The billionaire whose electrode empire enables electric car success in China – 6/1/2023 – Market

A Chinese billionaire from humble beginnings with a fascination with metallurgy is presenting a crucial challenge to a traditional auto sector that is already struggling to compete with China in developing electric vehicles and batteries.

Bai Houshan, 59, founder and chairman of Ronbay Technology, which trades in Shanghai, dominates a major part of the global market for cathode electrodes, which are the main components of electric vehicle batteries and account for between 30% and 50% of costs. of components.

With the constant evolution of battery chemistry and components, in the pursuit of lower material costs and higher energy density, Ronbay has been leading the way in the shift from lower nickel cathodes to higher performance cathode materials.

Analysts at investment management firm Bernstein say there is a “clear movement” in the sector in that direction. Nearly three-quarters of new electric vehicles shown at the 2021 Shanghai Motor Show offered the technology, according to Ronbay, which has about a third of the global market for high-nickel cathodes.

The company’s dominance is an example of the challenges US President Joe Biden and his counterparts in Europe face as they offer hundreds of billions of dollars in taxpayer-funded grants to catch up with China in cleantech.

Cory Combs, associate director at Beijing-based consultancy Trivium China, said battery material processing technology was “the top need” for the United States and Europe as they need to catch up with China. However, achieving this and achieving the economies of scale that Chinese material groups pride themselves on is not guaranteed.

“China didn’t invent a battery sector overnight. There’s a whole industrial chain and a value chain that took decades to build,” he said.

UK-based research group IDTechEx predicts that demand for EV battery materials will grow more than 12-fold over the next decade and be valued at over US$230 billion by 2033. Bai intends to meet this demand with plans expansion plans for his empire spanning the United States and Europe.

Ronbay is currently looking at locations in Europe and North America with a view to setting up factories to serve these markets, the company told the Financial Times.

Meanwhile, in South Korea’s landlocked province of North Chungcheong, a model of Bai’s vision can be seen taking shape.

In a hillside industrial park on the outskirts of Chungju city, Ronbay is commissioning a plant that represents a key pillar in Bai’s plans to increase the company’s high-nickel cathode capacity by six times by 2025 compared to with 2021 levels.

Its biggest immediate competition is local, coming from South Korean rivals such as EcoPro BM, which trades in Seoul, and the sprawling “chaebol” LG, Korea’s biggest producer of batteries and battery materials. LG said this month that it aims to increase sales of battery materials by six to $25.5 billion by 2030. Central to its strategy is to target the same high-nickel cathode market.

The rapid growth of China’s electric vehicle supply chain has already seen Bai, whose net worth reaches $1.45 billion, ranked among the 500 richest people in a country of 1.4 billion people.

In his early years, he studied at top Chinese universities, including Tsinghua – President Xi Jinping’s alma mater – before taking on a series of technical and leadership roles at state-owned materials processors during the 1980s and 1990s.

Bai founded Ronbay 10 years ago and joins Wang Chuanfu, founder of China’s largest electric vehicle manufacturer, BYD, and Robin Zeng, founder of the world’s largest electric vehicle battery producer, CATL, as part of a new generation of billionaire industrial magnates who help Xi achieve his goals of technological and energy independence for China.

According to Bernstein, Bai’s company not only has the most ambitious capacity expansion plans in the cathode industry, but also the lowest capital costs.

In documents filed with regulators in March, the company, with a market capitalization of $4.4 billion, pointed to an “explosion” in electric vehicles.

“The penetration rate of new energy vehicles in European and North American markets is significantly lower than in China. As the company is rapidly advancing its internationalization strategy, its products are mainly applied in overseas markets, covering a huge space for future development,” he said.

This expansion into the United States and Europe would represent a significant change for the group. With production bases in China’s Hubei, Guizhou and Zhejiang provinces, and now also in South Korea, Ronbay’s biggest customers have been China’s major battery manufacturers, including CATL, SVOLT, Farasis and Eve. It also has a supply contract with SK, Korea’s second-largest battery manufacturer.

Bai’s overseas aspirations could be complicated by the Biden administration’s Inflation Reduction Act (IRA), under which the U.S. government is handing out $370 billion in subsidies to boost domestic cleantech manufacturing and reduce dependence on US economy vis-à-vis China. Similar measures are being considered in Brussels.

The IRA means a 25% tariff on Chinese cleantech exports to the United States, but Ronbay is counting on an exemption for its overseas production base. In her March statement, she said she believed shipments from her South Korean factory “do not fall under the prohibitions stipulated in the Act”.

Despite these reassurances, investors are wary of the company establishing operations in the United States and some parts of Europe, given growing antagonism towards China. However, the backdrop of rising demand in the global transition to electric vehicles means that many countries will still rely on Ronbay for cathode supply.

“As long as the market is still hot, it’s probably a good move for them to expand as much as they can, get to the level where they are more competitive than others, and that way people will have to go to them,” Chan Lee said. , managing partner of Petra Capital Management, a Seoul-based hedge fund that has investments in the electric vehicle supply chain in Asia.

Additional reporting by Kang Buseong in Seoul and Gloria Li in Hong Kong. Translated by Paulo Migliacci