In November, LG Energy Energy made a comeback in the national power battery market

Although LG Energy Solution has returned to the top ten in China, the current power battery market is still difficult to change the "top-heavy" pattern.

On December 7, according to foreign media reports, LG Energy Solution is seeking an IPO (initial public offering) of 12.75 trillion won (about 73.785 billion yuan), which is the largest scale in South Korea's history, even more than twice the size of Samsung Life's 4.9 trillion won IPO in 2010.

However, just as the news of LG Energy Solution's upcoming IPO came, it broke its three-month silence in the Chinese power battery market, and returned to the top ten list of power battery companies in terms of installed capacity.

Although the whole story of General Motors' "fire" recall incident is still echoing in the market, LG Energy Solution, which is making a comeback with the momentum of IPO, has undoubtedly reiterated its attitude: even if it has to face off against a powerful "native" like CATL, LG Energy Solution will not be willing to give up the Chinese market easily.

In fact, LG Energy Solution is not the only company that wants to "steal food from the tiger's mouth". Whether it is Honeycomb Energy, which has just established a 600GWh target and raised 6 billion yuan, or Guoxuan High-tech, which is currently starting construction to expand its production capacity, they are all eyeing the growing demand for power batteries in the country.

According to the latest installation volume data of domestic power battery companies in November, we can clearly see LG Energy Solution, which ranks tenth, Sinotruk and Gotion High-tech, which are equally matched, as well as companies such as CATL and BYD, which are firmly in the lead.

It is not difficult to find that compared with the installed capacity in October, the performance of major power battery companies has improved significantly. However, from the perspective of market share, the "top-heavy" market structure has not changed. Even if LG Energy Solution returns, it will be difficult to break this "solidified" market.

01. Prince Ning "one against nine"

In general, the new energy vehicle market and the power battery market in November are much better than those in October. In particular, the delivery volume of NIO, Xpeng, Li Auto, and other auto brands has exceeded 10,000 units, which is enough to show that the new energy vehicle market is hot nowadays. Under the strong correlation, the power battery market has also gained new growth. 

According to the data, the monthly installed capacity of power batteries in China exceeded 20GWh for the first time in November, reaching 20.8GWh, up 96.2% year-on-year and 35.1% month-on-month. Among them, CATL, with an installed capacity of 11.45GWh, has taken a 55% market share, once again achieving the achievement of "one against nine".

Moreover, even in terms of total installed volume from January to November, CATL officially continued to stage the "loneliness of the master" drama with a market share of over 50%.

It is not difficult to foresee that if there is no strong intervention, the top five domestic power battery companies in terms of installed capacity in 2021 can be regarded as having been booked in advance: first CATL, second BYD, third CASIC, fourth GOTION High-tech, and fifth LG Energy Solution.

The reason for making such a prediction is mainly related to the overall environment of the power battery market. It is no exaggeration to say that CATL will be in a state of "one against nine" for a long time, and the fundamentals of BYD and Zhongxinhang will not suddenly collapse in the last month. Guoxuan High-tech has the support of Volkswagen ID. series, and LG Energy Solution is also favored by Tesla.

However, it is important to mention that the ternary battery route that LG Energy Solution mainly operates is at a disadvantage in the domestic market. After the November data was released, lithium iron phosphate batteries have surpassed ternary batteries in all aspects such as production, monthly installation volume, and total installation volume.

But on the other hand, is the ever-expanding production capacity of lithium iron phosphate batteries really a good thing?

02. Beware of the lithium iron phosphate production capacity trap

In terms of production, in November 2021, the domestic power battery production totaled 28.2GWh, a year-on-year increase of 121.8% and a month-on-month increase of 12.4%. However, when combined with the data of 20.8GWh of installed capacity in November, the installation-to-production ratio (the ratio of installed capacity to production) only reached 73.76%.

In other words, such a large proportion of power batteries has already shown signs of "overcapacity". If we look specifically at ternary and lithium iron phosphate batteries themselves, it is easier to see the problem with lithium iron phosphate batteries.

In November, the output of ternary batteries was 10.4GWh, the installed capacity was 9.2GWh, and the installation-to-production ratio reached 88.46%; while the output of lithium iron phosphate batteries was 17.8GWh, the installed capacity was 11.6GWh, and the corresponding installation-to-production ratio was only 65.17%.

The numerical values ​​of the three different installation-to-production ratios of 73.76%, 88.46% and 65.17% are enough to show that compared with ternary batteries, lithium iron phosphate batteries have a more serious overcapacity situation, even far exceeding the "average" level of 73.76%.

However, it is not difficult to find that the production capacity of major power battery companies is still mainly lithium iron phosphate batteries. If you think about the reason carefully, it is nothing more than "profit".

Compared with ternary batteries, lithium iron phosphate batteries are cheaper and safer. In addition, the concept of electrification has gained popularity, and the market demand for entry-level new energy vehicles has been further expanded. As a result, lithium iron phosphate batteries have returned to the center of the stage.

However, although the current market is still thriving, the trap of overcapacity of lithium iron phosphate batteries has already emerged.

According to statistics, since the beginning of this year, power battery companies such as BYD, AVIC Lithium Battery, Guoxuan High-tech, EVE Energy, and Honeycomb Energy have announced nearly 30 battery expansion projects, with a total investment of more than 300 billion yuan. The new production capacity is expected to be 1,000GWh, which is about 10 times the total installed capacity this year.

Although there is a certain period of time from the construction of new production capacity to the official production, there is no doubt that as time goes by, a large amount of power battery production capacity will inevitably be further released. By then, the lithium iron phosphate battery, which is the focus of attention, will inevitably have overcapacity, and the situation afterwards can be imagined: vicious competition, quality decline, and the withdrawal of backward production capacity...

According to industry insiders, the high prosperity of the industry is often caused by product price increases due to short-term mismatch between supply and demand, but this cycle is not sustainable. And it is obvious that with the promotion of high profits, power battery companies have stepped up their expansion of production and capacity, which has laid the root cause of "overcapacity".

The current market demand is indeed huge, but one thing that must be recognized is that the market needs high-quality production capacity, not the accumulation of obsolete production capacity. In other words, high-quality, low-priced and competitive power batteries have a greater market share, especially when the industry cycle enters a downward trend again, obsolete production capacity is likely to be cleared out.

By then, the ternary battery, which is now "sneered at" by people, may become a technology route with greater development potential; and LG Energy Solution may also gain more competitive advantages in the domestic market of "one super and many strong".