9 that “the cost advantage of sodium-ion batteries over lithium-ion batteries is quite evident at present, and once the supply chain matures, sodium-ion batteries will have even more advantages.” The company also emphasized that “ordinary sodium-ion batteries may not show significant advantages with falling lithium prices, but our sodium-ion batteries are less sensitive to lithium price fluctuations.” Undoubtedly, CATL’s sodium-ion battery industrialization has provided yet another reason for lithium prices to decline, which in turn may call into question the economic viability of sodium-ion batteries.From this perspective, CATL is facing a dilemma of “left hand fighting right hand.” While its “AB Battery Technology” may address the current energy density limitations of sodium-ion batteries, it has raised concerns in the market about whether the product is more of a gimmick than a practical solution. At the same time, the company’s ongoing efforts to secure lithium resources, such as its investments in lithium mining projects in Australia and Africa, make it clear that CATL intends to maximize its own lithium assets.

The AB Battery Technology could serve as a good solution: on one hand, it pushes the boundaries of sodium-ion battery innovation, and on the other, it allows CATL to continue leveraging its own lithium resources.Sodium-ion battery development is not limited to CATL. For example, Wang Yu, CEO of Fulin Technology, revealed that the company had developed an alternative solution last year to address the industry’s reliance on lithium metal, enabling sodium-ion battery industrialization. This year, Fulin Technology’s sodium-ion batteries have entered the mass production stage, and the company plans to replace batteries in economy models with a range of up to 300 km in the short term, and expand to vehicles with a range of 500 km in the medium term. Fulin also plans to offer a sodium-ion and ternary battery hybrid solution to automakers. Wang Yu explained, “When cobalt prices skyrocketed in 2018, we removed cobalt; when lithium prices surged in 2022, we used sodium to challenge the market. Sodium is a very good solution because sodium carbonate only costs 2,000 RMB/ton. Sodium-ion batteries are more suitable for China’s current national conditions, where lithium resources have not been fully explored and the industry is heavily constrained by lithium and cobalt.”It can be expected that, after CATL’s first-mover advantage in launching sodium-ion batteries, news of other “sodium-ion vehicles” will continue to emerge. The industry winter may well be the spring for innovation.