Investor excitement about China’s rapidly growing electric vehicle market helped make Tesla a USD 1 trillion stock, as well as turn its battery supplier Contemporary Amperex Technology Ltd. into an RMB 1 trillion (USD 148.1 billion) company.

CALB, a smaller rival of CATL, aims to rack up big numbers too. Liu Jingyu, the group’s chairwoman and chief executive who is among the highest-profile female executives in China’s male-dominated automotive industry, wants to raise CALB’s annual production capacity to 1 terawatt-hours worth of batteries by 2030 from 11.9 gigawatt-hours.

The company has applied to hold an initial public offering in Hong Kong. It is reportedly seeking to raise more than USD 1 billion in what could be the city’s biggest IPO this year.

CALB has momentum on its side, at least. It posted RMB 6.82 billion in revenue last year, nearly quadruple its 2019 sales. Its bottom line has improved even more dramatically, reversing from a net loss of RMB 156.4 million in 2019 to RMB 111.54 million in net profit last year.

While most Chinese battery makers are also seeing rapid sales growth, CALB’s spurt has moved it ahead of midsized peers like SVOLT Energy Technology, Gotion High-tech, and Farasis Energy to establish itself as the country’s No. 3 player behind CATL and BYD, even though it set its focus on passenger car batteries just four years ago. Based solely on its domestic success, CALB now ranks No. 6 globally, according to data cited in its preliminary prospectus.

CALB batteries accounted for 8.6% of new installations in China in March, according to data gathered by investment bank Jefferies, up from a 5.7% share in January 2021. Over the same period, CATL’s share slipped from 53.3% to 50.5%. Meanwhile, much of BYD’s output goes into the group’s own vehicles.

In contrast to CATL, which was founded by an entrepreneur, CALB started under the wing of the China Airborne Missile Academy, which belongs to the Aviation Industry Corp. of China (AVIC), a leading state-owned aerospace and defense conglomerate.

Control of CALB has since shifted to the eastern municipality of Changzhou, with government support continuing to play a crucial role in the company’s electrifying rise in the form of direct financial aid, co-investment in factories, and orders from state-owned carmakers.

Last year, CALB received RMB 364.51 million in government subsidies, triple its total net income, according to its financial filings. Many of its new factories are being set up as joint ventures with local governments, with some following Changzhou’s path of investing directly into CALB.

In January, CALB reached a deal with Jiangmen, Guangdong Province, to invest RMB 10.2 billion into a 50 GWh battery plant in which the city would hold a 49% stake, according to the company’s preliminary prospectus. The following month, CALB reached a matching deal with the city of Xiamen. Xiamen-controlled companies, in turn, hold a 16.9% stake in CALB, making the city the manufacturer’s second-largest shareholder.

State-owned Guangzhou Automobile Group last year alone accounted for 51.9% of CALB’s revenues, with the battery maker supplying 70% of the power units for the car producer’s main EV division. The group, known as GAC, also controls a 4.2% stake in CALB.

Chang’an Automobile, another state-owned group, was CALB’s second-biggest customer, at 13.9% of total revenue. State-controlled Dongfeng Motor is also a client, but it and Chang’an rely primarily on CATL for supplies, according to industry data.

CALB has attracted some private backers. Xiaomi founder Lei Jun controls a 2.6% stake, according to the battery group’s preliminary prospectus, while a fund affiliated with U.S. venture investment group Sequoia Capital holds 2.4%.

Private-sector clients include Zhejiang Geely Holding, Leapmotor, and Xpeng, which was CALB’s third-largest customer last year. Geely and Xpeng buy more batteries from CATL than from CALB, however.

“CALB managed to secure orders from top-selling EV makers due to its cheaper pricing compared to rivals such as CATL,” said Yang Yongping, executive director of investment research company EqualOcean in Beijing.

Tu Le, managing director of consultancy Sino Auto Insights in Beijing, said that CALB also appeals to automakers looking to diversify their supply chain, given CATL’s prioritization of orders from Tesla and market dominance which can lead it to demand substantial prepayment from other car groups.

“[Carmakers] hate it when a supplier is this important to them,” said Tu, a veteran of both Ford Motor and General Motors. Referring to CATL, he added, “They are dictating the price and the terms because they have a 50% share.”

He believes CALB is now targeting foreign carmakers, whose support would give it a higher global profile. The company set up a research and sales subsidiary last year in Germany and has a U.S. distributor. However, 97.8% of CALB’s battery installations so far have been in China, and revenues from the U.S. reached just RMB 56.7 million last year.

But CALB’s military background could be an obstacle in Western markets. AVIC is already on a U.S. investment blacklist of Chinese military-linked companies and retains an 11.7% interest in CALB.

In preparation for its Hong Kong IPO, CALB formalized a split in March with China Lithium Battery Technology (Luoyang), the AVIC Missile Academy unit which previously oversaw CALB.

According to its prospectus, CALB decided to spin off all military-related work to the Luoyang company “to minimize the impact and potential risk … and to implement our group’s globalization strategy.” It also formally changed its name to CALB from China Aviation Lithium Battery Technology.

Richard Kim, the lead auto battery analyst for S&P Global Mobility in Seoul, said that CALB needs to further improve its technology “for sustainable growth of its business in the market.”

Indeed, CATL filed suit against CALB last year for alleged patent infringement. CALB has denied wrongdoing and is contesting the claims.

CATL is also pouring funds into new capacity, targeting 880 GWh by 2030, with SVOLT and Gotion following suit with their own ambitious plans. Consultancy Wood Mackenzie tallied 3 terawatt-hours worth of announcements from Chinese producers through late March while noting it expected “many more new plant announcements in 2022.”

CALB did not respond to a request for interview.

Liu, who joined CALB when it shifted its focus to passenger vehicles, is a trained accountant who previously helped turn around Tianma Microelectronics, a liquid-crystal display maker controlled by AVIC.

When announcing her new stretch targets for CALB at a news conference in November, she said, “There is a big gap in the demand for battery capacity. Whoever can make good products and serve the market well will enlarge the market.”

This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.