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Exclusive-Apple’s talks with Chinese battery makers CATL and BYD mostly stalled -sources

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October 22, 2021

SHANGHAI/HONG KONG (Reuters) – Apple Inc’s talks with China’s CATL and BYD over battery supplies for its planned electric vehicle have been mostly stalled after they refused to set up teams and build U.S. plants that would solely cater to the tech giant, three people with knowledge of the discussions said.

The firms informed Apple sometime in the past two months that they were not able to meet its requirements, the people said. But the U.S. company has not given up hope of resuming talks with either CATL or BYD, according to one source.

Chinese battery makers are more advanced than rivals in the development of lithium iron phosphate (LFP) batteries which are cheaper to produce and sources have previously said Apple favours this battery technology.

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CATL, the world’s No.1 maker of batteries for EVs, has been reluctant to build a U.S. factory due to political tensions between Washington and Beijing as well as cost concerns, said one of the people with direct knowledge of the talks.

The Chinese firm has also found it impossible to set up a separate product development team exclusively working with Apple due to difficulties in finding sufficient personnel, the person added.

BYD, which has an iron-phosphate battery plant in Lancaster, California, declined to build a new factory and team that would solely focus on supplying Apple, said two of the sources.

The stalled discussions have meant that Apple has been considering Japanese battery makers and it sent a group of people to Japan this month, they added.

Panasonic Corp is one of the companies that Apple is considering, said one of the people.

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The sources declined to be identified as the talks were confidential. Apple, BYD and Panasonic declined to comment.

CATL said in a statement to Reuters that it denied “the relevant information”.

“We are evaluating the opportunity and possibility of manufacture localization in North America,” the statement said, adding that it has a dedicated professional team exclusively for each customer.

Sources told Reuters last year Apple was aiming to launch an electric car by 2024 https://www.reuters.com/article/us-apple-autos-exclusive/exclusive-apple-targets-car-production-by-2024-and-eyes-next-level-battery-technology-sources-idUSKBN28V2PY. Apple has not publicly disclosed its plans.

The stall in discussions comes at a time when U.S. President Joe Biden is seeking to make the United States a powerhouse in electric cars, setting a goal https://www.reuters.com/business/autos-transportation/biden-set-target-50-evs-by-2030-industry-backs-goal-2021-08-05 of having half of all new vehicles sold in 2030 electric.

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Any delays in securing battery supplies could further impede EV development for Apple which last month lost the head of its car project, Doug Field, after he decided to return to Ford Motor Co.

Tesla Inc, which has been making some of its Model 3 and Model Y cars in China with LFP batteries from CATL, said this week it intended to use that battery chemistry outside China as well.

CATL and BYD use a type of battery pack technology to improve the performance of LFP batteries. Without that, LFP batteries usually offer much shorter driving ranges and lower energy density than the more expensive lithium batteries that use cobalt and nickel.

(Reporting by Zhang Yan in Shanghai and Julie Zhu in Hong Kong; Additional reporting by Stephen Nellis in San Francisco and Tim Kelly in Tokyo; Editing by Edwina Gibbs)

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Oil up on OPEC+ plan to meet ahead of schedule if Omicron dents demand

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December 3, 2021

By Sonali Paul

MELBOURNE (Reuters) – Oil prices climbed on Friday, extending gains after OPEC+ said it would review supply additions ahead of its next scheduled meeting if the Omicron variant hits demand, but prices were still on course for a sixth week of declines.

U.S. West Texas Intermediate (WTI) crude futures rose 27 cents, or 0.4%, to $66.77 a barrel at 0122 GMT, adding to a 1.4% gain on Thursday.

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Brent crude futures rose 12 cents, or 0.2%, to $69.79 a barrel, after climbing 1.2% in the previous session.

The Organization of the Petroleum Exporting Countries, Russia and allies, together called OPEC+, surprised the market on Thursday when it stuck to plans to add 400,000 barrels per day (bpd) supply in January.

However the producers left the door open to changing policy swiftly if demand suffered from measures to contain the spread of the Omicron coronavirus variant. They said they could meet again before their next scheduled meeting on Jan. 4, if needed.

That boosted prices with “traders reluctant to bet against the group eventually pausing its production increases,” ANZ Research analysts said in a note.

Wood Mackenzie analyst Ann-Louise Hittle said it made sense for OPEC+ to stick with their policy for now, given it was still unclear whether Omicron could resist existing vaccines.

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“The group’s members are in regular contact and are monitoring the market situation closely,” Hittle said in emailed comments.

“As a result, they can react swiftly when we start to get a better sense of the scale of the impact the Omicron variant of COVID-19 could have on the global economy and demand.”

The market has been roiled all week by the emergence of Omicron and speculation that it could spark new lockdowns, dent fuel demand and spur OPEC+ to put its output increases on hold.

Brent was poised to end the week down about 4%, while WTI was on track for a 2% drop on the week, both down for a sixth straight week.

(Reporting by Sonali Paul; editing by Richard Pullin)

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Didi Global to start work on delisting from New York, to pursue listing in Hong Kong

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December 3, 2021

(Corrects last paragraph to say Reuters reported last month on Didi preparing for relaunch of its apps, not this month)

SHANGHAI (Reuters) -Chinese ride-hailing giant Didi Global will delist from the New York stock exchange and pursue a listing in Hong Kong, it said on Friday, after it ran afoul of Chinese regulators by pushing ahead with its $4.4 billion U.S. IPO in July.

The company made the announcement first on its Twitter-like Weibo account.

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“Following careful research, the company will immediately start delisting on the New York stock exchange and start preparations for listing in Hong Kong,” it said.

It later said in a separate English language statement that its board had approved the move.

“The company will organize a shareholders meeting to vote on the above matter at an appropriate time in the future, following necessary procedures,” it said.

Reuters reported last week citing sources that Chinese regulators had pressed Didi’s top executives to devise a plan to delist from the New York Stock Exchange due to concerns about data security.

The company pressed ahead with its New York listing despite a regulator urging it to put it on hold while a cybersecurity review of its data practices was conducted, sources have told Reuters.

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Didi is also preparing to relaunch its apps in the country by the end of the year in anticipation that Beijing’s cybersecurity investigation into the company would be wrapped up by then, Reuters reported last month.

(Reporting by Brenda Goh; Editing by Himani Sarkar and Edwina Gibbs)

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Exclusive-Toyota turns to Chinese tech to reach its electric holy grail

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December 3, 2021

By Norihiko Shirouzu

BEIJING (Reuters) – Toyota Motor Corp will launch an all-electric small sedan in China late next year, having turned to local partner BYD for key technology to finally make an affordable yet roomy runaround, four sources told Reuters.

Two of the four people with knowledge of the matter described the car as an electric holy grail for Toyota which has struggled for years to come up with a small EV that is both competitive on cost in China and doesn’t compromise on comfort.

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The sources said the breakthrough was chiefly down to BYD’s less bulky lithium-iron-phosphate (LFP) Blade batteries and its lower-cost engineering know-how – a turning of the tables for a Chinese company whose popular F3 saloon was inspired by Toyota’s Corolla back in 2005.

Little known outside China at the time, BYD, or “Build Your Dreams”, hit the headlines in 2008 when Warren Buffett bought a 10% stake and it has since become one of the biggest manufacturers of so-called new energy vehicles in the world.

Toyota’s new EV will be slightly bigger than its compact Corolla, the world’s best-selling car of all time. One source said think of it as “a Corolla with bigger back-seat section”.

It will be unveiled as a concept car at the Beijing auto show in April and will then most likely be launched as the second model in Toyota’s new bZ series of all-electric cars, even though it will only be on sale in China for now.

“The car was enabled by BYD battery technology,” one of the sources told Reuters. “It has more or less helped us resolve challenges we had faced in coming up with an affordable small electric sedan with a roomy interior.”

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It will be pitched below premium EVs such as Tesla’s Model Y or the Nio ES6 but above the ultra-cheap Hong Guang Mini EV, which starts at just $4,500 and is now China’s best-selling electric vehicle.

Two of the four sources, all of whom declined to be named because they are not authorised to speak to the media, said the new Toyota would be priced competitively.

One said it would likely sell for under 200,000 yuan ($30,000), aiming for a segment of the Chinese market Tesla is expected to target with a small car within the next two years.

“We don’t comment on future products,” a Toyota spokesperson said. “Toyota considers battery electric vehicles as one path to help us get to carbon neutrality and is engaged in the development of all types of electrified vehicle solutions.”

A BYD spokesperson declined to comment.

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‘ALL KINDA FLOORED’

The fact Toyota has been compelled to turn to BYD to solve its low-cost EV conundrum shows how far the competitive balance of the global auto industry has tipped in the past decade.

When the quality of Chinese vehicles was considered below par, global automakers were not too concerned that they couldn’t compete on price and left Chinese companies to control the domestic market for cheap, no-frills cars.

But times have changed.

Toyota executives started to worry back in 2015 when BYD launched its Tang plug-in hybrid, with significant improvements in styling, quality and performance. Most worrying was that fact it was still about 30% cheaper than comparable Toyota models.

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There was a critical turn of events in 2017 when Toyota’s top engineering leaders, including then-executive vice president Shigeki Terashi, drove several BYD cars such as the Tang at its proving ground in Toyota City near its headquarters in Japan.

Terashi subsequently visited BYD’s headquarters in Shenzhen and drove a prototype of its Han electric car.

“Their long-term quality is still a question mark, but the design and quality of these cars showed levels of maturity, yet they were much cheaper than comparable Toyota models,” said one of the four sources, who participated in the test drives.

“We were all kinda floored by that.”

Two of the sources said the BYD evaluations pushed Toyota to create its research and development (R&D) joint venture with BYD last year. Toyota now has two dozen engineers in Shenzhen working side-by-side with about 100 BYD counterparts.

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BLADE WINNER

Toyota’s new EV comes at a time it is under fire from environmental groups that maintain it is not committed to zero emissions. They say Toyota is more interested in prolonging the commercial usefulness of its successful hybrid technology.

Toyota executives say they’re not against battery electric vehicles (BEVs) but argue that until renewable energy becomes more widely available, they won’t be a silver bullet for slashing carbon emissions.

Nevertheless, Toyota has set up division in Japan dedicated to zero-emissions cars called ZEV Factory and it is developing safer and lower-cost battery technologies, including solid-state lithium-ion cells which would significantly boost an EV’s range.

While Toyota has long advocated a runaround that doesn’t compromise on comfort as the best way to popularise BEVs, it has struggled to produce such a car.

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One problem stems from need to stack bulky, heavy batteries under the floor, as they eat up the interior unless the roof is raised too – which is why many smaller EVs are SUVs.

In 2018, Toyota briefly explored the idea of a battery venture with BYD. That and subsequent interactions led Toyota’s engineers to come across BYD’s LFP Blade battery. They described it as a game-changer as it was both cheaper and freed up space.

“It’s a ‘scales fell from my eyes’ kind of technology we initially dismissed because its design is so radically simple,” one of the four sources said.

BYD officially launched its Blade battery in 2020.

LFP batteries have a lower energy density than most other lithium-ion cells but are cheaper, have a longer shelf-life, are less prone to overheating and don’t use cobalt or nickel. Tesla already uses LFP batteries in its Model 3 and Model Y in China.

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One of the sources said a typical Blade pack is about 10 cm (3.9 inches) thick when the modules are laid flat on the floor, roughly 5 cm to 10 cm thinner than other lithium-ion packs.

A BYD spokesperson said that was possible, depending on how an automaker packages the Blade pack in a car.

CUTTING CORNERS?

While Toyota has not fully solved the puzzle as to how BYD keeps coming in low on costs, two of the sources said one factor may be its abbreviated and flexible design and quality assurance process – which some Toyota engineers see as cutting corners.

Toyota’s planning process is much more rigid and thorough, the sources said. Once it has decided on the technologies, components and systems at the outset of a car’s three-to-four-year development process, it rarely changes designs.

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During the process, Toyota typically does three design prototypes and three manufacturing prototypes. Some are driven about 150,000 km (93,000 miles) to bullet-proof quality and reliability when testing for emissions or bad-road durability.

At BYD, engineers do far less prototyping – there are typically just two – and designs can be changed as late as two years into the process, which is a definite no-no at Toyota, one source said. A BYD spokesperson declined to comment.

But as a result of those last-minute changes, the technology in a BYD car is much more up to date than in a Toyota when it hits the market, and is often cheaper.

The four sources believe that further advances in simulation and virtual engineering know-how, as well as the fact that BYD produces a wide array of its own components, have helped it close potential gaps in quality and reliability that could stem from such last-minute design changes.

“Our challenge at Toyota is whether we dismiss BYD’s way of engineering as being loosey-goosey and too risky, or whether we can learn from it,” one of the sources said.

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($1 = 6.3703 Chinese yuan renminbi)

(Editing by David Clarke)

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