Dynamic Battery Market Pattern Differentiation Li-Electric New Energy Core Material Industry takes the lead

China's power battery industry is developing rapidly, and companies have had mixed results last year.

In 2017, the Ningde era, BYD, and Wotema ranked among the top three domestic installed capacity with 10.5 GWh, 5.65 GWh, and 2.41 GWh, respectively, and the Ningde era alone accounted for 30 % of the market share.

In addition to BYD, lishen, BAK and other traditional battery giants, there are four new faces in the top ten companies in terms of power battery installed capacity in 2017 – Fu Neng Technology, Beijing Guoneng, Yiwei Lithium and Suzhou Xingheng Quickly join the fierce competition in power batteries.

In terms of profits, the battery companies ranked in the top ten installed capacity show a polarization trend. In the era of Ningde, net profit reached 4.288 billion yuan, an increase of 38.8 % year-on-year. Wotema's parent company, Kennedy, is expected to lose 3.68 billion yuan for the year.

As Wotema's profits did not reach expectations in 2017, and the future profit level was significantly different from expectations, Wotema issued an announcement on April 19, fully accounting for the goodwill generated by the acquisition of the company. In 2016, the business generated by this merger was hailed as 4.61 billion yuan.

Profits also fell, according to published annual reports or performance letters, along with BYD and Guoxuan Gaoke.

BYD's 2017 net profit fell 19.5 % from a year earlier to 4.07 billion yuan due to a drop in new energy subsidies and lower sales of fuel cars. BYD expects net profit to fall 75.24 % -91.75 % in the first quarter of this year.

Guoxuan Gaoke said in the announcement that due to the adjustment of the new energy vehicle subsidy policy, domestic power battery prices generally fell in 2017, while the price of upstream raw materials rose, affecting the overall profit level. The company is expected to achieve a net profit of 920 million yuan in 2017, a year-on-year drop of 10.73 %.

Data show that by the end of 2017, the price of power cells dropped by 20 % -25 % from the beginning of the year. The price of lithium iron phosphate batteries dropped from 1.8-1 .9 yuan/Wh at the beginning of the year to 1.45-1 .55 yuan/Wh at the end of the year. The price of a ternary power battery pack dropped from 1.7-1 .8 yuan/Wh at the beginning of the year to 1.4-1 .5 yuan/Wh at the end of the year.

According to the goals proposed by the Ministry of Industry and Information Technology in the "Medium-and Long-term Development Plan for the Automobile Industry", by 2020, the new energy automotive power battery system will strive to reach 260 watt/kg in energy and the cost will be reduced to 1 watt/watt-hour.

But raw material prices have risen instead of falling. The price of lithium carbonate rose by more than 30 per cent in 2017 as electrolytic cobalt rose by more than 100 per cent, and the cost of some types of triple-electrode materials increased by nearly 50 per cent, according to the Institute of Securities. The price of negative materials also increased slightly.

In 2017, the output value of China's four major power battery materials (positive, negative, diaphragm, and electrolyte) was 61 billion yuan, a year-on-year increase of 62 %. The output value of positive material accounts for the largest, accounting for 71.5 %, and the output value of this material has increased the most.

Sugiyama, a lithium-ion battery-material company, reported a net profit of 896 million yuan last year, up 171.42 % from a year earlier, as the business of positive materials rose sharply. When the company's lithium material business revenue was 1.929 billion yuan, it increased 89.41 % year-on-year, and sales increased 21.73 % year-on-year. Driven by the lithium material business, Dangsheng Technology achieved a net profit of 250 million yuan in 2017, an increase of 151.79 % year-on-year.

Some upstream enterprises have also joined the competition of ternary materials by expanding the layout of the industrial chain. At present, Huayou Cobalt Co., Ltd. has a ternary cathode material production capacity of 20,000 tons/year. This year, Huayou Cobalt Co., Ltd. also established a joint venture with South Korea's Pohang Steel and LG Chemical to produce precursors and cathode materials. Xiamen Tungsten Industry also expanded its cathode material capacity by 16,000 tons in Xiamen and Sanming, and designed a production capacity of 20,000 tons in Ningde.

Also driven by the demand for power cells and related lithium power, Tianyi Lithium, a supplier of new energy core materials for lithium, hit a record high in 2017, achieving revenue of 5.47 billion yuan and net profit of 2.15 billion yuan, both of which increased by more than 40 % year-on-year. The Li Feng industry achieved a net profit of 1.469 billion yuan, a year-on-year increase of 216.36 %.

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