Briefly describe the hidden worries behind the boom in power battery

“In 2017, the production and sales scale of new energy vehicles is expected to reach 700,000 units, accounting for 2.4%-2.5% of the total production and sales of automobiles.” Wu Wei, Director of the Machinery and Equipment Division of the Industry Coordination Department of the National Development and Reform Commission, held the second power of 2017. The Battery Application International Summit and the 3rd China Battery Industry Intelligent Manufacturing Symposium said.

The development of new energy vehicles has given birth to the prosperity of related industry chains. According to Wei Wu, China has emerged a number of companies with internationally influential power battery drive systems, with an increasingly developed charging service system, industry technical service testing and certification platform and operational monitoring data system, and in these areas at the forefront of the world.

Behind the prosperity, there are also hidden concerns: insufficient enterprise intelligence manufacturing capability, cost squeeze, inventory shortage, and policy stability need to be further improved, which has become a drag on the development of the industry.

Industry scale leads the world

"From the perspective of industry scale, from last year to the first three quarters of this year, China's power battery shipments accounted for nearly 70% of the world, the world's top 10 power batteries, China's seven industry's leading global scale." China's chemical and physical power supply Jianhua Fang, senior consultant of the Industry Association power battery Application Branch and partner of the National Science and Technology Achievements Transformation Fund New Energy Vehicle Venture Capital Fund, said.

Despite the rapid development of China's power battery industry, in the view of Yanlong Liu, secretary general of the China Chemical and Physical Power Industry Association, the entire domestic power battery industry in 2017 was “ups and downs”. This is mainly reflected in the fact that at the beginning of this year, affected by the new energy subsidy new policy and the re-examination of the new energy vehicle promotion catalogue, the vehicle manufacturers and power battery companies in the first quarter were busy with product adjustment, especially the latter in the production line, technology, process, product specifications, etc. The aspect adjustment is very large.

Under the good expectation of the power battery market demand, the power battery field has become a hot spot for the capital market. According to statistics, in the first half of the year, the investment in lithium-ion battery industry related projects exceeded 120 billion Yuan. The expansion of scale is accompanied by technological advancement and innovation. According to Yanlong Liu, “Battery energy density has increased by almost 10% per year in the past five years. Now, the energy density of battery produced by many leading enterprises in industrial scale has been 180Wh/kg, 200Wh/kg or even 220Wh/kg.”

Under technological advancement and scale production, the price of power batteries has also entered a rapid decline channel. According to reports, the average annual price reduction of battery prices in the past five years has reached 10% - 15%. "In addition, China has a complete industrial chain in the power battery industry. From the perspective of battery core materials, the four core materials such as lithium iron phosphate, ternary, and negative electrode materials such as artificial graphite and natural stone have all been fully localized. This is of great benefit to improving competitiveness, especially in reducing costs." Yanlong Liu said frankly.

Overcapacity, profit compression

Although the power battery has become fertile ground for investment, it still needs to remain calm in this round of capital boom. "At present, the investment in the power battery industry is hot, and many funds want to enter, but it is far from being as simple as imagined. There are problems that need to be solved behind it." Yusheng Yang, an academician of the Chinese Academy of Engineering, said in an interview with reporters during the meeting.

Yusheng Yang bluntly said, "At present, there are large inventory of power battery companies, and there is a problem of overcapacity in the industry." The data shows that the output of domestic power batteries in the first three quarters has reached 31.5Gwh, and the installed capacity of various new energy vehicles. It is only about 14.7Gwh.

"In addition, the increase in production capacity in the power battery specification at the end of last year has also prompted a large number of power battery companies to expand production capacity. It is expected that the overall capacity of power batteries is expected to reach 228Gwh by the end of this year, an increase of 125% over last year, which will further cause a serious excess of industry capacity."

The direct impact of capacity expansion is profit compression. In the buyer's market, the industry is fiercely competitive. “Many companies have to sell at a reduced price. This kind of financial pressure is beyond the tolerance of the entire industry, which will inevitably lead to serious consequences.” Yanlong Liu further said. In addition, this year, the power battery industry has been squeezed by two ends – one is the subsidy for the new energy vehicle subsidies, the most direct way to reduce the cost of the power plant is to reduce the purchase cost of the power battery; one is the price of the upstream material lithium carbonate and cobalt raw materials. Continued bullish, profit margins are being swallowed up a little bit.

A number of participants also said at the meeting that the future power battery industry should continue to improve in terms of manufacturing capacity, management level and safety. "In terms of smart manufacturing, China's power battery companies have just started to change from manual semi-automation to automation, but there is still a long way to go from smart manufacturing. In terms of management level, there are also companies in Japan, Japan, South Korea and Germany. There is no small gap; in addition to strengthen security concerns, we must pay attention to security from the national, industry and enterprise levels," Jianhua Fang added.

Industry concentration continues to increase

With the rapid development of the industry, the concentration of the power battery industry continues to increase, and the leading role of the industry leader continues to emerge. The data shows that in the first nine months of this year, the market share of the two companies in Ningde and BYD is close to 50%, and the market share of the top 10 companies is 75%. First-tier enterprises are gradually eroding market share through technological advantages, while low-end production capacity of second- and third-tier enterprises is facing a crisis of elimination. Supporting and strengthening the industry and improving industrial concentration are the industrial requirements put forward by the competent national authorities for the new energy vehicles and the power battery industry.

Yanlong Liu judged that in the future, the new energy vehicles and power battery industry will concentrate most of their production capacity on a few large enterprises, while other energy-consuming and diversified new energy vehicles and power battery companies will be more brutal in the future. "Automobile companies need to adjust, and power battery companies need to adjust. Whether it is to integrate various resources with upstream and downstream enterprises, or to reorganize with large enterprises or enter other more segmented markets, power battery companies should start to consider and "The plan." Yanlong Liu suggested, "Enterprises must actively change the development mode, from capacity expansion to quality improvement and efficiency. Through technological innovation, production automation and management standardization accelerate the realization of intelligent battery manufacturing."

Wu Wei suggested that “power battery companies should focus on further extension in two aspects. First, they must have deeper, closer and more relevant cooperation and participation with automobile companies, and they must have deeper, broader and more energy companies. It will form of cooperation, ultimately transforming battery companies with product technology competitiveness into enterprises with service and related industry development capabilities."

Policy stability has also become a common appeal of the participants. Since 2009, subsidies and government fiscal and taxation policies have played an important role, greatly promoting the development of the power battery industry. “The subsidy policy for new energy vehicles should not be adjusted frequently. After the adjustment of technical conditions, the verification process of all supporting experiments must be redone. It not only takes time and effort, but also causes the interruption of supporting products. The current subsidies are greatly reduced, and the market scale is expanded. Next, to promote industrial technology advancement, it should be mainly played by the market, allowing users to choose technology. The state should strengthen the supervision of the application market, and can blacklist the power battery companies with more problems." Yanlong Liu pointed out.

"A truly market-competitive industry should not be affected by too many fiscal and taxation policies. Fiscal and taxation policies are a kind of support and a supplement, but they should never be the dominant factor in the market." Wu Wei said, "Relevant authorities should study policies to maintain stability and create a better market environment for the development of the industry. Non-fiscal and taxation policies may be more important and sustainable."

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