The "dangers" and "opportunities" of second-tier power battery companies

During the "cold winter", under the influence of the oligopoly effect, the survival and development of second-tier power battery companies are particularly affected by changes in industry dynamics.

Recently, Miao Wei, the Minister of Industry and Information Technology, said at a 100-person meeting that "subsidies will not be further reduced on July 1 this year", which caused great celebration in the industry. However, this statement was later interpreted as a "slip of the tongue", and it was explained that the subsidy policy has not yet been determined. This has suddenly cast a veil on the new energy subsidy policy that was almost clear, and it indicates that the new energy vehicle market will still face many variables this year.

"The subsidy policy in 2020 has become a tense string in the hearts of companies in the industrial chain. If the subsidies do not decline, the battery shipment price may remain at last year's level or drop by about 5%. Once the subsidy decline is confirmed, the price may be required to drop by another 10%-15%. This will put even greater pressure on second-tier battery companies." said an industry insider.

Gaogong Lithium Battery learned that as of now, the tax-exclusive price of the ternary battery system is 0.95-1.05 yuan/Wh, and the tax-exclusive price of the LFP system is 0.85-0.95 yuan/Wh.

If the price drops another 15%, it will mean that the tax-exclusive price of the ternary battery system will be 0.81-0.87 yuan/Wh, and the tax-exclusive price of the LFP system will be 0.72-0.81 yuan/Wh.

"This price is still out of reach for most second-tier power battery companies." The above-mentioned person admitted. This shows that fiscal subsidies still affect the nerves of second-tier power battery companies.

In fact, the difficulties faced by second-tier power battery companies are not only in reducing costs. The main concerns of the companies are:

First, the sluggish sales of downstream automakers have caused power battery companies to generally face problems such as profit pressure, high accounts receivable, and cash flow. In the context of the oligopoly effect and the impact of foreign-funded battery companies, the competition among second-tier battery companies is becoming increasingly fierce, and they are the first to deal with the above problems.

Second, currently only first-tier companies in the power battery industry can achieve profitability, while the power business of second-tier power battery companies is mostly at a break-even point or even at a loss. Once first-tier giant companies implement price cuts to "strike down the dimension", the market share of second-tier power battery companies may be further reduced, and the resulting long-term unprofitable situation will make it difficult for second-tier power battery companies to move forward.

Third, the market advantages of electric vehicles of joint ventures and foreign-funded automakers are beginning to emerge. In the next few years, the choice of supporting automakers will directly determine which second-tier companies will rise and which will fall. This means that second-tier companies must not only be prepared in terms of products and production capacity, but also select customers. Battery companies must "bet" on car companies and even "bet" on models when expanding the market.

At present, China's power battery market is officially open to foreign capital. Foreign battery models included in the recommended catalog can also obtain subsidies when sold in China. The explosive sales of domestically produced Tesla low-priced models and the change in battery selection by joint venture brands will further intensify the ranking fluctuations of second-tier power companies.

It is worth noting that the domestic supply chain supporting foreign-funded batteries is not yet sufficient. It is estimated that it will take 1-2 years to truly realize a complete domestic supply chain with cost advantages. This also reserves a certain buffer period for second-tier companies.

Whether the second-tier power battery companies can get a head start during this period, break away from their dependence on subsidies, and build a moat of product performance, quality, brand, and cost-effectiveness will be the key to their "survival."

Overall, domestic second-tier power battery companies have been roughly divided into three types to cope with the competitive crisis after the subsidy reduction. The first is to stick to the breakthrough and focus on the automotive power battery market, represented by AVIC Lithium Battery; the second is to bloom in multiple places, deploy in multiple fields, and attack the international supply chain, represented by EVE Energy, Xinwangda, and Xingheng Power; the third is to change the course and focus on the small power field, represented by Jiangsu Tianpeng, Highstar, and Zhenhua New Energy .

The following is a strategic review by representatives of some second-tier power battery companies:

AVIC Lithium Battery

Under the leadership of the new head Liu Jingyu, AVIC Lithium Battery has accelerated its development. In 2019, AVIC Lithium Battery reshaped its reform and made great strides under the guidance of top-level strategies.

GGII data shows that in 2019, AVIC Lithium Battery achieved an installed capacity of 29,002 units and an installed capacity of 1,492,168KWh, a year-on-year increase of 108%. The supporting automobile companies include Changan Automobile, GAC Passenger Vehicle, BAIC Foton, Jinkang Automobile, Dongfeng Motor, Geely Automobile, Jiangling Motors, Jiangxi Dacheng, Yutong Bus, and Ruiqi Automobile.

In July 2019, AVIC Lithium Battery's 20GWh power battery project settled in Xiamen with a total investment of 10 billion yuan. Two months later, the first phase of the project, the A6 project, officially started construction and is scheduled to be put into production in the fourth quarter of 2020.

Liu Jingyu, general manager of AVIC Lithium Battery, told Gaogong Lithium Battery that the Xiamen project is an important part of AVIC Lithium Battery's implementation of strategic planning and smooth promotion of production capacity layout. In the future, AVIC Lithium Battery's planned annual production capacity will exceed 100GWh, and it will become a global leading power battery manufacturer and a strategic supplier to global outstanding automobile companies.

EVE Energy

By accurately stepping into the segmented track and "blossoming in multiple places" in the market, Yiwei Lithium Energy is entering a channel of rapid growth.

In the field of new energy vehicles , GGII data shows that EVE Energy achieved 13,441 installed units and 1,835,951 KWh of installed capacity in 2019, ranking fifth on the list. The top five automakers in terms of supporting quantity include Nanjing Golden Dragon, Dongfeng Motor, Geely Commercial Vehicle, Hozon New Energy, and Kaiwo Automobile.

In March 2019, EVE Energy announced that its subsidiary Huizhou EVE Energy had received a notification from Hyundai Kia that it would be selected as a supplier, with an estimated demand of 13.48GWh in the next six years. This is another progress of the company in the international market after it signed a supply contract with Daimler.

In May, EVE Energy plans to raise 3.5 billion yuan to expand the scale of power battery production in China. Soft-pack batteries will have a production capacity of 3GWh in 2019, and will increase by 6GWh to 9GWh in 2020; lithium iron phosphate batteries are also planned to add 3.5GWh.

It is worth mentioning that in addition to the field of vehicle power, Yiwei Lithium Energy has also achieved considerable development in the sub-sectors of electric ships, TWS headphones, power tools, electric two-wheeled vehicles, ETC, etc. Yiwei Lithium Energy expects its net profit to reach 1.455 billion to 1.626 billion yuan in 2019, a year-on-year increase of 155% to 185%.

Star Power

In 2019, Phylion Power continued to advance in the field of new energy electric vehicles and light vehicle lithium batteries.

In the field of light vehicle lithium batteries, in August this year, Phylion Power's global light vehicle lithium battery sales exceeded 10 million sets, becoming another milestone for Phylion Power.

According to GGII data, China's lithium battery shipments for electric two-wheelers reached 6.1GWh in 2019, a year-on-year increase of 79.6%. Among them, Phylion Power still ranks first in market share.

In the field of electric vehicles , Phylion has cooperated with Dongfeng, Changan, Chery, Ruichi, Geely, Wuling, FAW and others. Its products include pure electric sedans, pure electric multi-purpose passenger vehicles, pure electric logistics vehicles, etc. It is a leading company in the supply of power batteries for pure electric logistics vehicles.

GGII data shows that in 2019, Phylion Power ranked eighth among the top 10 in terms of installed capacity of new energy special vehicles.

In September 2019, Nachuan Shares issued a "Reminder Announcement on Receiving the Listing Guidance Filing Notice from Phylion Power Co., Ltd.": China International Capital Corporation Limited submitted the listing guidance filing materials of Phylion Power to the Jiangsu Securities Regulatory Bureau, and obtained the "Notice of the Jiangsu Securities Regulatory Bureau on Confirming the Guidance Filing Date" issued by the Jiangsu Securities Regulatory Bureau (Su Securities Regulatory Letter {2019} No. 536).

This means that the listing procedure of Xingheng Power has officially started.

Jiangsu Tianpeng

After more than ten years of deep cultivation in ternary cylindrical lithium batteries, Jiangsu Tianpeng (TENPOWER) became the first company in China to mass-produce NCA system cylindrical batteries.

Jiangsu Tianpeng's NCA system cylindrical batteries achieved large-scale mass production in 2017. They have been widely used in a variety of applications including high-end power tools, garden tools, two-wheeled vehicles, and micro electric vehicles, and have received good feedback from clients.

At present, Jiangsu Tianpeng's NCA system batteries have taken the lead in China, and have far surpassed its peers in the field of small power batteries in terms of rate performance improvement, and even surpassed some international competitors.