Termination of Acquisition! CATL Shifts to Nearly 3.2 Billion Yuan Equity Investment

On the evening of January 13, Fuling Precision (300432.SZ) announced several major developments. The company disclosed the termination of a significant asset restructuring plan. It also proposed issuing new shares to specific investors.

Specifically, Fuling Precision plans to introduce CATL as a strategic investor. The original plan involved equity cooperation with its subsidiary, Jiangxi Shenghua. This has now changed to a comprehensive strategic partnership. The new partnership covers both the parent company’s equity and its business operations.

In short, the collaboration between Fuling Precision and CATL has shifted from restructuring to a private placement. Reports indicate CATL will subscribe to 233 million Fuling Precision shares at RMB 13.62 per share. This represents a total investment of RMB 3.175 billion. After the offering, CATL will hold a 12% stake in Fuling Precision.

This move is not just a financial investment. The two parties have signed a Strategic Cooperation Agreement. Under this agreement, CATL will buy at least 3 million tons of lithium iron phosphate (LFP) products from Fuling Precision over the next three years. Their cooperation will also extend to other fields. These include new energy vehicle electric drive systems, robotic joints, intelligent chassis, and power systems for low-altitude aircraft.

**From On-and-Off Collaboration to Comprehensive Partnership**

Fuling Precision was founded in 1997. Its main businesses cover automotive engine components, new energy vehicle intelligent electronic control systems, and lithium battery cathode materials. The company focuses on the research, production, and sales of these products.

Its lithium battery materials division relies heavily on CATL. The two companies began cooperating in 2020. At the end of September that year, Jiangxi Shenghua became a supplier of LFP materials for Jiangsu Times. Jiangsu Times is a wholly-owned subsidiary of CATL.

In 2021, the companies established a capital relationship. CATL and its affiliate Changjiang Chendao jointly increased their investment in Jiangxi Shenghua. By 2022, CATL and Changjiang Chendao each held a 20% stake. Jiangxi Shenghua then became an associate of CATL.

However, the relationship between CATL and Jiangxi Shenghua later became unstable.

In August 2024, Fuling Precision announced a buyback. It repurchased all Jiangxi Shenghua equity held by CATL and Changjiang Chendao. The transaction completed in October 2024. Alongside suspending equity cooperation, both parties signed a Business Cooperation Agreement. CATL agreed to provide an advance payment to support capacity expansion at Jiangxi Shenghua's facility. They also entered into a long-term procurement agreement.

In 2025, CATL re-engaged. It invested RMB 400 million in March to reacquire an 18.74% stake in Jiangxi Shenghua. Then, in September, CATL signed another advance payment agreement worth RMB 1.5 billion. CATL also planned a further capital injection of RMB 2.563 billion. This would have given it a 51% stake and control of Jiangxi Shenghua.

The latest announcement changes these plans. CATL will no longer take control of Jiangxi Shenghua. Instead, it will make a strategic investment in the parent company, Fuling Precision. The two firms will also establish a comprehensive strategic partnership.

**What Makes Fuling Precision So Appealing?**

The cooperation timeline shows a change in CATL's equity stake in Jiangxi Shenghua. However, CATL's commitment to Fuling Precision has remained consistent and has deepened.

Why does CATL favor Fuling Precision? What are the strategic reasons?

First, CATL is securing resources for future competition through various collaborations. This is the most obvious reason.

Current trends suggest lithium iron phosphate (LFP) will remain the dominant battery technology. The industry is rapidly shifting toward fourth-generation LFP, known as high-density LFP. The industry defines materials with a compaction density above 2.6 g/cm³ as high-density LFP. Producing such products requires advanced technology. Currently, only a few leading companies mass-produce them.

Jiangxi Shenghua pioneered the oxalic acid iron(II) technology route for LFP materials in China. This technology uses divalent iron as a raw material. It differs from routes that use trivalent iron sources. The oxalic acid iron(II) process needs only one sintering step. It does not require carbothermal reduction. This leads to more uniform carbon coating and simpler production. It also means lower energy consumption and a smaller equipment footprint. Jiangxi Shenghua's products currently achieve a compaction density around 2.6 g/cm³. Its existing capacity for high-density LFP is 300,000 tons.

A deep partnership with Fuling Precision gives CATL a technologically advanced supplier. It also strengthens CATL's influence within the supply chain.

Additionally, CATL has secured future LFP supply from Ronbay Technology. Ronbay is a ternary materials company. The agreement is worth over RMB 120 billion over five years. This "trillion-yuan long-term order," combined with the "strategic equity investment," solidifies CATL's supply chain. It will also increase industry concentration in the LFP sector. Market share will likely consolidate around leading, low-cost producers.

Second, CATL values resource coordination across the industrial chain. The partnership goes beyond LFP. It includes integrating Fuling Precision's energy storage components into CATL's projects. These components include pumps, valves, and controllers. Cooperation also covers electric drive systems, motors, and robotic electric joints. These will be part of CATL's ecosystem projects. The projects include CTC chassis systems, energy storage solutions, robotics, and low-altitude economy initiatives.

Fuling Precision will use the RMB 3.175 billion from the private placement for several projects. These include a high-end energy storage LFP project with an annual capacity of 500,000 tons. Funding will also go toward key components for new energy vehicle electric drive systems. Other projects involve integrated robotic electric joint systems, key components for intelligent chassis by-wire systems, and key components for low-altitude aircraft power systems.

For Fuling Precision, deeper ties with CATL enhance its core business. It helps the company become an "LFP leader and intelligent control pioneer." It also reduces risks linked to technology roadmap choices.

"The LFP industry is vast and needs substantial investment. If Fuling Precision invested alone, we would face many uncertainties. Demand for high-density LFP is immense, and the technology keeps evolving. As the industry leader, CATL's direct involvement can help strengthen this technology path," said Li Pengcheng. Li is the Vice Chairman of Fuling Precision. He made these remarks in a previous interview.