Valued at 12.4 billion, Wei, Xiaoli and Li Auto jointly invested in a battery unicorn

The "Prince of Ning" has suffered for a long time.

"King Ning" is so dominant that car companies are almost "unable to stand it anymore".

On February 24, battery manufacturer Xinwangda received an investment from 19 companies and capital institutions, with a total amount of 2.43 billion yuan. After the capital increase, Xinwangda's registered capital increased by 1.237 billion yuan to 6.325 billion yuan. The 19 investment companies received a total of 19.55% of the shares. Some media estimated that Xinwangda's valuation will reach 12.4 billion yuan.

An unknown battery manufacturer was pushed to the forefront because the investors of this capital increase in Xinwangda are luxurious, including not only "Wei, Xiaoli, and Li Auto", but also many leading traditional car companies. Among them, Jiangsu Chehejia Automobile Co., Ltd., an affiliate of Ideal Auto, invested 400 million yuan to become the lead investor and holds 3.218% of Xinwangda's equity. The company behind another investor, Sky Top LLC, is Xiaopeng Motors, which also invested 400 million yuan and obtained 3.218% of the shares. Weirui Investment, an affiliate of Weilai Auto, increased its capital by 250 million yuan.

In addition to Weilai, Xiaoli, and Li Auto, Sunwoda's investors also include SAIC Jinshi, Guangqi Xindian, Xinzhifeng/Dongfeng Jiaoyin, which are related to SAIC Group, GAC Group, and Dongfeng Motor respectively. It should be noted that the main battery suppliers of these automakers are CATL. Among them, CATL is even the only battery supplier for Weilai and Ideal.

After the news came out, Xinwangda's stock price once soared by 5.11%. On February 25, CITIC Securities released a research report predicting Xinwangda's net profit in 2021, with an estimated value of 860 million yuan. Xinwangda, which has been losing money for years, seems to be turning around. As second- and third-tier power battery manufacturers enter the field of vision of car companies, will the era of "Ningwang" standing alone end?

1. Why Xinwanda?

Wang Mo, who has worked in the lithium battery industry for many years, believes that although Xinwangda ranks low in the field of power batteries, compared with other second-tier battery manufacturers, in the field of mobile phones and traditional consumer 3C lithium batteries, Xinwangda is a "very leading enterprise" and "it has the technical foundation to go from consumer battery PACK to power battery PACK."

From the perspective of technology, Xinwanda Automotive Battery adopts a multi-line strategy of HEV, BEV and PHEV. In January 2020, Xinwanda launched a power battery solution that "only smokes, no fire". Looking back on the growth path, Xinwanda and CATL have many similarities. Before 2011, CATL was the power battery division of New Energy Technology Group (hereinafter referred to as "ATL"). ATL started out by making mobile phone batteries and was once a major supplier to Apple.

Xinwangda was founded in Shenzhen in 1998 and also made its fortune in the mobile phone business. Its founder Wang Mingwang is known as "the man standing behind Lei Jun".

On the right is Wang Mingwang, former chairman and general manager of Xinwangda, and on the left is Wang Wei, current chairman and general manager

Source: Xinwanda

In 2010, Lei Jun took the cost-effective Xiaomi mobile phone as the starting point of his new business, and launched the Xiaomi 1 a year later. This product received 4 million orders within two years. Xinwangda is the supplier of Xiaomi 1, helping the phone achieve the effect of "80% battery recharge in 10 minutes".

Subsequently, Xinwangda became a deep cooperation partner of Xiaomi. Public data shows that this company has manufactured more than 98% of the sweepers for Roborock Technology at a very low gross profit, and supplies batteries for Xiaomi drones and other products. In addition to having the technical foundation for manufacturing batteries, in fact, there don’t seem to be many better choices besides Xinwangda. Aside from CATL, the relationship between the other top-ranked battery companies and car companies is intricate. For example, Volkswagen is the largest shareholder of Guoxuan High-tech, holding 26.47% of the shares. Honeycomb Energy is an independent new energy company born out of Great Wall Motors. It is not so easy for other car companies to "get involved."

In addition, "Xinwanda has expanded very aggressively in recent years." The financial report shows that as of the end of September 2019, Xinwanda had 1 billion yuan of projects under construction, corresponding to the power battery plant under construction and the expanded production of consumer battery PACK. After August 2021, Xinwanda successively established joint ventures with the Management Committee of Nanchang Economic and Technological Development Zone, Geely Group and Zhejiang Jirun Company, investing 20 billion yuan and 5 billion yuan respectively to establish power battery production base projects in Nanchang and Zaozhuang, Shandong. Among them, the Geely Xinwanda power battery project will build 3 BEV and 7 HEV power battery production lines, which is expected to achieve an annual output of 800,000 hybrid batteries after reaching full production.

As car companies are struggling to find battery "production capacity", it is not difficult to understand why "NIO, Xiaoli, Li Auto and several traditional car companies have bet on Xinwanda. In the field of power batteries, compared with CATL, Xinwanda can be said to have "got up early and arrived late".

As early as 2008, Xinwangda began to lay out the field of power batteries. However, the Soochow Securities report pointed out that it was not until 2015 that Xinwangda established the Power Battery Research Institute. In 2018, Xinwangda achieved self-sufficiency in battery cells. In April 2019, Xinwangda received an order from Renault-Nissan, which was its first major customer in the automotive field. Compared with CATL's cooperation with BMW at the end of 2011, it was seven years later. Although it was late for several years, Xinwangda's ambitions are not small. In January this year, Liang Rui, vice president of Xinwangda, admitted in an interview with "Talents of a Great Country" that "in the future, we hope that (the power battery business) will reach the same scale as the consumer battery business, and the goal is to be among the top three in the country."

Entering 2022, there are signs that the shipment volume of Xinwangda's power batteries has increased. According to data from the Power Battery Application Branch, in January 2022, Xinwangda's installed capacity of power batteries reached 232.4MWh, ranking 8th, with a year-on-year increase of 409.1%. Not only is the growth rate far ahead, but it is also the only company in the top 10 with a growth rate of more than 400%.

Map: Future Car Daily

However, Xinwangda's popularity will not have much impact on the landscape of the power battery field in the short term.

Wang Mo believes that "in the short term, Ning Wang's position will not be shaken." Over the years, Xinwangda has been transforming into automotive power batteries. The main reason for its failure is that its "core technology is not hard enough." "Xinwangda is mainly engaged in battery packaging, which accounts for a relatively low proportion of the value of the battery, which also leads to a huge difference in market value between it and CATL."

At the same time, the company's power battery business has put pressure on its performance. From 2018 to the first half of 2021, the net profit of Xinwanda's power battery business after deducting non-recurring items was -146 million yuan, -305 million yuan, -607 million yuan and -403 million yuan respectively. "We must have lost money in the first few years of making power batteries, but this investment can help Xinwanda recover in the short term."

2. Have you suffered from "Prince Ning" for a long time?

Behind the promotion of Xinwangda by "Wei, Xiao and Li Auto" is the battery anxiety of automakers. "2022 is a year of full competition in the new energy vehicle industry," said Cui Dongshu, secretary general of the China Passenger Car Association. The China Passenger Car Association predicts that the sales volume of new energy vehicles in 2022 is expected to exceed 6 million, with a penetration rate of about 22%.

Electric vehicles are booming, but there is a huge gap in the supply of batteries, which are the "heart" of electric vehicles. Yang Hongxin, chairman and CEO of Honeycomb Energy, once said that the current production capacity gap of power batteries is 30% to 50%, and predicted that the production capacity of power batteries will be relatively tight until 2025.

Even as the "power battery overlord", CATL has difficulty meeting the needs of many automakers. At a shareholders' meeting, Zeng Yuqun, chairman of CATL, complained that "customers are urging him to deliver goods." NIO, which has established an exclusive supply relationship with CATL, is "suffering greatly". In the 2021 Q3 earnings call, NIO founder Li Bin bluntly stated that battery supply is the "ceiling of delivery" for NIO.

The industry is highly concentrated, and the leading battery suppliers naturally have the final say.

In order to successfully obtain batteries from CATL, car companies even need to pay a huge advance payment in advance. Yang Tao, who is in charge of sales at CATL, revealed to Future Auto Daily that CATL allocates battery production capacity in the following way: the OEM pays for a whole production line, and whoever has the money gets the capacity. "If the OEM is not wealthy enough, it cannot even buy the batteries."

In addition, "when production capacity is tight, CATL has its own standards for who to supply and who not to supply", which has caused car companies to collectively fall into anxiety about the shortage of core components. "With a market share of more than 50%, CATL has too much say, and car companies are very passive in terms of production order and price. This is not a situation that car companies are happy to see." Zhang Xiang, a researcher at the Automotive Innovation Research Center of the North China University of Technology, believes. With no guarantee of battery supply and procurement subject to the "Ning Wang", car companies have to find other partners.