BMW Signs $1.16 Billion Battery Contract with Chinese Company CATL

Part of the deal would allow the Chinese company to build a new plant in Germany.

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BMW's vested stake in its expanding electric mobility offering has become even greater after it awarded a contract to a Chinese battery maker, the automaker confirmed on Thursday. Contemporary Amperex Technology Ltd (CATL) will receive a reported $1.16 billion to build battery packs for BMW's upcoming line of EVs.

CATL will be replacing BMW's existing partnership with Samsung in supplying the batteries for its next-generation vehicles. The battery-maker will be relying on the use of subsidies provided by the Chinese government, specifically those which are aimed at expanding the presence of its battery manufacturers outside of Asian automotive markets, despite the physical location of the company itself.

Because of this, part of the deal with BMW allows CATL to build a factory in Europe to produce the cells. This provides a cost-benefit to BMW by allowing for a decrease in logistic costs, all while using existing technology to avoid costly research and development expenditures. According to Reuters, a location is currently being scouted in the eastern German state of Thuringia, about 250 miles north of both BMW's Munich headquarters and a near-equal distance from its Dingolfing plant where BMW manufacturers the 8-series, as well as various other components for the automaker's EV range.

The partnership between the Bavarian marque and its supplier is near-ideal considering that both China and Germany have plans to push mandated banning of the internal combustion engine in their respective countries. While many major German automakers are looking to electrify their existing lineups, Chinese-based companies have several advantages that can be offered to the Germans, including well-established battery technology, as well as state-sponsored stipends to lower the cost of manufacturing. U.S. brand Tesla has also expressed interest in building a battery plant in Germany should it expand operations to Europe.

Despite BYD Co Ltd being the largest battery-maker in China, CATL has built a significant international presence. BMW is just one of several manufacturers who have contracted with CATL thus far; Daimler and EV-startup Byton have both confirmed their use of CATL to build batteries for their vehicles. Coincidentally, Apple (who is still allegedly making a car) is also said to have reached out to the battery manufacturer to supply cells for its vehicle as well.