Power battery "three strong competition"

In 2011, rows of BEV soft-pack battery production lines were operating in an orderly manner in the production workshop of the Iksan factory in South Korea. This year, LG Chem's power battery business began to expand rapidly with soft-pack batteries.

CATL Sichuan Base

In the same year, in China, Zeng Yuqun gambled his career to set up a new company specializing in automotive batteries and named it "CATL". At this time, BYD's new energy vehicles equipped with lithium iron phosphate batteries were already driving on the streets of China.

At that time, these three companies might not have thought that ten years later, they would become each other's strongest competitors.

The latest data released by South Korean market research organization SNE Research shows that from January to July this year, the global installed capacity of power batteries has reached 240.8 GWh. CATL, LG Energy Solution and BYD ranked in the top three, accounting for more than 70% of the market share. The global power battery market is divided into three parts.

The global power battery market is divided into three parts

From January to July this year, the global installed capacity of power batteries reached 240.8 GWh, a year-on-year increase of 76%. Compared with last year, the "three giants" of CATL, LG Energy Solution and Panasonic no longer exist, and instead, CATL, LG Energy Solution and BYD "three-way split" has taken their place.

Data source: SNE Research

Data shows that CATL is still the absolute "dominant player" in global power battery installations. From January to July, its installed capacity reached 83.6 GWh, a year-on-year increase of 110.6%, with a market share of 34.7%; LG Energy's installed capacity reached 34.4 GWh, with a market share of 14.2%, and its ranking remained unchanged; while BYD ranked third with an installed capacity of 30.3 GWh and a market share of 12.6%.

It is worth noting that compared with the 2021 semi-annual list and annual ranking, CATL has further widened the gap with LG Energy Solution. In addition, BYD's battery installations in July exceeded LG Energy Solution and jumped to second place. This is the third time that BYD has taken the second place from the latter after April and May. Panasonic, which ranked third in the same period last year, slipped to fourth with an installed capacity of 20.8 GWh.

Zhao Zhenyue, executive deputy general manager of CCID Consulting's New Materials Industry Research Center, analyzed that the high prosperity of the domestic new energy vehicle market is the main reason for the growth of the battery scale of CATL and BYD. In addition, CATL has rich customer resources and covers all domestic and foreign automakers, making its installed capacity far ahead. BYD has seen a surge in installed capacity thanks to the surge in sales of its own models. "It can be foreseen that in the third quarter, the global installed capacity ranking may continue to change, and the competition among CATL, LG Energy Solution and BYD will continue," said Zhao Zhenyue.

Data source: China Automotive Power Battery Industry Innovation Alliance

However, CATL, LG Energy Solution and BYD are not satisfied with the existing market share. In order to get a bigger share of the "cake", they are still expanding their "circle of friends".

CATL has achieved full coverage of the supply chain of mainstream car companies. "At present, basically all the mainstream car companies in the world are our customers." A relevant person in charge of CATL told the reporter of China Electronics News. In CATL's "circle of friends", there are not only six major state-owned car companies such as FAW, BAIC, and GAC, but also a number of new car-making forces such as "Weixiaoli", Nezha, and Celes, as well as foreign auto giants such as Tesla, BMW, Volkswagen, and GM. Recently, it was reported that CATL will supply Hyundai Kia's Korean local models and officially enter the Korean market.

LG Energy Solution has always adhered to the globalization strategy, and its customers are mostly from North America, Europe and South Korea, such as Tesla, Renault, Hyundai, Volkswagen, Audi, Porsche, GM, Kia, etc. It is worth mentioning that in the ranking of power battery installed capacity outside China from January to July, LG Energy Solution ranked first with 31.1 GWh, while CATL ranked only third. In addition, LG Energy Solution has also begun to target the Chinese market and provide power batteries for Chinese independent brand car companies. For example, LG Energy Solution's wholly-owned subsidiary in China, Aierji, supplies power batteries for Geely Haoqing Automobile. It is expected that in the future, LG Energy Solution may develop more Chinese local car company customers.

Compared with CATL and LG New Energy, BYD batteries have long been mainly self-supplied, and have only gradually moved towards "opening up" in the past two years, and have established cooperative relationships with FAW Hongqi, Changan, Jinkang, BAIC, etc. At the same time, it is rumored that it is also in contact with many international automakers such as Tesla, Ford, Volkswagen, Daimler, Hyundai Motor, etc. "BYD's parts must be market-oriented. On the one hand, we should do our own business, and on the other hand, we should do the business of other people. It is a real skill to do the business of top foreign automakers." BYD Chairman Wang Chuanfu said, "Almost all the car brands you can think of are talking to us about cooperation."

TrendForce analyst Zeng Youpeng said that high-quality products, mature technology, stable production capacity and innovative ability to update and iterate products are the main considerations for automakers when choosing power battery manufacturers. At present, high-quality production capacity is in short supply, and these three battery manufacturers can ensure quality and quantity, deliver stable production capacity, and continuously improve key indicators such as driving range, fast charging performance, and safety performance. This is a reflection of their competitiveness.

In addition, in the cooperation with car companies, the three companies are not satisfied with the supplier relationship, but hope to achieve deep bundling through joint ventures with car companies, equity investment and other forms. CATL has reached cooperation with the six major state-owned car companies in the form of joint ventures or equity. LG Energy Solution, Honda and GM have jointly built factories in the United States, and BYD has also built a power battery factory with FAW in Changchun. In Zhao Zhenyue's view, under this model, battery companies provide battery cell technology, car companies lead the installation and integration, and both parties share profits and risks, forming a more stable supply and demand relationship. At the same time, the technical exchanges between the two sides are more frequent, which will help to better play each other's advantages and further promote the improvement and upgrading of battery technology.

The race to expand production capacity is heating up

The ability to control the supply chain and mass-produce has become the key to the current success of power battery companies. When Volkswagen Group built its own battery factory, it said that in the era of electric vehicles, the importance of scale far exceeds its importance in the era of fuel vehicles.

In terms of the supply chain, CATL, LG Energy Solution and BYD all have a relatively complete layout, from the upstream lithium mines and lithium salts to the positive and negative electrode materials, diaphragms, and manufacturing equipment of batteries. For example, from the perspective of upstream resources, CATL is deeply bound to Tianyi Lithium and has invested in foreign mining companies such as North American Lithium; LG Energy Solution has signed a long-term procurement agreement with Australian lithium miner Liontown Resources; BYD has in-depth cooperation with many domestic lithium mining companies such as Rongjie Co., Ltd., Shengxin Lithium Energy, and Tibet Mining. In addition, CATL and BYD also have extended layouts in automotive chips, chassis, autonomous driving, and laser radar technology, forming an integrated closed loop of the industrial chain.

In terms of production capacity, as market demand continues to expand, there is a gap in the supply of power batteries. SNE Research predicts that if calculated based on the production capacity plan at the beginning of 2021, by 2025, the gap between power battery production and sales will reach 37%, and the gap between vehicle installation will reach 25%, and the supply and demand will continue to be tight. Against this background, CATL, LG Energy Solution and BYD have successively accelerated their pace of expansion, and the competition for expansion has entered a fierce stage.

CATL continues to expand its production capacity globally. According to incomplete statistics, from January to July this year, CATL disclosed that the amount of investment in expansion has exceeded 80 billion yuan, and investment projects include Shandong Jining Battery Base, Hungary Battery Factory, Indonesian Battery Industry Chain Project, etc. At this stage, CATL has invested in 12 production bases worldwide. Combined with the production capacity of joint ventures with car companies, the production capacity is expected to exceed 670 GWh in 2025. Some people believe that by the end of 2022, CATL's production capacity will exceed 400 GWh. After adding the expansion capacity in Hungary, the total production capacity plan may exceed 900 GWh, far ahead of other domestic and foreign battery factories, and can guarantee more than 35% of the global installed capacity share. A relevant person in charge of CATL said that the company has deployed production bases in Europe, Southeast Asia and other regions to form a global resource allocation capability, which can respond to the needs of overseas customers in a timely manner and ensure the delivery and supply of Terawatt Hour (Twh) Era.