Why 90 % of power battery companies will be eliminated

Data from the association of countries, 2017 sales of new energy vehicles in China 777,000 vehicles, is expected in 2018 sales of new energy vehicles in China is expected to exceed one million vehicles. Rapid growth in new energy vehicles has also stimulated the rapid development of the power battery market. Data show that in 2017, the total installed power of new energy vehicles(EV + PHEV) was about 36.24 GWh, up 29.4 % from 28 GWh in 2016.

The rapidly growing market also brings many problems to the development of the power battery industry. On the one hand, the problem of overcapacity is beginning to emerge. Statistics from relevant research institutions show that in 2017, the installed capacity of power batteries in China was only 36.24 GWh. In fact, the output of power batteries in China in 2017 was 44.5 GWh. Therefore, the overall inventory of power batteries in 2017 accounted for about 18.7 % of the total production.

Lithium-iron phosphate batteries will face more severe overcapacity problems in the next 1-2 years. Lithium-ion batteries will have stage overcapacity. However, in the medium and long term, China's power battery industry still has a lot of room for growth. According to the data on the output of the vehicle's output certificate, by 2020, China's domestic power lithium battery demand will be about 90 GWh, by 2025. The demand for power cells will reach 310 GWh.

On the other hand, the concentration of the power battery industry has increased. The total installed power of the top ten power battery companies was 26.22 GWh, accounting for 72.3 % of the total installed capacity. In the Ningde era, with 10.4 GWh installed capacity, the market share was nearly 30 %, while the second-ranked BYD installed capacity was 5.43 GWh, with a market share of about 15 %. Other companies such as Wotema, Guoxuan Gaoke, and Bic Power are ranked between three and ten, with a market share of no more than 6.5 %.

In addition, higher power cell production also stimulated higher prices for upstream raw materials. Coupled with the adjustment of state subsidy policies and the price reduction of downstream vehicle companies, many power battery manufacturers have begun to encounter "winter" one after another.

Profits of several power battery companies fell sharply or grew significantly in 2017, according to financial reports. Take Guoxuan Gaoke as an example. In 2017, its total revenue was 5.048 billion yuan, an increase of 6.1 % year-on-year; The net profit of shareholders belonging to listed companies was 920 million, a year-on-year drop of 10.73 %. However, in 2016, the total revenue and net profit of shareholders belonging to listed companies increased by 73.3 % and 76.35 % respectively.

According to statistics from third parties, domestic power cell production capacity has exceeded 200 GWh in 2017. However, even if the production of new energy vehicles in China reaches 2 million by 2020, the demand for power lithium batteries is only 170 GWh. As a result, power cell capacity is now seriously overcapacity.

In a state of extreme imbalance between market supply and demand, the natural law of survival has been put in place. In 2016, there were still 116 shipping companies in the power battery market. However, according to the number of companies supporting the promotion of the catalog in the first ten batches before 2017, 31 companies have disappeared from the list, leaving only 85. More experts predict that the number of power battery companies will shrink further to less than 50 in 2018.

Fangjianhua, the former president of Guoxuan Gaoke, once told the media that 2017 is only the beginning and that the next elimination will be faster. By 2020, more than 90 % of power battery companies will be eliminated.

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