Innovation drives breakthrough in the "impossible triangle" of power batteries

Recently, at the "New Fortune, New Momentum, New Vision 2022 New Energy Vehicle Industry Chain Investment Annual Conference" guided by the China Association of Automobile Manufacturers and the People's Government of Jintan District, Changzhou City, and co-organized by New Fortune and the Automobile Industry Department of Securities Times, guests from industry associations and power battery companies discussed power battery technology innovation.

Looking back at the Chinese automobile market in 2021, "power battery technology innovation" is an important keyword.

Recently, at the "New Fortune, New Momentum, New Vision 2022 New Energy Vehicle Industry Chain Investment Annual Conference" guided by the China Association of Automobile Manufacturers and the People's Government of Jintan District, Changzhou City, and co-organized by New Fortune and the Automobile Industry Department of Securities Times, guests from industry associations and power battery companies discussed power battery technology innovation.

At present, the technological innovation of power batteries can be roughly divided into two directions: one is material innovation, such as the sodium-ion battery and cobalt-free battery that became famous in 2021; the other is to improve the energy density and safety of power batteries through process innovation such as changing the battery structure. As Wang Fang, chief expert in the field of power batteries at CATARC and chief engineer of the Testing and Certification Division of CATARC, said, both material innovation and process innovation are urgently needed by the power battery industry. "We are still in the rapid development stage of power batteries, and the more technological innovations in these two aspects, the better."

Some industry insiders believe that "superior performance, lower cost, and better safety" is an impossible triangle in the development of power batteries. However, driven by various forces, there is still a lot of room for imagination in the technological innovation and business model innovation of power batteries.

Battery installations are rising

Recently, South Korean market research organization SNE Research released global power battery installation data from January to November 2021. The data showed that CATL's market share ranked first in the world in power battery installation, at 31.8%, 11.3 percentage points higher than LG, which ranked second.

In the list, Chinese power battery companies such as BYD, Sinotruk, Guoxuan High-tech, and Yiwei Lithium Energy are also listed, occupying the vast majority of the top ten. The research institute pointed out that Chinese power battery companies have led the growth of the global electric vehicle market.

Data released by the China Power Battery Industry Alliance showed that from January to November 2021, my country's installed capacity of power batteries reached 128.3GWh, a year-on-year increase of 153.1%. Among them, the installed capacity of ternary batteries reached 63.3GWh, accounting for 49.3% of the total installed capacity, a year-on-year increase of 92.5%; the installed capacity of lithium iron phosphate batteries reached 64.8GWh, accounting for 50.5% of the total installed capacity, a year-on-year increase of 270.3%.

Ma Xiaoli, deputy secretary general of the China Automotive Power Battery Industry Innovation Alliance, said that driven by the rapid development of the new energy vehicle industry, my country's cumulative installed capacity of power batteries has exceeded 395GWh, and has formed two mainstream product systems: ternary batteries and lithium iron phosphate batteries. It is worth noting that from the current power battery market demand, high-quality power batteries are still in short supply.

Some institutions predict that in 2022, with the increase in sales of new energy vehicles, China's power battery shipments are expected to reach 450GWh. At the same time, driven by orders from overseas markets, the export value of China's mainstream power battery companies is expected to account for more than 20% of the total shipments in 2022.

Raw material price increases draw attention

In 2021, the prices of upstream raw materials for power batteries rose sharply, causing a certain impact on mid- and downstream power battery manufacturers. In order to stabilize the prices of raw materials, many leading power battery companies began to actively deploy in the upstream materials field to alleviate the tense market supply and demand situation.

It is reported that the cost of automotive power batteries is greatly affected by the price fluctuations of metal raw materials in the upstream supply chain, including cobalt, nickel, manganese, lithium and other metal raw materials and their compounds, which have increased dramatically. Among them, the cost of positive electrode materials accounts for the largest proportion in power batteries, and the cost of raw materials accounts for 90% of the cost of positive electrode materials. Analysis points out that this means that the price changes of positive electrode materials will greatly affect the research direction and technical route of power batteries.

Ma Xiaoli told the Securities Times reporter that according to calculations based on public data, compared with June 2020, the cost of 523 ternary batteries has increased from 0.52 yuan/Wh to 0.77 yuan/Wh, and the cost of lithium iron phosphate batteries has increased from 0.47 yuan/Wh to 0.66 yuan/Wh, an increase of 48.1% and 40.4% respectively.

According to Ma Xiaoli's analysis, the current cost of raw materials for power batteries is basically the same as or even lower than the current selling price of batteries, and it is inevitable for battery companies to raise prices across the board.

In fact, the cost and price of power batteries not only affect the product itself, but also directly involve the cost and price of new energy vehicles. Public information shows that power batteries currently account for about 30% to 40% of the cost of new energy vehicles and are the most important component of new energy vehicles.

Yue Shijie, partner of Jinshajiang Capital, said that new energy vehicles have now changed from policy guidance to market drive, and the core of the next step of development is cost control. In the future, the entire new energy vehicle industry chain will be further optimized, and coupled with innovative applications of technology, the overall cost of new energy vehicles is expected to decrease.

Solving the high cost problem

"Innovation in power battery materials can be seen as an invention-type innovation, which is a breakthrough from 0 to 1; while process innovations such as changing the battery structure belong to progressive innovations, which can drive progress from 1 to 100, or even to 10,000." In Wang Fang's view, these two types of technological innovations have emerged one after another in recent years, improving the technological content and product competitiveness of new energy vehicles.

Wang Fang said that material innovation of power batteries often involves basic sciences such as chemistry, and is also closely related to application innovation.

"Whether it is sodium batteries, cobalt-free technology, or even brand-new solid-state batteries, if they want to truly become commodities, especially commodities accepted by the majority of consumers, they must make the leap from basic scientific research to commercial applications and must overcome the technical difficulties on the road from laboratory to market." Wang Fang emphasized that in the journey of innovation in power battery technology, the coordinated development of industry, academia and research and the promotion of the capital market are both indispensable links.

"Technological innovation in power batteries will bring about changes in the product form of new energy vehicles and even the entire industry, thereby leading to new changes in the upstream and downstream of the industrial chain." Zou Guangcai, deputy general manager of the National New Energy Vehicle Technology Innovation Center, pointed out that once solid-state batteries with higher energy density and higher safety are commercialized, it will definitely bring greater development opportunities to the new energy vehicle market, thereby creating new business opportunities.

Zou Guangcai gave an example and analyzed that sodium-ion batteries have their own advantages in low-speed electric vehicles or new energy vehicles with shorter driving range. He believes that because the use scenarios of new energy vehicles vary greatly, many technical routes have their market space.

"The huge changes in product form brought about by technological innovation will lead to the linkage of upstream and downstream of the industrial chain. This may be the biggest business opportunity for the new energy vehicle industry in the future." Zou Guangcai said that the cycle for realizing this business opportunity is relatively long, and bold trial and error may be needed. "This requires us in the industry and investors to remain patient."

In fact, starting from 2021, the global lithium battery market demand has increased significantly, but the production capacity of the entire industry chain has grown relatively slowly, and the effective supply is insufficient. Some industry analysts pointed out that in the next five years, the lithium industry market will usher in a blowout period and enter the TWh era.

"It goes without saying that a big part of the reason why everyone is discussing the business model of power batteries is to try to absorb the cost pressure of power batteries as much as possible." Zou Guangcai admitted that if the cost of power batteries accounts for too high a proportion of the entire new energy vehicle, it will set a very high threshold for consumers to purchase and use new energy vehicles.

Zou Guangcai pointed out that based on the continuous advancement of power battery technology, the purchase and use costs of new energy vehicles can be reduced through a series of business model innovations, and even certain profits can be generated. This will be the next direction of efforts for the new energy vehicle industry.