Dec. 24 (NBD) -- Chinese car manufacturer Geely Automobile Holdings Limited ("Geely") has reached an agreement to set up a battery joint venture with the country's largest lithium battery maker Contemporary Amperex Technology Ltd (CATL).

The companies said in their separate filing to the Hong Kong and Shenzhen stock exchanges last Thursday that Zhejiang Jirun, an indirect 99 percent owned subsidiary of Geely, and CATL entered into an agreement to establish a joint venture to engage in the research and development, manufacturing and sales of battery cells, modules and packs.

The registered capital of the joint venture will be 1 billion yuan (144.9 million U.S. dollars), and will be contributed as to 49 percent (equivalent to 490 million yuan or 71.0 million U.S. dollars) in cash by Zhejiang Jirun and as to 51 percent (equivalent to 510 million yuan or 73.9 million U.S. dollars) in cash by CATL. 

This makes part of Geely's efforts to forge itself the industry leader in new-energy vehicle (NEV) technologies. 

Geely Borui GE (Photo/Zhang Jian)

As early as November 2015, Geely announced its NEV strategy named "Blue Geely Initiatives". The five-year initiative's target is to ensure that up to 90 percent of the company's total sales volume would be in the form of NEVs by 2020.  

The ambitious goal couldn't be achieved without a stable and reliable supply of advanced and high-performance battery cells, modules and packs. 

Through the cooperation with CATL, Geely could guarantee the supply and improve its technical performance and price advantages of its new-energy and electrified models, an industry insider told OFweek, a service platform for China's high-tech industry. 

Despite a short history, CATL is now overwhelmingly dominant in the power battery market. Many models from China's mainstream NEV manufacturers employ batteries made by the Fujian-based battery maker.

In the first 11 months of this year, China's installed capacity of power batteries reached 43.53 GWh, according to data from the power battery applications branch of the China Industrial Association of Power Sources. CATL ranked top with installed capacity of 17.86 GWh (or 41.3 percent of the total), followed by BYD with 9.57 GWh (or 21.99 percent of the total). 

In addition to the joint venture with CATL, Geely has managed to take a stake in two power battery companies through its subsidiary as well as a company focusing on the research and development of high-performance lithium iron phosphate batteries. 

Moreover, the auto manufacturer is committing itself to battery pack production. The company has established two subsidiaries engaging in the research and development, manufacturing, and sales of powertrain system for electric cars - Viridi E-Mobility Technology (Suzhou) Co Ltd and Viridi E-Mobility Technology (Ningbo) Co Ltd. The latter is now constructing a battery pack project with an annual production capacity of 500,000 sets at Hangzhou Bay New Area of Ningbo, and the project is scheduled to be completed this year. 

An Conghui, president of Zhejiang Geely Holding Group, said Geely would work with partners to establish a global industrial value chain to become a global leader in new energy vehicle and energy saving technologies and roll out new energy vehicle models to better meet customer needs.

Data shows Geely's sales of new-energy and electrified models reached 10,575 units in November 2018, representing a month-over-month increase of 30.5 percent. The carmaker plans to have more than 30 new-energy and electrified models on the market by 2020.

Email: lansuying@nbd.com.cn