CATL is shut out of the US market and has responded by licensing its battery technology to American manufacturers rather than owning plants there, an arrangement usually described as capital-light. Summerford, a forensic accountant, reads it instead as a retreat that leaves the company with no physical assets and an IP link US regulators can cut at will. His co-host concedes the point, noting CATL itself learned manufacturing from BMW.
Now for the other side of the story, because no thesis survives without the bear case. Beyond the risk we talked about though, are there any more worth putting on the table before I get in there?
…I think it's a clever way to circumvent the restriction and it's a template that CATL could repeat with other partners. But having said that, as I mentioned, it's still in the early stage and it's not a done deal yet. So the risk is still very real and something investors need to watch out for.
…into a low-rent IP landlord. This model makes CTL, CATL, what I would call a ghost in the machine, vulnerable to a stroke of the pen, where the U.S. regulators can sever the IP link at any time and leave CATL with zero physical assets to reclaim. Not only a stroke of the pen loss, by handing over the blueprint for high-density packs to Ford and GM, not only are you handing over the blueprint, CATL is training the very competitors who seek to exclude it. Let's call it LRS leakage. You're right. It's a threat that is very real.
Yeah, I totally agree. As the LRS framework evolves, this will be an important aspect to watch out for. I mean, after all, CATL itself learned the manufacturing skills from other players such as BMW. So it's definitely possible for U.S. manufacturers to learn from CATL. Although with the high RD…
Manush, and I agree. Before we talk about valuation, let me jump in and amplify some of those risks. Present a little bit more on the bear case for CATL. The volcano celebrates volume growth as a sign of dominance, but a forensic look at the numbers reveals a treadmill effect. Recall, I'm a…
Thanks, Ralph.