CATL’s new ShenXing electric vehicle battery features a range of 700 kilometres along with super-fast charging whereby 400 kilometres of range can be added in only 10 minutes of charging

Further to an article we published in May reporting on the commercialisation of a new lithium-ion battery variant, last week the battery was officially named and launched by the world’s leading battery manufacturer.

Contemporary Amperex Technology (typically referred to as CATL) officially launched its ShenXing Superfast Charging Battery. The battery is based on lithium iron phosphate (LFP) chemistry and is reported to have a range of 700 kilometres (on a single charge, in an average electric vehicle). CATL attributes the battery’s superior performance to groundbreaking innovations in various aspects of the cell including the cathode, anode, electrolyte and separator.

While the 700 kilometre range is impressive relative to the current generation of batteries (the industry average electric vehicle range is approximately 350 kilometres), most impressive is its fast charging ability whereby 10 minutes of charging is reported to provide 400 kilometres of range.

We believe this development marks the end of range anxiety. Compared to its peers, the ShenXing is roughly twice as good as the next best battery presently available which is produced by South Korean, SK Innovations and used in the Hyundai Ioniq 5. It performs almost 2.5 times better than the Tesla Model 3 (which sources batteries from various manufacturers including Panasonic, LG Energy Solutions and CATL itself). A comparison which highlights how quickly technology has evolved, the ShenXing battery performs more than 5 times better than the Nissan Leaf (which sources its batteries from Japan’s AESC) which has been one of the best-selling electric vehicles over the last decade. CATL expects the ShenXing will enter mass production by the end of 2023 and will be incorporated in electric vehicles in the first quarter of 2024.

Does T8 Energy Vision have a position in CATL?
No. We do not hold the stock and have not held the stock previously on the basis of valuation and risk. A key factor is that we don’t believe battery manufacturing will prove to be a good investment in the long-term on the basis of structural industry dynamics (low margins, high capital intensity, highly competitive) and what we consider to be a challenging environment to protect critical intellectual property (lack of a sustainable competitive advantage). In the nearer-term, we believe that the risk to CATL’s margins is skewed to the downside (relative to run-rate and consensus on a 2-3 year view).

If not CATL, what is the best way to be positioned to benefit from the battery boom?
In the longer-term, inputs such as raw materials (copper, silver), specialty materials (silicon carbide), specialty components (separators and foils), as well as second derivatives within the broader supply chain of energy storage (such as specialty manufacturing machinery, energy storage-specific software, data management, integration and distribution) have the potential to be much more attractive investments.

What is the key takeaway?
We reiterate the comment we made back in May that up to now, the availability and maturity of battery technology has been holding back the adoption of renewables (solar and wind are intermittent energy sources and require energy storage to be ‘baseload’ competitive) and electric vehicles (range anxiety and charging wait-time anxiety).

This development continues to indicate that we are witnessing a remarkable rate of change within battery technology and that batteries present much more of an opportunity than a risk to clean energy. The world is set to produce and utilise an extraordinary volume of batteries over the next five to 10 years and this is not reflected in the valuations of any of the companies we track within this space.

T8 Energy Vision has unique exposures to various energy storage technologies and their supply chains on the basis that we believe they represent an extraordinary investment opportunity at this stage of evolution.