Bai Houshan deepens China’s EV dominance with his electrode empire

A self-made Chinese billionaire with a fascination for metallurgy is posing a fundamental challenge to a traditional auto industry already struggling to compete with China in the development of electric vehicles and batteries.

Bai Houshan, the 59-year-old founder and chair of Shanghai-listed Ronbay Technology, dominates a key part of the global market for cathode electrodes, which are core building blocks in EV batteries and account for 30 to 50 per cent of component costs.

With battery chemistries and components constantly evolving in the search for lower material costs and higher energy density, Ronbay has led a shift from cathodes with a lower nickel content to better-performing high-nickel cathode materials.

Analysts at investment manager Bernstein say there has been a “clear movement” by the industry towards this. Nearly three-quarters of new EV models at the 2021 Shanghai motor show featured the technology, according to Ronbay, which holds around a third of the global market for high-nickel cathodes.

The company’s dominance is one example of the challenge facing US president Joe Biden and his counterparts in Europe as they deploy hundreds of billions of dollars in taxpayer-funded subsidies to chase down China’s ascendancy in cleantech.

Cory Combs, associate director at the Beijing-based Trivium China consultancy, said the technology of processing battery materials was “the number one thing” the US and Europe needed as they played catch-up with China. Yet obtaining this and reaching economies of scale boasted by the Chinese materials groups are not guaranteed.

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

IDTechEx, a UK research group, predicts the demand for EV battery materials will grow more than 12-fold over the coming decade and be valued at more than $230bn by 2033. Bai aims to tap that demand with expansion plans for his empire that encompass the US and Europe.

Ronbay is currently investigating sites in Europe and North America with the aim of setting up factories to serve those markets, it told the Financial Times.

Meanwhile, in the landlocked South Korean province of Chungcheongbuk-do, a model for Bai’s vision can be seen taking shape.

On a hillside industrial park on the outskirts of Chungju city, Ronbay is firing up a factory that represents a key pillar in Bai’s plans to boost the company’s high-nickel cathode capacity six-fold by 2025, compared to 2021 levels.

Its biggest immediate competition is local — coming from South Korean rivals such as Seoul-listed EcoPro BM and the sprawling chaebol LG, Korea’s largest producer of battery materials and batteries. LG said this month it aimed to grow its battery materials sales six-fold to $25.5bn by 2030. Central to its strategy is to target the same high-nickel cathode market.

The rapid growth of the EV supply chain in China has already propelled Bai, with a net worth of $1.45bn, to rank among the 500 richest people in a country of 1.4bn people.

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

Bai founded Ronbay 10 years ago and he ranks alongside Wang Chuanfu, the founder of China’s biggest EV maker BYD, and Robin Zeng, founder of the world’s biggest EV battery producer CATL, as part of a new generation of billionaire industrial tycoons helping Xi towards his targets of technology and energy independence for China.

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

In corporate filings issued in March, the company, with a market capitalisation of $4.4bn, pointed to an EV “explosion”.

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

That expansion into the US and Europe would mark a significant shift for the group. With production bases in the Chinese provinces of Hubei, Guizhou and Zhejiang, and now also South Korea, Ronbay’s biggest customers have been China’s largest battery makers, including CATL, SVOLT, Farasis and Eve. It also has a contract to supply SK, Korea’s second-biggest battery maker.

Bai’s overseas aspirations could be complicated by the Biden administration’s Inflation Reduction Act, where the US government is doling out $370bn in subsidies to boost domestic cleantech manufacturing and cut US economic dependency on China. Similar measures are being considered in Brussels.

The IRA means a 25 per cent tariff on Chinese cleantech exports to the US, but Ronbay is counting on an exemption for its overseas production base. In its March filing, it said it believed that shipments from its South Korean factory “do not fall under the prohibitions stipulated in the Act”.

Despite those assurances, investors are wary about the company’s chances of setting up operations in the US and some parts of Europe given rising anti-China sentiment. However, the backdrop of booming demand in the global EV transition means many countries will still depend on Ronbay for cathode supply.

“While the market is still hot it is probably a good move for them to expand as much as they can, get to the level where they’re more competitive than others, then people will have to come to you,” said Chan Lee, managing partner at Petra Capital Management, a Seoul-based hedge fund with investments in the Asian EV supply chain.

Additional reporting by Kang Buseong in Seoul and Gloria Li in Hong Kong