What will happen if Korean power cells enter China?

At present, China-ROK relations have maintained a sound development momentum. South Korean battery companies, which have lost three years of rapid growth in China's new energy car market, are preparing to continue to invest more in China to increase production capacity. How to view Korean battery companies entering the Chinese market is a topic worth discussing.

The introduction of Korean batteries is controversial, and the three years from early 2016 to mid-2018 did have some impact.

First of all, the South Korean electric core can not obtain subsidies. Bus and some passenger car companies can only choose among domestic electric core companies, which objectively encourages domestic electric core companies to invest heavily, resulting in a period of impulse and shortage of supply. As a result, large and small battery companies have expanded their production capacity through various investment methods, but in fact they can stabilize supply and reach the level of qualified auto parts suppliers.

Due to the inability of South Korean power core to enter the Chinese market in 2016, some car companies have delayed the process investment of battery core to modules and modules to Pack, resulting in a less clear division of labor between battery companies and automotive companies. At present, the car company has basically established its own manufacturing process to engage in modules and then to engage in Pack. For the front-end module design, most of them still use the plan of the electric core company.

The second is the restriction on the downstream. The business of third-party Pack companies has been suppressed in the absence of qualified core supply, and vehicle companies have less room to choose from in the supply of Pack. Objectively, under the condition that there are many products that can provide product differentiation, price differentiation, and development capabilities, the improvement of system integration and core product characteristics should be two-way, but at present, the Pack supply is artificially locked.

Most of the state's financial subsidies are used to grow parts, but the effect is not particularly good. When money is easy to make, the components think of strange business models, such as eco-reverse, chain locking in the form of alliances. Money is transferred, but it is not based on technology or market behavior. To a certain extent, the technological strength and market competition level have not been effectively increased.

The current basic policy trend is that direct financial subsidies are rapidly declining, and the country's hope is to reduce cash incentives early, and subsidy funds are the capital input that can not be ignored by various auto companies at the current policy level. The dual-point policy, which will gradually replace direct financial subsidies, is expected to bring balance to the entire automotive industry and require the full participation of the entire automotive market. Joint ventures need to be able to balance the fuel truck and new energy vehicle product lines and use a reasonable ratio to leverage the adjustment of supply structures. The result is that electric cars will become as cheap as fuel cars, and the proportion of electric cars and fuel cars will also be reasonable based on market demand.

So for now, the entry of Korean battery companies into China is likely to give the market several incentives:

1. Shared car companies tend to give priority to Korean batteries

Korean battery companies have been playing an important role in the global electric vehicle supply chain. Due to the particularity of new energy vehicles, the production capacity of a car limits the number of suppliers. Excellent suppliers can make the joint venture adopt high-quality battery systems globally and reduce development costs.

In fact, in the latest announcement batch, PHEV passenger car companies tried to start using Korean batteries, as follows:

At present, South Korean battery companies have begun to increase investment in the country, and production capacity will also cut in after the subsidy slope of 2019-2020, relying on the experience of developing and launching electric models abroad.

The joint venture also has a major demand for supply chain security. Before the domestic market because of battery directory protection, willing to keep up with the upgrade of ternary battery technology, there are not so many battery companies that choose to work on costs and products. Many companies are addicted to the dividends of subsidies and are reluctant to invest large amounts of money in development and continuous improvement. This poses a big problem: there are very few Chinese electric core companies that can select very suitable vehicles.

2. Domestic car companies will increase their demand for quality brands

The role relationship between suppliers and vehicle manufacturing is progressive. With the opening of the private consumer market, the purchase of auto parts will become more and more intense for quality brands, focusing on price negotiation rights, battery companies 'engineering capabilities, and battery quality. And follow-up services.

At present, domestic battery price negotiation is a very sensitive topic. Although this is only temporary, in the case of qualified engineering and quality, the battery purchase of the OEM can maximize the discussion with several suppliers for the current and future strategies. The price has more room for manoeuvre.

In terms of engineering capabilities, vehicle companies will continue to try to provide users with different products in product development, which has led to the demand for vehicle system integration based on different configurations. In the case of limited supplier support, the acquisition of collaborative development and product data transparency has become a great problem. Systems integration is responsible for the safety, performance, and life of battery products. If a car company can communicate with multiple suppliers that compete in the normal market, it can obtain a more optimized and reasonable solution.

In terms of quality and follow-up, the car projects that each company can undertake are limited. The core is the post-sale problem handling and response speed after mass production. This has high requirements for supplier quality control, engineering support and project management.

There is also systemic risk: if most companies end up with a product with the same design, the product itself should have a very large insurance factor. This common choice is more the result of long-term trial and error.

3. Industrial management policy will be based on more thorough research

We often say that the introduction of Tesla into the domestic market and a certain degree of compromise is a hint of industry managers to domestic automakers: you need to understand the objects that the entire auto industry needs to match in the future. It is very necessary for domestic battery companies to feel certain pressures and constraints. This pressure does not mean that the industry will return to the low-price competition in 2016, but it needs to have a comparable sample in terms of technology, cost and supply. So that domestic battery companies can quickly achieve mergers and acquisitions, and integrate large and small battery companies into qualified power battery enterprise suppliers on various technical routes.

When industry managers guide the direction of technology, if there are sufficient opportunities for research and balance, it is easier to hear the full range of voices, make more accurate decisions on current and future technological developments, and thus formulate more reasonable industrial policies.

4. Battery value chain is being restructured

From the perspective of the lithium battery industry chain, mineral resources, battery materials, and core manufacturing have different profits that can be obtained by different characters. At present, the upstream mineral and material parts account for a relatively large value chain. In the future, if the entire lithium battery industry is to be fully implemented, more efforts need to be made at the end product level to reshape the battery value chain.

Summary:

After the steep decline in subsidies, the role of Korean batteries in technology, supply chains and the entire value chain has remained positive. With competition, the development of the power battery industry can not achieve sustainable and competitive development in the current state of protection.

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