It is in this context that CATL moved in to Indonesia by setting up a JV with Antam and the Indonesia Battery Corporation (IBC). In this manner, CATL is responding to the state-driven attempts at positioning Indonesian companies more strategically within the emerging EV supply chains. Beyond the above-mentioned export bans, in the past 7 years the Indonesian state-owned mining industry has been through rounds of consolidation at the hands of the state. In 2017, the state-owned aluminium refiner, Inalum, was transformed into a holding company taking over control in nonferrous metal (herein nickel) producer Antam, the coal company Bukit Asam and the tin miner Timah. The idea was to "create a national mining champion to compete with global groups such as Rio Tinto and BHP."29 Since then, a new constellation was created through the holding company Mind.ID, which in turn took over control from Inalum of all 4 companies, which remain predominantly state owned (65%). In order to ensure the development of projects beyond simply mining and export of raw ore, the separate Indonesia Battery Corporation was also set up in 2021. It is this constellation that CATL has partnered up with aiming for "an end-to-end lithium battery supply chain" in Indonesia.30 As a concrete expression of the Indonesian state's broader industrialization plans, this specific project attempts to link up state-backed national capital as junior partners to CATL, in this way positioning Indonesia within CATL's larger global production network.
At first glance, the project seems to fit well for CATL's strategy of ensuring a cheap source of nickel for its battery production: the above-noted technological developments have made Indonesian nickel a much cheaper source than nickel reserves elsewhere. However, despite the announcement of the project, money is yet to flow from CATL into the production of the factory and it remains unclear how much the company will actually invest. Whether and how the Indonesian state strategy pays off is also an open question: In the larger context of the current Darwinian moment characterised by rapidly changing technologies and the Indonesian state's significant "bet" on the nickel-based battery supply chain, it is worth raising the question for how long this source of nickel will remain central – and hence whether and how the state's bet will prove successful. As noted above, CATL is not putting all its eggs in one basket, but is in the process of developing multiple battery technologies – including those for which nickel is not needed, like LFP-batteries. Moreover, the Indonesian state strategy is itself being challenged through the EU's WTO-case against the nickel ore ban.31 The social and environmental implications of the expansion of the nickel extraction and refining across Indonesia are already significant – what would it mean for Indonesia if all these mining landscapes and infrastructure end up being obsolete for the EV-supply chain?
4.2 Strategies of exchange
As a producer of intermediate goods (batteries) that are bought and used by other capitalist actors (auto manufacturers) in the production of their commodities CATL ultimately relies on the ever-increasing expansion in the consumption of electric vehicles. CATL's domestic market in China has until recently been promising, but is increasingly oversaturated due to the piling in of many new companies seeking to benefit from the above-mentioned subsidy regime. Consequently, Goldman Sachs has estimated that EV-battery production by 2025 will be double the size of demand on the domestic market, while recent research from BloombergNEF argues that "manufacturing capacity will exceed annual battery demand by at least 400% for the rest of the decade".32 This situation is forcing CATL (and its Chinese competitors) to pursue strategies of exchange (i.e. selling) outside of China.
A key target market here is the EU – particularly because of much lower market penetration of EV's compared to the Chinese market.33 This strategy, however, is complicated by the above-mentioned increasing geopolitical tensions, whereby the EU (and the US) is seeking to disentangle supply-chains from China, e.g. through the EU's Critical Raw Materials Act and the negotiations of energy and raw materials chapters in EU Free Trade Agreements, such as the EU-Chile Association Agreement.34 Such geopolitical concerns are, however, complicated by the economic realities of supply chains that are heavily dependent on Chinese actors, which is especially the case for batteries (see Figure 2, above). CATL is actively navigating its way around such geopolitical tensions by investing in territories that are strategically linked to EU- and US-markets.
As noted in Figure 4 above, already in 2018, CATL acquired a 25% share of North American Nickel, giving access to the company's Moroccan nickel reserves. Since Morocco has trade agreements with both the US and the EU, batteries based on Moroccan nickel would qualify under both the new US and EU policies. Since CATL's initial investment, North American Nickel was subsequently taken over by Premium Nickel Resources in 2022 with CATL now only playing a marginal role in the company (3% shareholder).35 However, CATL's competitors have since taken a page from their playbook and Morocco is emerging as a key site of investment for Chinese battery groups precisely due to the access the country gives to the US and EU markets.36 More recently, CATL has followed up on this strategy through further downstream investments by setting up battery production facilities within the EU in order to directly link up to and "localize" with EU-based supply-chains, especially those around the German auto-industry. This has manifested through one investment in Germany and then a subsequent investment in Hungary, where the factory is supposed to become the largest EV battery production plant in the EU.
The Hungarian investment, worth 7.34 billion euros, promises to create 9000 new jobs, and is currently the largest single greenfield investment in Hungary’s history. It was made public on August 12 2022, just shortly after BMW announced plans to build a new production facility in the same Southern Economic Zone industrial park of Debrecen in Hungary. Although smaller (2 billion euros, promising 500 jobs), BMW’s decision was also hailed as of historic significance by the Hungarian government, for making Hungary a key node in the electric transition of European automobility. According to current planned investments by a host of other German and Chinese actors, by 2026 Hungary is set to become the EU's second largest battery maker after Germany.37
In the 2010’s, the expansion of Hungary’s role as a manufacturing site for German automakers happened in parallel with a turn in German industry’s export policies: after the EU single market could not provide enough compensation for declining profits after 2008, exports turned to global – primarily Chinese – markets. Meanwhile, as late adopters of the electromobility transition, German carmakers have been partnering up with East Asian, including Chinese, battery producers, to build their new EV models. The electromobility boom of the early 2020’s, combined with the effects of Russia’s war on Ukraine, and the global turn towards protectionist industrial policy has complicated this picture. First, Chinese manufacturers upgrading from battery makers to EV producers started to squeeze out German producers from their positions in the Chinese market, and then stepped up as their competitors on global markets. Second, in the context of growing geopolitical and geoeconomic tensions, the EU’s reactions have been torn between a now diverging set of capitalist interests, contradictions also manifesting in the conflict between anti-Russia sanctions, the EU’s battery strategy’s (including the Critical Raw Minerals Act’s) aim to build independent supply chains, and German carmakers’ need for Chinese collaborations and Russian energy. Third, the loss of cheap Russian energy imports due to sanctions placed a vital blow on already struggling German industrial competitiveness. Hungary’s geopolitical balancing has so far made it a site where both Chinese inputs and Russian energy are available.38
It is in this broader geopolitical and -economic context that CATL's decision to locate in Hungary should be seen, but also in light of very direct benefits extended from the state to CATL. CATL was reported to be considering both Poland and Serbia as potential sites, but in the end went with Hungary, not least due to the lucrative circumstances offered by the state. As noted by the BBC, "Mr Orban's Fidesz government has bent over backwards to attract Chinese investment, promising CATL €800m in tax incentives and infrastructural support to clinch the deal - more than 10% of the €7.3bn investment."39
CATL’s location of its second EU-based plant within Hungary is thus a strategic move that primarily serves to maintain access to EU markets, including its EU-based automotive partners, despite emerging protectionist policies, e.g. the recently announced 25% tariffs on Chinese EVs.40 Within Hungary, CATL will collaborate with German carmakers who have been moving their capacities into the country – first to cut labor costs, and recently also to access Russian energy and Chinese suppliers. Hungary’s generous state support to both German carmakers and battery-makers like CATL is producing a historic wave of reindustrialization in the country. On the state's side, this serves to cover the increased need for external financing (while avoiding loans with strict policy conditions), as well as to enable the expansion of state-backed domestic capitals as service providers to new manufacturers. These collaborations do not include technology sharing that would allow for domestic capital’s industrial upgrading. State support for foreign companies includes direct subsidies, and measures that reduce costs: infrastructure-building, provision of cheap energy, land and water, and favorable labor and environmental regulations. The costs of these measures are largely externalized to taxpayers, domestic and migrant labor, and the environment.
In this light, the EU-Commission's recent proposal of tariff-impositions towards Chinese EVs with reference to how "Chinese carmakers and their suppliers received subsidized loans, tax breaks and cheap land [within China]" seems at best inconsistent, when both BMW and CATL along with a long list of other actors, have been granted very similar treatment within the EU itself.41