Chinese EV Battery Giant CATL's Global Expansion & Geopolitics Navigation

CGTN Europe spoke to David Bailey, Professor of Business Economics at Birmingham Business School.

Transcript

00:00David Bailey is professor of business economics at Birmingham Business School. Great to have you

00:04on the program again. This float is shaping up to be a mega deal. What do you think makes CATL

00:11confident of investor interest at these levels? Well, that piece then I think summarized it

00:18really well. It is a leading company in the EV battery market. It has over a third of the global

00:25industry. Many of the top tier automotive firms in the world use CATL batteries and they are looking

00:32to expand globally outside of China. So that suggests very rapid expansion in the future.

00:39And that's going to be very, very attractive to investors that want to see growth in sort of the

00:44big growth areas that are coming. But American onshore investors aren't going to be able to

00:49buy shares in Hong Kong. Why is that? So there's been a kind of an issue. As we know,

00:55Trump as president has become very critical of China and involvement of Chinese firms in the U.S.

01:02So CATL was put on a list that sort of Chinese military company CMC list by the Pentagon recently.

01:10So there's been a kind of an attempt by the Trump government to warn investors away

01:14from Chinese companies. Now, that doesn't really necessarily stop them. It's not legally binding.

01:20But what CATL has done is to kind of form this initial public offering in a way which excludes

01:27onshore American investors to kind of really reduce the kind of liability in the U.S.

01:33I think they may also challenge that Pentagon ruling down the line as well if the Pentagon doesn't backtrack.

01:39David, something else that I think is quite interesting is that so many deals have been postponed

01:43in America and in Europe. But there's this bonanza of Chinese companies going ahead with their listing plans

01:51in Hong Kong. Yes, that's right. So I think there's a number of things going on there. So CATL, for example,

01:58they want money to expand globally. They want to build battery supply chains around the world.

02:03They have something like $40 billion worth of cash in China. They can't get that out very easily

02:10because they need quite complex government approval. By doing a listing in Hong Kong,

02:15they can attract international investors and then use that to expand globally. So this is,

02:20I think, largely about the expansion of Chinese firms into new markets around the world.

02:26And in so doing, they're also starting to kind of allay some of the political uncertainty they face

02:32because if they produce in the European Union, for example, which they're hoping to do in a big way,

02:37that's going to mean the EU is more favourable towards them because it creates jobs there.

02:42So I think it's a very clever strategy, Bynum.

02:44Look, throughout the programme, for weeks now, we've been discussing the rapidly changing tariffs picture.

02:51How do you see CATL managing the exposure to the geopolitical uncertainty we're seeing,

02:57especially in Western markets?

03:01I think they have a number of different strategies in different places. So in the European case,

03:05they're trying to get over those 45% tariffs, build it into the European Union and get Europeans on side.

03:12And the Europeans are very amenable to that. In the US, it's much more difficult where

03:17CATL involvement with the likes of Ford has been challenged by the government.

03:21So what they're looking to do in that case is license their technology to the likes of Tesla,

03:27which means that Tesla can still use the technology but build it themselves.

03:31Now, that's a very interesting reversal, isn't it, from 10 years ago,

03:35where it was a Western firm to go to China and license it there.

03:39Now it's turned full circle and it's the other way around.

03:42David Bailey, thank you very much.