Politics aside, China's CATL ramps up cell production in Germany

ARNSTADT, Germany, Jan 26 (Reuters) - Chinese battery giant CATL (300750.SZ) is putting down roots near the small central German town of Arnstadt, ploughing ahead with the ramp-up of battery cell production despite uncertainty over Germany's future relations with China.

The Arnstadt plant delivered its first sample cells to customers in December and aims to have six production lines running this year.

At full capacity, the 14 gigawatt-hour (GWh) plant can make 30 million cells annually - enough to power around 350,000 electric cars with a 40 kilowatt-hour battery. CATL expects to receive approval in June to raise that capacity to 24 GWh.

For now, the materials used are mostly imported from China, partly because CATL has long-term relationships with suppliers there. But some Chinese suppliers have set up shop in Europe near the Arnstadt plant, CATL's Europe president Matthias Zentgraf said in an interview.

Long term, the battery maker hopes to localise its supply chain further and is organising a supplier conference later this year in Weimar, around a half-hour drive away, to start building relationships, Zentgraf said.

CATL will be the largest battery maker in Europe once its planned 100-GWh plant in Hungary reaches full capacity. Construction is due to start in the second half of this year with the aim of starting production in 2-3 years, Zentgraf said.

"We're just at the start. Long term, when volume grows, we will reassess our supply relationships," he said.

Some 44% of planned battery capacity in Europe by 2030 is from Asian companies, data shows, with CATL top of the list - prompting some concern in political circles on an over-reliance on foreign producers for a key technology.

Such concerns are particularly prevalent in Germany, where the government is developing a strategy on China which aims to reduce economic dependence on what is currently the country's largest trading partner.

"I don't find it good," Zentgraf said of the strategy under development, echoing others in the autos industry who fear the strategy's tone will strain their relationship with China.

"On a personal level, it doesn't help... but I try to carry on with my daily job and let it affect us as little as possible, despite not knowing how the political circumstances will pan out."

($1 = 0.9184 euros)

Reporting by Victoria Waldersee, Writing by Miranda Murray; Editing by Madeline Chambers and Mark Potter

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