A handful of things put the southwestern Chinese city of Yibin on the map.

There’s Wuliangye, a popular brand of fiery liquor baijiu. The iconic Bamboo Sea that formed a key location for Ang Lee’s 2000 martial arts hit Crouching Tiger, Hidden Dragon. And there are the fuel rods it pumps out as one of China’s most important nuclear hubs, where enriched uranium is processed for plants around the country.

The local government is keen to add another. Their plan is to turn Yibin into one of China’s largest manufacturing bases for electric vehicle (EV) batteries. The effort has begun to yield results.

It’s a play for deeper involvement in the global push to electrify transport, which could be a money-spinner for the 4.6 million people living in the city located at the junction where the Min and Jinsha Rivers combine to form the powerful Yangtze.

The electric transition, which Chinese carmakers are dominating, has contributed to the takeoff of several domestic lithium cell makers like Contemporary Amperex Technology Co. Ltd. (CATL) (300750.SZ -3.74%), and minted new billionaires like the firm’s founder Robin Zeng Yuqun.

China’s city governments have been bending over backwards to court firms like Zeng’s, as they seek new sources of economic and jobs growth amid a general slump.

In a high stakes game, who can blame Yibin for wanting a piece of the action. The city hosted the 2023 World Power Battery Conference in June, and was able to net the title of “China’s Power Battery Capital” from the China National Light Industry Council in recognition of its “advantages in power battery industrial clustering, complete industrial chain, clear development path and strong support policies.”

Yibin produced 72 gigawatt-hours (GWh) of EV batteries last year, accounting for about 15.5% of the country’s total, according to local government data. The industry’s output value surged to 88.9 billion yuan ($12.2 billion) in 2022 from less than 2 billion yuan in 2020, the data showed.

 

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But that production figure is a fraction of the output of Changzhou, a city in East China’s Jiangsu province. Changzhou produced 108 GWh of lithium batteries last year, with the sector’s output value surpassing 170 billion yuan, according to data released by the local government.

Changzhou’s impressive output has some insiders grumbling about why Yibin was named China’s battery capital. The city hosts the headquarters of CATL’s main rival CALB Group Co. Ltd., and the firms have traded a number of patent lawsuits. It also hosts a CATL plant, another for carmaker BYD Co. Ltd. and for battery maker SVOLT Energy Technology Co. Ltd.

Yibin, on the other hand, is a CATL town. It owes its rise as a battery power almost entirely to the world’s largest EV battery-maker, which supplies big-name carmakers including Tesla Inc. and Volkswagen AG as well as local Chinese upstarts like Nio Inc. and Li Auto Inc.

After a nearly two-year negotiation, the Yibin government in September 2019 clinched an agreement with CATL to build a manufacturing facility in two phases in the city. The factory is one of CATL’s 13 operating battery bases, 11 of which are in China and two in Europe.

As part of the deal, CATL has pledged to build a complete industrial chain in Yibin, including upstream raw material suppliers and downstream car manufacturers.

The first phase of the plant began producing batteries in June 2021. CATL said at the time it had signed contracts for four further phases with a total investment of more than 30 billion yuan. EV batteries made at the Yibin facility were being transported to car production lines in the nearby cities of Chengdu and Chongqing within three hours, CATL said.

Underlining the city’s need for CATL’s business, Zhou Qiang, the head of a power battery division under the Yibin Municipal Bureau of Economic Cooperation and Emerging Industries, told Caixin the Yibin government arranged for earth-moving machines to work day and night to level a hilly industrial parcel of land, at great expense, in order to meet the battery giant’s timeline.

There are also plans to build a regional headquarters, an industrial ecosystem, an industry fund and a global training center in the city as part of a separate deal inked a month after the Yibin plant began running.

CATL has also teamed up with Geely Automobile Holdings Ltd.’s EV brand Zeekr to set up an EV battery project in Yibin. The first phase, with a designed annual capacity of 15 GWh, began manufacturing in December.

Cleaner power

One advantage Yibin has is its edge in hydropower generation, which is key to turning battery manufacturing into a cleaner industry, said Zhou.

That’s increasingly important as jurisdictions like the European Union (EU) tighten up regulation of battery-making supply chains. It comes after environmental researchers and activists have spent years drawing attention to the fact that while EV batteries do not produce emissions, their upstream supply chain includes everything from mining industry contamination to dirty manufacturing processes which need to be factored into an assessment of their overall environmental footprint.

More than 70% of Yibin’s power comes from hydropower stations, and more than 80% of energy used at CATL’s Yibin plant is hydroelectric power, according to local government data.

In April, CATL unveiled sustainability plans to achieve carbon neutrality at its core factories by 2025 and across its entire industry value chain including mining and raw material making by 2035.

The commitments are important for CATL to secure and grow its share in overseas markets. The EU’s new rules, approved in June, require EV battery-makers to certify the carbon footprints of their batteries and obtain a digital battery passport before selling their products in the region.

Zhou also recalled a local job fair organized in 2021 by CATL, where a great number of candidates competed for roles at its Yibin plant that offered decent monthly salaries, adding that Yibin is one of few prefecture-level cities in Southwest China that saw a net population inflow.

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In the first seven months of 2023, CATL retained its crown as China’s No. 1 EV battery-maker by installed capacity with a 43.1% market share, followed by BYD which controlled 29.7% of the domestic market, according to a ranking list by the China Automotive Battery Innovation Alliance.