R&D investment exceeds 600 million: Huanyu aims to become one of the "top five in the world"

The market size of lithium batteries is huge. According to relevant statistics, by 2015, the production capacity of lithium batteries will exceed 5 billion Ah.

On October 21, Li Zhongdong, chairman of Henan Huanyu Group, stated bluntly in an interview with reporters that Huanyu’s goal is to become one of the top five lithium battery solution providers in the world.

Li Zhongdong said that the rapid development of solar energy, wind energy storage power stations and electric vehicle power battery demand in China has made the lithium battery market have unlimited expansion potential. Huanyu has also made great efforts in the development and monitoring of battery research and development equipment through two generations of efforts. "I dare not say that it is the best in China, but it is definitely one of the best in China."

Huge market

With the rise in oil prices and the occurrence of the Japanese nuclear crisis, renewable energy such as new energy vehicles, solar energy, lithium batteries, and wind power have become popular among investors.

Li Zhongren introduced that solar energy and wind energy are gradually declining due to reasons such as high costs and difficulties in power transmission, while the investment advantages of new energy and lithium batteries are becoming more prominent.

Recently, CCID Investment Consulting Company released the "China Lithium-ion Battery Industry Map White Paper (2011)", which shows that in 2010, the scale of China's lithium battery market reached 27.61 billion yuan, a year-on-year increase of 37.9%. In terms of output, China's lithium-ion battery output reached 3.67 billion pieces in 2010, a year-on-year increase of 33.9%.

Li Zhongdong introduced that the substantial increase in lithium battery production capacity came from large-scale short-term capital investment.

Wang Xia, chairman of the Automotive Industry Committee of the China Council for the Promotion of International Trade, said that from 2010 to 2011, China's automobile production and sales increased from more than 2 million to 18 million, with an average annual growth rate of 24.2%, making it the world's largest automobile manufacturer.

At the same time, the huge resource consumption, energy and environmental pressures brought about by the automobile industry also need to be urgently addressed. In comparison, the development advantages of electric vehicles have also become more prominent.

This transformation, in the first year of the 12th Five-Year Plan, coincidentally pointed to new energy vehicles. The reporter learned that in the 12th Five-Year Plan, the new energy vehicle industry was defined as a "leading industry in the national economy". In the next 10 years, the central government will provide a huge amount of funds of more than 100 billion yuan to support it.

It was in this environment that Huanyu Group encountered new development momentum. After nearly a year of communication and negotiation, Huanyu Group and the UK-based Ori Fund established Huanyu Saier New Energy Technology Co., Ltd. in Beijing in August 2010 and successfully completed the first round of financing, creating favorable conditions for the company's production and development of lithium battery business.

Capital support

At the end of August 2010, the news that "Huanyu Group and Ori Capital jointly produced lithium batteries for electric vehicles" was released, which was of great significance to Henan Huanyu Group.

Li Zhongdong said that in the early stages of electric vehicle battery development, large capital investments are critical. With Ori’s venture capital, Huanyu will have more opportunities to “stand out” in the field of electric vehicle power lithium batteries.

Huanyu's favor from Orei Capital is also due to its continuous development of technology and the expansion of market scale. Dong Linfu, marketing director of Beijing Huanyu Saier New Energy Technology Co., Ltd., introduced that Huanyu began to use lithium manganese oxide as power batteries in 2002, and later found that lithium manganese oxide power batteries had many disadvantages. Then it entered the field of lithium iron phosphate battery research. After two years of hard work, Huanyu's lithium iron phosphate materials and batteries were successfully developed. In 2008, Huanyu lithium batteries entered the market and began to be sold abroad. With the verification of the market, especially the development of electric vehicles in recent years, Huanyu lithium batteries truly entered the market on a large scale at the end of 2010. Recently, when Terry Gou, president of Foxconn Technology Group, led the Foxconn Technology Delegation to visit Huanyu, he made it clear: "I will give you money, you don't have to worry about funds, don't worry about the market. Our cooperation will build Xinxiang into the largest battery base in the country. If you agree, let's shake hands. It's better to shake hands with you than to sign an agreement."

In addition, another breakthrough in Huanyu’s development is the equity incentive plan.

On August 6, 2011, in the conference room of Huanyu Saier's headquarters, 30 middle and senior managers of the company, Chairman Li Zhongdong and President Cheng Zhijie signed the equity certification, and Huanyu Saier's equity incentive plan was officially implemented.

Cheng Zhijie, President of Huanyu Group, introduced that the equity incentive plan was proposed by the company's strategic investment partner, the British Ori Fund, with a focus on the company's strategy, and is implemented in a hierarchical manner, while striving to make incentives and constraints symmetrical. For the company's senior managers, option incentives are adopted, and for the middle and lower levels, stock incentives are adopted.

The total amount of options and futures shares that can be distributed in the equity incentive accounts for 10% of the total share capital, of which 7% is used for incentives for existing positions, and 3% is reserved for rewards for special contribution talents and incentives for important new positions in the future. The total amount of dry shares distributed in this option incentive plan is 10% of the total share capital to ensure that the incentive targets can receive the company's annual dividends when they do not enjoy the option spread benefits.

As an enterprise with a distinct family flavor, Li Zhongdong said that although the implementation of equity incentives has encountered some resistance, measures that are beneficial to the enterprise will continue to be adhered to.

Fifth in the world

Despite the huge investment and full support from the local government, Li Zhongdong and his team did not get carried away.

Li Zhongdong said that Huanyu’s goal is to make batteries its main business and become one of the top five lithium battery solution providers in the world. In addition to policy and financial support, science and technology are also very important.

Li Zhongdong's confidence in the company mainly stems from its emphasis on science and technology. Li Zhongdong said that among private battery companies, Huanyu is one that pays great attention to technology upgrades. Without any national scientific research institutions or state-owned enterprise background, Huanyu has built a national secondary battery postdoctoral workstation.

"To this day, the Huanyu office building on the east side of Huanyu Avenue is still the same as it was more than ten years ago. However, the development and monitoring equipment for battery research and development cannot be said to be the best in China, but it is definitely one of the best in China. Over the past few years, most of the money earned by the company has been invested in the development of new technologies and the introduction of equipment. In the research and development of lithium batteries alone, we have invested more than 600 million yuan in the past few years."

On the day of the reporter's interview, Huanyu had just sent a scientific research team to several European countries for a ten-day technical exchange visit.

Dong Linfu, marketing director of Beijing Huanyu Saier New Energy Technology Co., Ltd., said that China's power lithium batteries are divided into three schools. One is BYD, but the industry is not clear about BYD's technology. Another school is the Leitian system, which has established joint ventures with local governments to form a series of Leitian battery companies. The other is Huanyu, which is our original school. Huanyu's electrolyte has almost no excess. After years of research, we have achieved standardization from hard packaging to later soft packaging, large battery cells to later small 20 ampere hours.

The domestic secondary battery industry has experienced several rounds of development booms. In each round, a large number of companies entered, especially private enterprises. However, with every technological shift, a large number of companies were eliminated.

Li Zhongdong predicts that there will be nearly 500 domestic lithium battery manufacturers in the future, and as they are continuously eliminated, less than 10% of them will be left with real strength.

"The current overcapacity in the lithium battery industry is an inevitable road for the market, and it is also a transition period that tests companies. Although Huanyu does not have strong capital, compared with other companies, we are more focused on the best batteries and have a stronger market awareness, so we can pass the test."

Regarding the company's initial plans, Li Zhongdong introduced that by next year, the first phase plans to build a 100-acre factory for the production of lithium batteries. After the 400-acre reserve land is fully put into production, it will create a production capacity base for Huanyu with an annual sales of 5 billion yuan.