In a significant move that underscores its ambitions on the world stage, CATL (Contemporary Amperex Technology Co., Limited), a leading battery manufacturer globally, has officially confirmed its plan for a secondary listing in Hong Kong. This announcement is not merely a procedural step; it highlights the company's strategic effort to enhance its international footprint and capitalize on the burgeoning global demand for electric vehicle (EV) batteries. By issuing overseas listed foreign shares and seeking a spot on the main board of the Hong Kong Stock Exchange, CATL aims to create a more dynamic platform for capital operations, thereby bolstering its competitiveness worldwide.

The catalyst behind CATL's move is its surging need for funds, propelled by rapid expansion in overseas production capacities. As the company invests heavily in critical markets, particularly in Europe, the financial requirements have grown exponentially. Currently, CATL has established three battery manufacturing plants outside China, located in Germany, Hungary, and Spain. The Hungarian facility, with an investment surpassing 50 billion RMB, and the expected 30.9 billion RMB commitment for the Spanish plant, epitomize CATL’s strategy to secure its dominance in key regions of Europe.

Although CATL holds a commanding position in the global battery market, leading in both installed capacity and market share, competition in overseas markets remains fierce. The company finds itself in increasingly close quarters with South Korean and Japanese battery manufacturers. For instance, when comparing its output with LG Energy Solution, the gap is narrowing – a mere 1.5 GWh separates the two, highlighting an intensifying battle for market supremacy. Additionally, domestic competitors like BYD and CALB are swiftly gaining ground, while major global players including Tesla continue to compete aggressively for business, exacerbating the competitive pressure on CATL.

Faced with this complex landscape, the focus of industry observers is firmly on how CATL will navigate these mounting challenges, particularly as it pursues its plans to list in Hong Kong.

As of December 26, 2024, CATL revealed its aim to issue H-shares and officially list on the Hong Kong Stock Exchange. This latest initiative concerns the issuance of no more than 5% of the company’s total equity post-issue, with an additional 15% in over-allotment options. The funds raised through this listing will primarily target the expansion of CATL’s international operations and bolster its overseas project investments. Further specifics, including the timing and scale of the issuance, will be revealed at a special shareholders' meeting scheduled for January 17, 2025.

What's essential to understand is that this move to list in Hong Kong has not emerged as a sudden decision. Rather, it is a calculated step in response to the escalating capital demands arising from CATL’s global capacity enhancements. For example, in December 2024, CATL signed a joint venture agreement with automotive giant Stellantis to jointly invest in a substantial lithium iron phosphate battery plant in Zaragoza, Spain, expected to cost around 4.038 billion Euros (approximately 30.9 billion RMB). This venture marks a critical milestone as CATL prepares to solidify its operational presence in Europe. The factories in Germany and Hungary are also crucial to CATL's strategic expansion and operational capabilities.

The expansion into the European market traces back to 2018 when CATL signed agreements with the government of Thuringia, Germany, to establish a battery manufacturing plant and a research center for intelligent manufacturing technologies in Erfurt. The initial investment for the German facility was about 1.8 billion Euros (around 13.2 billion RMB), with a projected output capacity of 14 GWh. In what would eventually become a landmark achievement for the company, January 2023 marked the official launch of the German plant, designating CATL as the first Chinese power battery supplier to commence overseas production.

Following that development, CATL revealed plans in 2022 for a significant investment in Hungary, aiming for a total outlay capped at 7.34 billion Euros (approximately 53.5 billion RMB) and an ambitious production capacity of 100 GWh. With the Phase One construction set to conclude in 2023 and full operations anticipated by 2025, CATL's operations manager in Europe, Jason Chen, emphasized that the factory would be up and running by the second half of 2025.

CATL's strategic listing in Hong Kong is a pivotal move aimed at addressing the pressing financial requirements stemming from its international expansion. The company has attempted to secure funding through various means to support its globalization ambitions.

Earlier in 2023, CATL explored issuing Global Depositary Receipts (GDRs) in Switzerland but paused the plan amid regulatory concerns regarding the scale of fundraising. In November of the same year, media reports emerged indicating CATL's intent to consider a listing in Hong Kong, with discussions initiated with financial advisors. The relatively relaxed regulatory framework in Hong Kong positions the city as a critical hub for global capital, allowing CATL to diversify and more flexibly meet its funding requirements for international operations.

As competition intensifies, especially from South Korean and Japanese manufacturers, CATL's need for funding becomes increasingly pronounced. Recent insights from SNE Research reveal that from January to October 2024, the global installed capacity for power batteries surged 25% year-on-year, totaling approximately 686.7 GWh. CATL led this charge with an impressive 252.8 GWh output, marking a 28.3% increase and clinching a 36.8% market share. However, the company's overseas performance tells a different story, as it accounted for 76.6 GWh of installed capacity—still number one globally but evidencing a precarious position with LG Energy Solution trailing closely behind with an output of 75.1 GWh.

Moreover, CATL's challenges aren't purely numerical. Competitors, including SK On, Panasonic, and Samsung SDI, are equally aggressive in seizing market share. For instance, SK On reported 31 GWh of overseas output (10.7% market share), while Panasonic and Samsung SDI followed closely with shares of 9.8% and 9%, respectively. This intensifying competitive environment underscores the urgent need for additional resources to fortify CATL’s standing, particularly in the evolving supply chain dynamics.

Despite an uptick in overall market share for CATL by 0.9 percentage points, the company experienced a decline of 1.2 percentage points in overseas territories outside China, revealing a mere 7.8% growth rate. In contrast, BYD and CALB's growth metrics far exceeded those of CATL. For instance, CALB's installed capacity surged by nearly fourfold in 2024, and Tesla’s rising prominence as the ninth largest power battery supplier further complicates the competitive landscape for CATL.

In light of these ramifications, the necessity for CATL to secure substantial funding is pressing. Analysts from Morgan Stanley project that the forthcoming H-share fundraising could yield between 6.8 billion to 7.7 billion USD, significantly outpacing rumors of 5 billion USD. Should CATL achieve the higher end of that spectrum, its initial public offering could establish it as the seventh largest fundraising company in Hong Kong history. Morgan Stanley argues that even with substantial cash reserves of approximately 20.8 billion USD, the additional funds would play a crucial role in facilitating CATL's global capacity expansions, including the Hungarian facility's scaling and the establishment of the joint 50 GWh plant with Stellantis in Spain.

Experts like Yu Fenghui indicate that CATL's timing for the Hong Kong listing strategically leverages the city's status as an international financial center to attract more global capital and enhance its financial capabilities. This initiative is expected to amplify CATL's brand influence internationally, crucial in countering competitive pressures from its South Korean and Japanese rivals.

Additionally, Wang Peng, a researcher at the Beijing Academy of Social Sciences, highlights that through this listing, CATL is not only broadening its financing channels while lowering costs but is also poised to draw in international capital and modern management expertise, thereby elevating its global competitiveness. Wang believes this strategic listing will empower CATL to consolidate its position as a leader in the global power battery market and foster its transition into an even more influential entity within the global marketplace.