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Honda Strengthens Its Battery Supply for Electric Vehicles, Inks Agreement With CATL

By Scott Levine – Jul 10, 2020 at 1:10PM

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This Japanese automaker is charged up about a newly signed agreement.

With a goal of electric vehicles (EVs) accounting for two-thirds of global sales in 2030, Honda Motor (HMC -1.75%) has just taken a step to shore up its battery supply. The automaker announced today that it has entered into an agreement with Contemporary Amperex Technology Ltd., otherwise known as CATL, to fortify their positions in the area of battery technology -- particularly for battery EVs. According to Honda, the "agreement will enable the two companies to begin discussions on a broad range of areas including joint development, stable supply, and the recycling and reuse of batteries."

If the partnership proceeds as planned, Honda will introduce the first vehicles sourced with batteries from CATL next year in the Chinese market, followed by vehicles globally, though Honda hasn't provided details for the timing of the latter. Lauding the merits of the collaboration between the two companies, Toshihiro Mibe, senior managing officer at Honda, said, "CATL will be a partner that will give Honda new strength, and we believe that our long-term alliance will enable Honda to further increase the competitiveness of our electrified products. Honda will continue its challenges toward offering joy and freedom of mobility and the realization of a sustainable society."

A blue Clarity Electric

Image source: Honda.

Having acquired a 1% stake in CATL through the purchase of nonpublic stock, Honda has an interest in CATL that transcends the recently announced agreement, presenting it with the ability to profit as CATL expands its partnerships with other automakers.

The Chinese market is of particular interest for automakers and their EVs because the nation's government is committed to growing the number of alternative fuel vehicles on its roadways. By 2025, the Chinese government is targeting 25% of auto sales to be "new energy vehicles," such as plug-in hybrid EVs, battery EVs, and fuel cell EVs.

Scott Levine has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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