From 200 to sharply reduced to less than 100 power battery companies entered the "elimination round" stage

On the eve of Double 11th, the initial public offering of the company's initial public offering in the lithium-ion industry (CATL) on the China Securities Regulatory Commission's website has quickly become a focus of media attention. The degree of concern is not less than The concern about the hot topics of the double eleven auto electric business has also triggered a new wave of attention from the outside world to the lithium power industry. But behind the attention of the outside world and the chasing of capital hot money, this year the power lithium battery industry is facing the challenge of falling prices and falling profits.

For leading companies such as the Ningde era, this year may be an excellent opportunity for expansion, but for some weak power battery companies, this year means the beginning of the cold winter.

"Power battery companies that have entered the Ministry of Industry and Information Industry for auxiliary products have been reduced from more than 200 last year to more than 90," said former president Guoxuan Hi-Tech, executive partner and chief executive officer of the New Energy Automotive Venture Capital Sub-Fund of the National Science and Technology Achievements Conversion Fund. Fang Jianhua introduced. Although the reduction in the number of people is already a big adjustment in the outside world, in Fang Jianhua's view, this is just the beginning of adjustment, and the next elimination will be faster.

By 2020, there will be only about 200 power battery companies with more than 20 companies, and more than 90% of power battery companies will be eliminated. This is a judgment that Fang Jianhua repeatedly mentioned in the past two years.

Two heads squeezed profits down

The decline in profits, which is one of the key words for the power lithium battery industry this year, has also been shown in the 2017 first quarter and third quarter earnings figures recently published by power battery listed companies.

From the battery raw materials to the power battery, new energy vehicle layout, stock prices have soared in recent years, Fluoride (SZ.002407) announced on October 23, the first three quarters of the total revenue of 2.48 billion yuan, an increase of 17.4%; The net profit attributable to the shareholders of the listed company was 208 million yuan, a year-on-year decrease of 45.02%. On October 26th, Guoxuan Hi-tech released a report saying that from January to September this year, it achieved operating income of 3.755 billion yuan, an increase of 9.7% year-on-year; net profit attributable to shareholders of listed companies was 640 million yuan, a year-on-year decrease of 13.27%.

On October 30th, BYD’s financial report showed that from January to September this year, BYD’s total operating revenue was 73.933 billion yuan, an increase of 1.56% year-on-year, and net profit attributable to listed company shareholders was 2.791 billion yuan, a year-on-year decrease of 23.82%.

On October 30th, China Aviation Lithium's parent company Chengfei Integrated (002190) released the third quarterly report of 2017. The company achieved operating income of RMB 10.01 million from January to September 2017, a year-on-year decrease of 21.19%; net profit attributable to shareholders of listed companies was RMB 608,400. Yuan, a year-on-year decrease of 99.32%.

As for the reasons for the decline in profits, the above-mentioned listed companies gave different explanations in their financial reports, such as rising raw material prices and adjustment of new energy policies. However, one of the reasons that people in the lithium power industry have repeatedly mentioned in the financial report without being highlighted is that prices have fallen.

According to the prospectus of Ningde era, the unit price of the company's power battery system showed a rapid decline, and the 2015-2017H1 decline was 21.1%, 9.6%, and 26.2%, respectively.

"This year's mainstream power battery product prices have generally fallen by 20%-30% compared to last year, and price cuts will be the main theme of the future power battery industry," said a person in charge of a battery company that did not wish to be named.

This year's power battery industry is more obvious by the upstream and downstream extrusion, on the one hand, the battery raw material prices continue to rise, on the other hand, due to the general decline in the price of lithium battery products in the world, domestic sales of new energy vehicles rose rapidly, multiple factors forced the domestic power battery companies In the past few years, the price of thousands of vehicles has been considered large orders, but now there are thousands of vehicles at every turn, and the output will surely drop in price.

Last year, the average price of the battery industry is still 2 yuan / Wh, this year has dropped to less than 2 yuan. According to reports from the company's lithium power grid, in the fourth quarter, some battery companies have further lowered their product prices to as low as 1.4 yuan/Wh in order to clear inventory.

Fang Jianhua believes that structural overcapacity of production capacity is also one of the reasons for the drop in the price of power battery companies. The data shows that at the end of last year, the domestic power battery capacity has reached 120GWh, and it may be close to 200GWh by the end of this year, and this year's market demand is less than 40GWh.

In Fang Jianhua's view, compared with the rise in raw materials, the price drop is even more challenging for the power battery industry.

Rising raw materials, some are due to scarcity of materials, non-renewable, some are temporarily in short supply, due to the release of production cycles, short-term supply exceeds demand, coupled with capital speculation, leading to soaring prices, this price rise can not be sustainable in the long term . However, the decline in prices is determined by the law of the industry's development and poses greater challenges to the company's technology, management, and product quality.

Elimination has begun

"The elimination has already begun. Last year, when it entered the Ministry of Industry and Information Technology's promotion catalog for new energy vehicles, there were more than 200 power battery companies supporting it and only 90 this year," said Fang Jianhua.

Industry insiders also made the same judgment: “From a quantitative point of view, the number of power battery companies has been significantly reduced this year, leaving only about 100 companies. From the point of view of the living conditions, this year’s companies are clearly differentiated, and some are in short supply, while others are underemployed. And it's not just the companies at the end of the downturn that are being eliminated. Some companies that have had a good momentum in the past few years have seen a sharp decline this year."

According to industry insiders, the reason for this differentiation is the adjustment of the market structure of new energy vehicles. All along, the domestic power battery industry has a structural excess of surplus mid- and low-end products and insufficient high-end products. By this year, this problem has become more prominent.

“The impact of policy adjustment on new energy vehicles and power battery industry is huge. The adjustment of policies to achieve subsidy after actual operation reaches 30,000 kilometers has caused a big impact on the sales of passenger cars and other commercial vehicles. The dual-point policy further inflates passenger cars. As enterprises vigorously develop new energy sources, correspondingly, power battery companies that originally used bus companies as their main customers are more upset this year, but they are able to achieve greater development for passenger car companies, and from a technical point of view The threshold of vehicles, especially international brands, is more difficult than commercial vehicles and the threshold is even higher.”

The data released by the China Automobile Association shows that in the first 10 months of this year, China’s new energy vehicles sold a total of 490,000 vehicles, an increase of 45.4% year-on-year. Among them, new energy passenger vehicles sold a total of 393,000 vehicles in January-October, a year-on-year increase of 61.3%. New energy commercial vehicles sold a total of 97,000 vehicles in January-October, an increase of 3.9% year-on-year. Undoubtedly, the new energy passenger vehicle is the growth leader, and it is only by seizing the passenger car customers to achieve great development.

The prospectus in the Ningde era shows that its major customers have switched from passenger cars to passenger cars. In the first half of this year, its largest customer has already transferred from Yutong to Geely Holdings, and the fifth largest customer, Xiamen Jinlong, has been replaced by Dongfeng Motor.

Timely card passenger car market, making Ningde era in the average price of power battery system dropped from 2.06 yuan in 2016 to 1.52 yuan in the first half of 2017, gross margin remained at 37.1% level.

In contrast, among the new third board companies, Hesdee, Tianfeng Power, Xin Lingjia, Weining Power, Dingeng Open Source, Houneng Shares, Zhuoeng Shares, Oupeng Bach, Xinghai Energy, Shanmu New Energy, etc. 10 companies whose businesses cover power batteries have a gross margin of about 20%. Cheng Fei's profit fell sharply in the first three quarters of this year. The important reason was that its subsidiary, CNAC Lithium, had insufficient orders for the passenger car market.

According to a research report of the Institute of Advanced Industrial Engineering, Institute of Lithium-Ion Battery (GGII), the situation of the icy world has actually begun since the beginning of this year. From the beginning of March to the end of May this year, the GGII research team visited nearly 100 power battery factories and found that some companies had operating rates of less than 30%. Some companies were in short supply and the watershed was clear.

Tianfeng Securities Research Institute of the Ministry of Industry and Information Technology released this year, the list of 10 recommended application of power battery manufacturers to do the statistical analysis shows that CATL supporting models reached 378 models, far beyond other peers. Ranked No.2 is CITIC Guoan League Gugli Power Technology, with 139 models, Shenzhen Waterma Battery Model 137 models, Hefei Guoxuan High-tech Power Model 114 models, and Huizhou Yiwei Lithium-powered models. For 108 models, Beijing Guoneng Battery Technology Co., Ltd. and Huizhou BYD Co., Ltd. are all equipped with 94 models. The remaining power battery companies have less than 80 models, and the last one is only 18 models.

From the perspective of market share, GGII statistics show that global power battery shipments from January to September 2017 were 42.6 GWh, an increase of 32% year-on-year. Among them, the global shipments of the top ten power battery companies totaled 30.98 GWh, accounting for 73% of the overall market.

How to break through

Consistent with Fang Jianhua's judgment, GGII's research report also believes that in the next three to five years, China's lithium power industry will deeply shuffle, and more than 90% of lithium-ion power companies will be merged, reorganized or bankrupted. The number of car supply systems will not exceed 20, and production capacity will be highly concentrated in the top few hands.

Regardless of how cruel the competition in the power battery industry is, experts predict a high valuation of RMB 130 billion in the Ningde era and news of successive investment acquisitions indicate that the industry is still a hot spot for capital chase. Large and small power battery companies are also busy with financing and expansion. They all think that they have the potential to become 10% lucky after the industry reshuffle.

However, the reality is cruel. In the rapid technological iteration, the rapidly changing market power of the battery industry, even if it is a leader, may not always be able to maintain its footing. For instance, AESC who is backed by Nissan and a few years ago is the world’s leading AESC. High cost and Nissan sell off. Domestic battery companies also face many challenges.

The biggest challenge comes from the drop in costs and prices. Not long ago, Wang Binggang, head of the National New Energy Automotive Technology Innovation Engineering Expert Group, shared a story at the forum. When he went to Guangzhou Automobile, a person from Guangzhou Automobile stated that the battery system needs to be 6 cents per watt-hour, only such electric vehicles. Without subsidies, they can be competitive. Above this price, electric cars are not competitive with ordinary cars. However, when communicating with people in the battery industry, many people think that 6 cents/watt is simply unimaginable and impossible to do.

What is behind the cost reduction is actually technology, process and management. This is actually the core of the company's competitiveness. Followed by upgrading technology and processes to improve production consistency. Also in the above forum, Wang Binggang said that China's power battery companies are still using internal screening methods to ensure product consistency, with traditional manufacturing CPI value of less than 1.67 to measure, and no one can achieve compliance. Failure to reach the quality level of large industrial production means that it cannot meet the requirements of the future automobile industry.

The third is to establish a close-up ecological circle. Fang Jianhua believes that the current vehicle companies are still the attitude of the traditional vehicle companies for parts and components supporting companies for power battery companies, and such cooperation cannot meet the development needs of the new energy automobile industry in the future.

“Like the Ningde era, a joint venture with a vehicle company to build a factory and accept a share of the entire vehicle company is a way for power battery companies to seek change, but there are certainly more than these two approaches. In the future, there will be more ways to develop with the industry. Wu Hui believes that the establishment of a closer industrial alliance requires the joint efforts of upstream and downstream enterprises.

Wang Binggang believes that in addition to strengthening cooperation with downstream vehicle companies, the current power battery companies and upstream companies are also very loose, and positive and negative materials are bought here, and there is little to buy. In the long run, it is necessary to establish a closely-coordinated industrial alliance. The government authorities also hope to form a huge industrial cluster and group around 2020-2025.