As the power battery industry moves towards the 2.0 era, “operational capability” will become the core competition among enterprises

The latest data shows that from January to July, the cumulative installed capacity of power batteries in China was 134.3GWh, a cumulative year-on-year increase of 110.6%. The rapid development of new energy vehicles has pushed the power battery industry into the fast lane, and also brought greater room for growth and breakthroughs to many second-tier battery companies.

Recently, power battery company Jiewei Power released the "Jiezhan 25000" strategy, which is "to achieve 100GWh power battery production capacity and achieve zero defects in delivered products". Official data shows that in 2021, Jiewei Power's installed capacity increased by more than 155%. With the gradual increase in orders, since the second half of 2021, Jiewei Power has quickly started the construction of bases in Changxing, Chuzhou, Wuhan and other places based on the original bases in Tianjin, Yancheng and Jiaxing.

"Today, the power battery industry is in the process of moving from stage 1.0 to stage 2.0. In this process, the core competition among power battery companies will be a competition of operational capabilities. How to maintain efficient production and operation management, how to ensure reliable product quality, and how to maintain stable large-scale delivery capabilities are the winning paths at this stage." said Wang Lipu, global partner of Fosun and chairman of JEV Power.

Wang Lipu, Global Partner of Fosun and Chairman of Jetway Power

The power battery industry is moving towards the 2.0 era, and competition is escalating

In Wang Lipu's view, the development of the power battery industry has gone through three stages:

Phase 1.0 (2010-2020) is the period of commercial feasibility verification. At this stage, the technology meets the use requirements, the cost lays the foundation for promotion, and the industry has development potential. However, because it is a new thing, some adverse effects also exist simultaneously, such as the capital chasing causing a distorted production capacity ecology, some non-automotive-grade quality bringing back market reputation, and the rapid iteration of technology bringing a stalemate in market competition.

In the 2.0 stage (2021-2025), the power battery industry will shift from commercial feasibility verification to large-scale industrial products, promoting the large-scale development of electric vehicles .

At this stage, power battery companies are no longer a single flower, but a hundred flowers bloom. On the one hand, new energy vehicles are entering a period of explosive growth; on the other hand, new energy vehicle companies are eager to reduce costs and maintain stability in the supply chain, so they actively introduce "secondary" and "tertiary" suppliers. Against this background, some companies that were once hidden under the halo of the leading players began to step onto the stage, taking advantage of the opportunity to expand production capacity and seek a breakthrough.

For example, after 13 years of accumulation, Jiewei Power has made rapid progress in the past two years, with a rapid increase in customer base. In less than a year, it has successively built three major industrial bases. At the same time, the installed capacity has also been rising steadily, and orders have continued to increase. The existing production capacity is insufficient and there is still a situation of supply exceeding demand. I believe this is also the main reason why Jiewei has successively built new production bases.

However, during this period, the industry track is upgraded and the survival of the fittest will be strengthened. According to statistics from the China Automotive Power Battery Industry Innovation Alliance, from January to July, a total of 45 power battery companies in my country's new energy vehicle market achieved vehicle installation and matching, 8 fewer than the same period last year.

In addition, large-scale expansion of production capacity has also become a major phenomenon during this period. "Crazy capacity expansion is bound to face the risk of overcapacity structure and technological change, but it is indeed the only choice in the face of fierce competition and cost pressure. However, for enterprises, prudent and effective capacity planning is crucial." Wang Lipu said.

In the 3.0 stage (2026-2035), power batteries will return to commodity manufacturing and drive global energy transformation. "During this period, the industry will mature, billion-dollar giants will emerge, and profits will return to normal," said Wang Lipu.

Overall, if the 1.0 stage is compared to the Spring and Autumn Period, the 2.0 stage will be the Warring States Period, with industry tracks upgraded and heroes competing for hegemony. For second-tier power battery companies that already have brands, technologies, and production capacity accumulation, it is the spring of development.

The competition is fierce, and “operational capability” will be the core competition for enterprises

Nowadays, the development of new energy vehicles is in full swing, and the power battery industry is also booming. However, we have seen that many "icebergs" have emerged, such as rising raw material prices, frequent quality problems, insufficient production capacity, etc. These are headaches for the leading power battery companies. How will the second-tier power battery companies, which are currently in a battle for position, respond? As one of the representatives, how will Jiewei Power operate and develop?

First, in terms of production capacity, the emergence of the "battery shortage" phenomenon in the past two years has affected the development of domestic new energy vehicles. In the view of Lu Chenli, CEO of Jiewei Power, the core problem behind this phenomenon is not the lack of battery production capacity, but the problem of capacity utilization and high-quality capacity supply.

It is understood that the overall capacity utilization rate of the industry is less than 50%, and old capacity is facing elimination. In addition, despite the frequent expansion of enterprises, with a total advertised capacity of more than 4,000GWh, less than 25% is actually under construction.

Lu Chenli pointed out that Jiewei Power did not over-expand its production capacity in the early stages of its development, which means that the company does not have the burden of invalid or inefficient old production capacity today, so it can respond to the market's new demands for iterative upgrades of battery products more efficiently and quickly. He emphasized that Jiewei Power's current capacity utilization rate has reached 95%.

CEO of Jiewei Power, Chenli Lu

The planned 100GWh production capacity in 2025 is also a well-considered layout based on the current business expansion of the company and the new energy market. It is understood that Jiewei Power currently has 6 major production bases in Tianjin, Yancheng, Jiaxing, Changxing, Chuzhou and Wuhan. Among them, the first phase of the Tianjin base and the Yancheng base has been put into production; the second phase of 4GWh will be put into production in Q3 2022; the Changxing base will start construction in October 2021. After the project is completed and reaches full production, it can form an annual production capacity of 18GWh, which is expected to be put into use in early 2023. The Chuzhou base has a planned production capacity of 20GWh, and the project is scheduled to be put into use before the end of 2023; the Wuhan base, which was just signed not long ago, has a planned production capacity of 30GWh; it is reported that a new base of 30GWh will be established in the near future. According to the above, the realization of Jiewei Power's 100GWh production capacity has been planned in detail.

In terms of profitability, the price increase of raw materials has become a major pain point for new energy vehicle and power battery companies since last year. Public data shows that the price of lithium carbonate has soared to 515,000 yuan per ton this year, an increase of more than 10 times in more than a year. Xu Haidong, deputy chief engineer of the China Association of Automobile Manufacturers, said that this has led to high costs for new energy vehicle manufacturers and power battery companies, and the cost increase has exacerbated the losses of companies that were not profitable.

Faced with the short-term pressure on industry profits, Jiewei Power has improved operational efficiency through lean production in the manufacturing process. According to reports, the company's automation rate has reached 80%, the labor cost per unit of electricity has dropped by 256%, and the energy consumption per unit of output value has dropped by 16.3%. By 2025, Jiewei Power's goal is to pursue higher benefits, reduce manufacturing costs by another 50%, increase personnel efficiency by another 40%, and reduce unit energy consumption by another 30%.

In terms of product quality, new energy vehicle fires have frequently occurred in recent years. Data shows that in the first quarter of 2022 alone, there were more than 600 thermal runaways of new energy vehicles. This is related to life safety and has become a sword hanging over the heads of power battery companies.

In response to this, JEW Power continues to improve the performance of battery products in accordance with the core requirements of high specific energy, high safety, long life, wide temperature range, and fast charging of power batteries. Taking the newly launched "sponge system" as an example, different from the traditional liquid cooling plate, the "sponge system" adopts a fully immersed thermal management solution, with a 75% improvement in thermal conductivity. The temperature difference between the battery cells in the entire system is less than 3°C, and the safety meets the TP 0 expansion. The volume grouping rate reaches 70%, and the overall cost is reduced by 10%. The external box/frame of the "sponge system" adopts a dual design of rigidity and flexibility, which ensures the rigidity and strength of the structure while protecting the battery cells from being invaded to the maximum extent when the vehicle is in an extreme collision, truly achieving active and passive protection compatibility.