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CNGR Advanced Material and Huayou Cobalt Have Secured Orders for Ternary Precursors from Tesla
2022-08-08   |  Editor:et_editor  |  148 Numbers

CNGR Advanced Material and Huayou Cobalt, which are among the major Chinese suppliers for battery materials, have respectively signed an agreement with Tesla for the provisioning of ternary precursors. CNGR and Huayou both made the announcement on July 31.

CNGR

The duration of the agreement between CNGR and Tesla is three years, whereas the duration of the agreement between Huayou and Tesla is three-and-half years. CNGR said the value of its deal is estimated to exceed RMB 10 billion. Huayou did not disclose the value of its deal.

CNGR will supply Tesla with ternary precursors from January 2023 to December 2025. The transaction is projected to account for more than 50% of CNGR’s audited main business revenue for the latest fiscal year. Since CNGR’s revenue for 2021 came to RMB 20.072 billion, the order from Tesla is calculated to surpass RMB 10 billion.

TrendForce points out that CNGR previously inked a ternary precursor supply agreement with Tesla and its subsidiary in March 2020. That agreement covered the period from January 2020 to December 2022. This new agreement is thus a continuation of the partnership between the two companies, and the terms of the 2020 agreement appear to have been carried over.

CNGR stated that Tesla is the global leader in electric cars, so the latest deal will further strengthen the long-term business relationship between both companies. Selling large quantities of precursor materials to Tesla will obviously benefit CNGR and its shareholders. Additionally, CNGR said that the revenue related to the contract will be recognized when the contractual obligations have been fulfilled and will only apply to the years when the contract is relevant. Still, CNGR expects Tesla’s order to make a huge contribution to its financial performances in the coming years.

The available market data show that CNGR is currently the world’s top supplier for ternary precursors. Its market share grew to 26% in 2021. In terms of production capacity, CNGR possesses three major production bases that respectively located in the western, central, and southern parts of China. The western base is in Tongren (Guizhou Province) and has a production capacity of 60,000 tons per year for precursors. This base was recently built with funds raised by the company on its own. The southern base is located in Qinzhou (Guangxi Province) has a production capacity of 180,000 tons per year for precursors, and it is currently in the process of ramping up. As of the end of 2021, CNGR had built up 200,000 tons per year of production capacity for ternary precursors.

Moreover, to the meet the demand of customers in the downstream of the supply chain as well as the growing global demand for Li-ion batteries, CNGR is continuing with its capacity expansion. The company aims to surpass 500,000 tons per year by 2023 as it accelerates the pace of production scale-up. CNGR has already fully inserted itself into the global supply chain for Li-ion batteries. Besides Tesla, its other major partners also include LG Chem, CATL, Easpring, XTC, BTR, L&F, ZEC, and Samsung SDI.

Huayou

Huayou’s holding subsidiary Huayou New Energy Technology (Quzhou) and subsidiary Huayou (Hong Kong) have entered into an agreement with Tesla and its subsidiary for the provisioning of ternary precursors. Under this agreement, Huayou will be supplying products to Tesla over the period from July 1, 2020 to December 31, 2025.

According to Huayou’s statement about the deal, the framework established with Tesla with respect to product shipments will improve Huyou’s competitiveness in the market for materials used in Li-ion batteries and other new energy products. Like CNGR, Huayou expects the deal to bring benefits to the company and its shareholders. Huayou will also recognize the related revenue only when the contract obligations have been fulfilled and within the relevant years.

Huayou has been doubling down on ternary precursors in recent years. Based on its own annual reports, Huayou’s revenue from ternary precursors came to RMB 1.151 billion for 2019, RMB 2.533 billion for 2020, and RMB 5.761 billion for 2021. This reflects a four-fold increase over a span of two years.

At an event held to present its financial performance for the whole 2021, Huayou said it has developed multiple precursor products based on the NCM 8 and 9 series. These products are also in mass production. There are also several new products that are under development, including a high-nickel precursor and a precursor for the NCMA cathode. Production is being scaled up for the high-nickel precursor (that is under the NCM 8 series).

In terms of production capacity, Huayou plans to raise the production capacity figures for precursors and cathodes by two-fold from 2021. Furthermore, it aims to expand its production capacity for ternary cathodes to 500,000 tons per year by 2025. Presently, the company is reportedly to possess 325,000 tons per year of production capacity in operation or development for ternary precursors. This figure includes the production capacity under the ownership of its joint ventures with other companies.

To commit more resources into the market for ternary batteries, Huayou announced this June that it will cease its activities in the market for LFP batteries. Specifically, the acquisition of Inner Mongolia Shengfan Technology in its entirety by Huayou’s subsidiary Bamo Technology has been called off. Therefore, Huayou now has more cash and resources available to concentrate on the development and production of ternary cathodes.

This article is a translation of a Chinese article written by Martin at TrendForce. It contains information that is either sourced from other news outlets or accessible in the public domain. Some Chinese names are transcribed into English using Hanyu Pinyin.

 
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