CATL Approved To Acquire Geely Battery Asset, JPMorgan Says

JPMorgan said CATL (03750) has received approval to acquire an equity stake in Geely's Chongqing Yaoning New Energy Technology, which owns a 24 GWh battery production project nearing completion, according to ETNet. The bank said the deal is more than a capacity expansion and may be an early sign that China's battery industry is entering a consolidation phase. It added that the transaction could challenge automakers' strategy of building in-house battery capacity and highlight the strategic value of approved production assets. JPMorgan said the deal is positive for industry structure because it would place the asset under the operational control of an industry leader rather than add another independent supplier to an already competitive market. It said this could help reduce fragmented competition, improve capital discipline and support healthier long-term profitability. The report said Chongqing Yaoning was originally developed within Geely's ecosystem as part of its battery self-supply strategy, but appears set to be transferred to CATL before commercial production. JPMorgan said this underscores the significant operational, technical and capital requirements of battery cell manufacturing, and that investors may continue to overestimate the speed and scale of automakers' battery self-sufficiency while underestimating the manufacturing advantages of leaders such as CATL. JPMorgan kept an Overweight rating on CATL and a target price of 725 yuan.