Shares of Contemporary Amperex Technology Ltd (CATL) fell 4.9% in Shenzhen on Tuesday following reports that the EV battery maker could spend up to $5 billion on facilities in Mexico and the United States.
The world’s largest battery maker has been considering at least two potential sites where it can establish facilities to supply batteries to Tesla and Ford, according to one report, which said Ciudad Juarez in Chihuahua, and Saltillo, in Coahuila, were two current options.
Ciudad Juarez is close to a port of entry to the US state of New Mexico, and not far from Tesla’s Gigafactory in Austin Texas.
There had also been speculation that CATL may set up a factory in Kentucky, possibly in addition to a separate facility in Mexico.
However, investors selling CATL shares could be taking a cue from investment banks such as Allianz and the JP Morgan China A-share Opportunities Fund, which recently shed some holdings in the Chinese battery giant, according Shanghai-based stock investor and independent financial commentator Guo Shiliang, whose columns appear in the China Securities Journal and Xinhua Finance.
CATL had bounced back from a 12-month low in May and given the sheer weight it carries on the benchmark stock market, many funds and institutional investors would still have a certain concentration of CATL in their portfolios, Guo said.
But the company had offered scant details about setting up a plant in Mexico to supply batteries to Tesla and Ford, so investors are still waiting for more confirmation, he said.
Row Over Pricing?
Meanwhile, the group may have lost orders from Nio, Xpeng and Li Auto. Guo said those carmakers “are now sourcing from alternative suppliers and accusing CATL of dictating prices – while BYD has excess capacity to sell batteries to other EV makers.”
A second analyst agreed that investors were not likely to be impressed with news about CATL building a factory in Mexico until it was confirmed and details were explained.
“Even if it’s real, it will be so far along in the process – from site selection to negotiation to navigating the regulatory maze – so there is no immediate lift to CATL’s shares. But what is more imminent is the risk of losing orders from some Chinese EV makers like Xpeng amid a row over pricing,” Dr David Zhang, chief of EV research at Jiangxi Provincial New Energy Technology Institute, said.
CATL, which currently has nearly a third of the world’s electric vehicle battery business and has supplied batteries to a host of leading foreign and domestic carmakers, has yet to comment on the developments.
But the group, based in Ningde in China’s Fujian province, is cashed up at present after raising $6.7 billion in a private placement last month, which was the second-largest capital markets transaction in the world so far this year.
- Jim Pollard and Frank Chen
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