New process of domestic power battery industry: Can the "low-end" break through the "high-end"?

With the rapid development of the domestic new energy vehicle industry, the number of electric vehicles in China has reached 3.34 million. In the process of rapid development, many historical problems have accumulated. As the age of the vehicles increases, the problems are becoming more and more exposed. In the long run, the problem of the domestic power battery industry being constrained by "high-end production capacity" and safety issues is becoming more and more obvious. In order to implement the development strategy of "low-end" breaking through "high-end", China's power batteries have entered a stage of steady development and focus on intelligent manufacturing. Among them, a solid strategic partnership with car companies is a very important part of the development of domestic power battery companies.

1) Current status of power battery industry

Globally, the number of new energy vehicles is expected to approach 2 million in 2018. The power battery industry has formed a pattern in which China, Japan and South Korea dominate the supply of electric vehicles throughout the world. Foreign companies that rely on their technological advantages to stand in the first echelon are: Panasonic, LG, SDI, SK, and domestic battery companies that compete with them include CATL and BYD. According to the data in the first half of 2019, the situation of China's power battery industry has shown a trend of increasing concentration of two-tier differentiation companies. The data shows that the shipment volume of the top 10 companies has accounted for 88.6%, as shown in Figure 1. In the top ten pattern, CATL and BYD are far ahead of other manufacturers.

The concentration of the market by the leading industrial enterprises and the imbalance of enterprise development have caused more and more problems for battery enterprises and car enterprises. At present, the main practical problems are as follows: At present, there are not many battery enterprises that car enterprises can trust at the supply level. Multiple projects and platforms can only rely on a certain battery supplier. This market form cannot guarantee the balance of the industrial chain on the one hand, and also makes resources tight in the development process. For car companies, the iteration and game of the supply chain cannot go down. Due to the tight production capacity upstream, if good conditions are not paid in terms of price and payment terms, they may face the situation that after mass production, they cannot match enough battery supply and market demand cannot be met. At present, the domestic power battery industry is facing a situation where "high-end" production capacity is too concentrated in CATL and BYD's own supply. There is a shortage of high-quality power batteries in the market. At the same time, the batteries that occupied the market in previous years are gradually being eliminated. The following problems have emerged in the industry:

The quality status of battery companies is inconsistent with the quality goals of car companies

At present, new energy vehicles have gradually entered the mature stage, and consumers are increasingly comparing the quality level of new energy vehicle companies' products with that of traditional vehicles, so the quality management of power batteries should also be benchmarked against the original powertrain level of traditional vehicles and run according to the 12-month PPM. However, many power battery companies can only provide limited quality levels, especially in the state of large-scale shipments. It is difficult to meet the requirements of car companies by compressing production time and managing by post-screening and classification.

Insufficient production capacity to meet high demand

When demand was concentrated in the past few years, many battery companies did not continue to invest in improvements on the manufacturing side. The previous explosive growth in demand for power batteries has forced battery companies to work hard to increase production capacity, simply expanding the production capacity of a large number of previous-generation products, while the demand for product iteration has led to very low utilization of production lines. As shown in Figure 2, since 2017, subsidy policies have been continuously adjusted, allowing new energy vehicles to continue to develop towards high mileage and high energy density. From 2017 to 2018, vehicle manufacturers have made a lot of product changes, and the speed of change is very fast.

High attention to battery safety and frequent accidents

At present, new energy vehicle owners and potential customers are highly sensitive to new energy vehicle fire accidents. For an accident whose cause has not yet been clearly analyzed, most public opinion associates it with the battery. If there is no effective traceability mechanism, a safety accident investigation will bring strong negative factors to the car company's brand. Battery companies' testing of the quality of battery cell traceability data and safety consistency during the production process can determine whether the company can keep up with the company's requirements in the future.

2) Growth opportunities for battery companies and the key to survival of the fittest

In the future development trend, battery companies must first lock in relatively stable customers through strategic level. The current second-tier battery companies have begun to see the trend:

Farasis obtains long-term order from Daimler

Xinwangda received an order from Nissan, Renault and Mitsubishi (EasyJet)

Yiwei Lithium Energy received an order from Hyundai Kia

Foreign vehicle manufacturers have also begun to support domestic battery companies. For example, Volkswagen's MEB point B suppliers are screened at the national level; BMW has also audited honeycomb battery companies in China through cooperation with Great Wall.

The main path for battery cell companies is currently

Designing safe batteries

In pursuit of higher battery life for electric vehicles, automakers have chosen to develop mid- to high-end pure electric vehicles, mainly starting with the high nickel content of power batteries. However, how to balance the safety performance after the energy density is increased is the most urgent task. According to the overall breakthrough, it is to do a good job in safety and energy density at the energy density level of 300Wh/kg. According to the current actual situation, due to the difference between soft packs and square shells, the energy density that can be stably installed in vehicles in recent years may be between 250-260Wh/kg. The current main path is the NCM ternary 811, as well as NCA materials. Honeycomb Energy doped Mx on the basis of the NCM system. Mx doping will enhance the boundary strength between primary particles, which is also a technical path worth observing.

Reduce costs through high automation and quality control

As subsidies decline, automakers need to achieve a continuous reduction in procurement costs. Battery companies are moving along the path of reducing costs, but the key to cost reduction is to improve automation, quality control, and improve the pass rate and finished product rate. The way out for power battery companies lies in intelligent manufacturing, which is an important way for companies to improve battery quality and occupy the market. The two most important aspects are the optimization and improvement of manufacturing processes and the standardization of equipment. The quality of lithium battery equipment and the level of technology are the key factors that determine the quality of power lithium batteries. The energy density of the battery cell is getting higher and higher, and the selection of battery materials is slowly approaching the limit. At the design level, the interference allowed for the pole piece will become smaller and smaller. This requires starting with the manufacturing process to improve the positioning accuracy of the stacking load. What companies can do is to continuously improve the process at the micro level, and use big data analysis based on the accumulation of process data to optimize the process. The intelligent manufacturing system involves a wide range of levels, involving the battery cell R&D design trial production and verification layer, the battery cell manufacturing and logistics execution control layer, and the battery cell process equipment terminal acquisition control layer, covering the seven major elements of people, machines, tools, materials, methods, environment, and energy.

Innovation in module and pack design

At the Honeycomb conference, we saw a solution that directly integrates two battery cells into the battery system, which is divided into two generations. Based on the basic architecture of MEB, a simplified module solution was adopted. In the second generation, the concept of the module was further weakened.

This iterative model is based on the platform-based Pack, which further simplifies the modules and reduces costs.

Summary: With the decline of subsidies and the guidance of the double points system, car companies' voice in the supply chain and procurement guidance have gradually become stronger, and car companies' funds have further moved upstream for layout and development. The development of power batteries has entered a new stage. It is time to truly develop around customers and gradually decouple from subsidies.