If you thought Panasonic was the largest EV battery maker in the world, then you’d be forgiven for making a mistake. That accolade goes to a relatively unknown (outside China) entity called CATL. Contemporary Amperex Technology Ltd. is now valued at $12.3 billion after a 44 percent jump in share prices since its IPO on May 30.

Although Panasonic is valued at almost three times that ($34.9 billion), its valuation includes all of its business units, not just the EV battery unit that supplies Tesla, with future plans to supply “prismatic” EV batteries to Toyota.

CATL is currently trading at around 36.20 yuan after debuting at 25.14 yuan on IPO day. The shares floated on the market represent a 10% stake in the company. Although they initially had bigger plans, their shrinking margins and a P/E ratio cap for IPOs imposed by Chinese authorities have limited the float.

Though CATL has many problems, its investors are confident that it can fend off Panasonic, its chief rival. CATL supplies to companies like BMW, Hyundai and Nissan, and heavy domestic demand allowed it to overtake Panasonic as the world’s largest EV battery supplier by sales.

On the margins front, reduced subsidies from the Chinese government forced the company to lower the price of its EV batteries, thereby putting them at a disadvantage on the profitability front.

Nevertheless, China still represents a tremendous growth opportunity for CATL. Planned and existing EV battery production capacities are more than four times that of the United States, which comes in at second place.

China EV battery capacity

If CATL can leverage China’s growth on the EV battery front and maintain its gross margins at the current 35 percent level, this could turn out to be quite an investment for early investors in this growth company. Panasonic’s performance, on the other hand, is highly dependent on how quickly Tesla can ramp up Model 3 production. The company is already on target to hit 5,000 Model 3 deliveries a week by the end of this month (June, 2018), and the faster they ramp up beyond that, the faster Panasonic’s EV battery unit can grow as well.

In a subsequent piece, we’ll cover Panasonic’s expansion plans for EV battery production.

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