ã€Power battery industry chain has been reshuffled, and leading companies have taken advantage of midstream companies to suffer.】 The power battery industry chain will experience major changes. As the middle part of the new energy automobile industry, the power battery field is under pressure at both ends. The increase in raw material prices in the upper reaches brings about an increase in costs. At the same time, the automakers will upwardly shift the pressure on subsidy withdrawals. In the past two years, the power battery industry experienced a substantial expansion of production capacity to the current structural excess.
Numerous battery manufacturers that entered the market early on in the heat and helium subsidy have entered a vicious cycle: weak technological change, difficulty in meeting product standards, lack of orders, and idle production lines. The profit margin is compressed, the cash flow pressure is high, and it is even more difficult to update the production line equipment. In this context, the scale, capital, and technical advantages of leading companies are highlighted, and the industry reshuffle will accelerate.
Expand production capacity
Li Qing (a pseudonym) entered the field of new energy vehicles in 2015 and witnessed the process of the industry's capacity leap forward to the current structural overcapacity in the past two years.
According to Li Qing, 2015 is the first year of development of the new energy industry. In this year, the output of new energy vehicles reached 340,500 vehicles, which was more than four times that of 2014 and entered a truly significant volume phase. Since then, in 2016 and 2017, the output of new energy vehicles was 517,000 vehicles and 794,000 vehicles, respectively, with an average annual growth rate of more than 50%.
"I did not anticipate that the production and sales volume in 2015 will grow so fast that the production capacity will not be matched at all. The battery plant will not be able to handle as much cargo," Li recalls. "When the battery was hit, it was basically able to sell it as long as it was produced." Quality is not the main indicator for everyone's consideration, but the lower the price, the cheaper it is, and it is easier to sell it out, especially in the first half of 2016. Some car companies directly went to the battery factory to rob the goods.At the battery factory gate waiting, the battery was pulled out. ."
Li Qing told reporters that in 2016, the industry entered the production peak. During 2016-2017, capacity-intensive construction, battery plant, separators, positive and negative materials, and other aspects will be greatly expanded production capacity. Among them, the power battery has the highest value in the industry chain, and the investment return period is relatively short. As a result, capital inflows concentrated and the number of battery manufacturers reached more than 150 at the peak.
At the end of 2016, the Ministry of Industry and Information Technology released the "Automotive Power Battery Industry Regulatory Conditions (2017)" (Draft for Comment), which will significantly increase the threshold for power battery companies. Among them, the annual production capacity of lithium-ion battery cell companies has been adjusted to “not less than 8 billion watt-hours†from the “No less than 200 million watt-hours†stipulated in the “Regulations for Automotive Power Battery Industryâ€. The adjustment triggered controversy.
“This rule was not implemented in the end. But at the time, it really made the industry very nervous. Once it was implemented, car companies would not receive subsidies if they purchased batteries from a battery plant with an annual capacity of less than 8 billion watt-hours. No orders will be received. However, this has become an important driver for the expansion of production capacity in the past two years." The chief analyst of Real Lithium Research, Mo Ke, told the China Securities Journal.
Benefit from the huge equipment demand brought about by the substantial expansion, the lithium battery equipment industry has ushered in rapid development. Zhongtai Securities statistics show that in 2017, revenue growth rate of lithium-ion equipment ranked first in the sub-sectors of new energy vehicles, up to 128%. Leading intelligence of lithium battery equipment leading intelligence in 2016 and 2017 were 1.079 billion yuan and 2.177 billion yuan, respectively, and the growth rate exceeded 100% for two consecutive years; net profit was 291 million yuan and 538 million yuan respectively. Yuan, with a growth rate of 99.68% and 84.93%.
The pursuit of capital for the new energy automotive industry continues to heat up.
Songsong Capital began to pay attention to the new energy industry many years ago and established a new energy and new materials fund. "In recent years, many new energy car battery companies have been invested. Some smaller investment institutions with low brand awareness have failed to make any investment," Zhang Shaolin, a partner at Songsong Capital, told reporters.
Yanshi Investment is also an early investment group focusing on the new energy automotive industry. “When we invested in early 2016, many people were not optimistic about this industry. By the middle of 2016, a large number of hot money was pouring in. Business plans were floating everywhere. Some companies raised hundreds of millions of dollars to say that they wanted to do a battery factory. In fact, they basically did. Not down." Chen Haodong, a partner of Panshi Investment, pointed out.
Structural excess
Sequelae of capacity expansion begin to appear from the second half of 2017. Chen Haodong pointed out that many of the early battery manufacturers who were involved in this area and were subsidizing the heat had weak technological capabilities. The batteries that are currently produced do not meet the energy density requirements of the latest subsidy policies. "No order can be received, and the production line is idle. It can only be depreciated and scrapped."
From the data can be a glimpse of the supply and demand imbalances. Citic Securities pointed out that in 2018, the domestic new energy vehicle production is expected to reach 1.015 million units, corresponding to 50GWh of power battery capacity; in 2020, the new energy vehicle production capacity will reach 2.1 million, and the corresponding power battery capacity is 101.1GWHh. In contrast, it is estimated that in 2016, the power battery capacity has reached 170GWh/year, and the power battery capacity in 2017 will exceed 200GWh/year.
However, Yang Zao, an analyst with Tianfeng Securities' new energy industry, believes that the gap between capacity and demand is not as serious as it seems. It is necessary to distinguish between planned production capacity and effective production capacity. "A lot of statistics have included planned production capacity, and there is moisture in comparison with actual production capacity. Similarly, 5G Wh production capacity, some companies may build 3G Wh, and the built-in 2G Wh production capacity can only be affected by yield and technology maturity issues. Play 1G's effectiveness."
“In the first half of 2017, we did a statistic. At that time, it was estimated that the domestic power battery capacity may be 130GWh-140GWh. After communicating with some senior executives in August-September, we found that we need to eliminate the capacity of the battery factory that has been shut down and the capacity that has not yet landed. The effective production capacity is about 60GWh-70GWh. Now this figure should reach 80GWh.†The chief analyst of Real Lithium Research Mo Ke told the China Securities Journal reporter.
Even if only the effective capacity is calculated, there is still a clear excess compared to the installed capacity of nearly 50Gw/hr predicted this year. Zhang Shaolin believes that excess capacity is still within an acceptable range. As a result, the industry must have production capacity before it can expand its customers. Secondly, next year, the “double-integration†policy will be officially implemented, and new energy vehicles may once again usher in explosive growth. "At this stage, the industry is facing a more severe situation is the structural imbalance of production capacity: the lack of high-end, low-end excess." Zhang Shaolin said.
The Action Plan for Promoting the Development of Automotive Power Battery Industry proposes that by 2020, the specific energy of new lithium-ion power battery cells exceeds 300 Wh/kg; the system specific energy will strive to reach 260 Wh/kg. Moco revealed that the production capacity for the first two years was not as high as the automation of production equipment and the production process was relatively low. At this stage, the technical solutions for a considerable number of power batteries could no longer meet the energy density requirement of 300 Wh/kg. many. "Many battery plant equipment and processes cannot produce batteries that can meet the energy density requirements of the New Deal. Vehicle companies are reluctant to place orders."
At the same time, the capacity of leading battery companies is in short supply, and expansion is continuing. By 2020, Ningde Times plans to add 34 GWh of production capacity and the total production capacity will reach 50 GWh. BYD will add 23 GWh of production capacity and the total production capacity will reach 40 GW.
Yang Zao pointed out that although there are more than 100 companies that produce power batteries in the domestic market, there are few suppliers of power batteries that can truly meet the technical requirements of downstream companies and can enter the supply chain of high-end automakers such as Geely and SAIC Motor. Concentration of production capacity to leading companies will become a trend.
A cathode materials listed company executives told the China Securities Journal that the industry had disputes over the technology of lithium iron phosphate batteries and ternary batteries for the first two years. Now the trend of high-nickel ternary rods with lithium iron phosphate pools is basically established. "The supply of lithium iron phosphate batteries is certainly excessive; on the Sanyuan battery, most companies did not lay out in time in previous years, which intensified the supply of Sanyuan power batteries."
The middle reaches of suffering
"This year's new energy industry faces many pressures and challenges. It is expected that the future will be even more difficult." The above listed company executives told reporters, "Structural overcapacity at least favors leading enterprises, while midstream companies are squeezed by both upstream raw materials and car enterprises. ."
According to the 2017 annual report of the related company, the growth rate of the new energy industry sector has obviously slowed down. According to statistics from Pacific Securities, in 2017, the overall operating income of the new energy vehicle industry increased by 13.2%, which was a decrease of approximately 4.6% compared to 2016; net profit attributable to mothers increased by 7.9% year-on-year, and the growth rate was declining from that of 2016. 20%; gross margin was 31.4%, down 1.4% year-on-year.
The profitability of each link is clearly different. In terms of upstream resources, lithium and cobalt are in a price increase channel, which significantly increases their profitability and drives the profitability of cathode materials. According to Pacific Securities statistics, in 2017, the gross profit margin of the cobalt segment increased by 21.89% year-on-year; the lithium margin of the lithium segment increased by 2.45%, and the cathode material rose by 2.7%. The middle segment fell across the board. Among them, the lithium hexafluorophosphate sector saw the most significant drop, which was a decrease of 18.87%; the lithium battery segment's gross profit margin decreased by 5.05% year-on-year, and its net profit growth rate decreased from 158% in 2016 to 21%.
The prospectus of Ningde Times shows that the average sales price of power battery systems decreased from 2.28 yuan/Wh in 2015 to 1.41 yuan/Wh in 2017, a cumulative decrease of 38.26%. Correspondingly, the gross profit rate of the power battery system fell from 41.40% in 2015 to 35.25% in 2017.
“In the first quarter of this year, the proportion of power battery installed capacity in the Ningde era was as high as 50%. The market share is high, and the battery system is of good quality, which makes its bargaining power strong. Therefore, the gross profit margin of the Lian Ningde era has declined so much. For other suppliers with weak bargaining power, the situation facing them is of course even more severe, said Zhang Shaolin, partner of Songsong Capital.
From the data point of view, the power battery price is still in a decline channel. According to data from the Institute of Lithofium-Institute of Lithium Research (GGII), in the first quarter of 2018, the price of lithium iron phosphate battery pack fell further to 1.2-1.4 yuan/Wh, and the price of Sanyuan power battery pack fell to 1. 3-1.4 yuan/Wh.
The above-mentioned executives of the cathode material listed company believe that the battery price will continue to decline. In the short term, the market quotations have seen a vicious competition. Some companies report too low prices for cleaning up inventory or competing for market. In the long term, the action plan for the development of the automotive power battery industry clearly stated that the cost of the new lithium-ion battery will reach 1 yuan/Wh in 2020. The entire industry chain will withstand higher cost pressures.
“The pressure on the middle reaches is the greatest. The battery plant will become a sandwich cookie. The automakers will send pressure downwards. At the same time, the prices of cobalt and other raw materials will increase rapidly, further reducing profit margins.†The executive pointed out that the price of cobalt this year is expected to Further rise. With continued subsidy retreat, the pressure on both sides of the middle reaches of 2018 will be even more serious, and will be further transmitted to electrolytes, separators, and negative electrodes. This situation must wait until the industry reshuffle to a certain stage, the battery price may fall to a reasonable level may be improved, the time node or in 2020.
There is a backlog of profit space, and at the same time, cash flow problems in the middle reaches are highlighted. Zhongtai Securities statistics show that in 2017, the proportion of lithium battery revenue accounted for 73.9% of revenue, ranking third in all segments.
At the end of 2016, the state adjusted the subsidy policy for new energy vehicles and added the “new energy vehicles that require non-individual users to apply for subsidies, and the accumulated mileage must reach 30,000 kilometers (except for special operating vehicles)â€. In February 2018, the subsidy policy was readjusted and classified to adjust operating mileage requirements. Financial subsidies were applied for private purchases of new energy passenger vehicles, special vehicles for operation (including sanitation vehicles), official vehicles of party and government agencies, and vehicles at civil aviation airports. Without operating mileage requirements, the operating mileage requirements for other types of new energy vehicles applying for financial subsidies are adjusted to 20,000 kilometers.
When BYD replied to the Exchange's inquiry letter on the increase of RMB 1.01 billion in the closing balance of accounts receivable in 2017, according to historical experience, it normally takes more than one year for the subsidy application under normal circumstances to return information and return funds. The new requirements for driving mileage will add a threshold to the timing of subsidy settlement and further increase the financial pressure on new energy vehicle companies. In addition, in the national subsidy policy issued in early 2018, the subsidy payment liquidation method was changed from the pre-dialling system to the ex-post clearing system. Changes in the liquidation method will also extend the subsidy recovery period for new energy vehicles.
The national subsidies for new energy vehicles are usually paid by the automobile production companies in advance, sold at a price after deducting state subsidies, and then the auto companies will apply for subsidies. Before the subsidy payments are in place, auto companies will generally pay downstream accounts. Considering the relatively strong status of car companies, battery factories generally bear the pressure of long-term accounts to obtain orders, and are further transmitted to other midstream links with weaker bargaining power.
“Taking a calculation of 30,000 kilometers, it takes a year or so for buses to finish; passenger cars usually run for at least two years because they mostly run in urban areas. This means that the return of subsidies should be extended by at least one to two years. As the prices of raw materials and car prices have been squeezed by multiple pressures, the billing period for the midstream segment will continue to deteriorate, said Chen Haodong, a partner in Panshi Investment.
Shuffle tide
In the context of multiple squeezes, technology, market size and financial strength are particularly important. Leading companies took full advantage, and weaker companies accelerated their elimination.
According to statistics, the top five domestic manufacturers of battery shipments in 2017 were Ningde, BYD, Waterma, Guoxuan Hi-Tech and Beijing Guoneng. Among them, the Ningde era accounted for nearly 30% of the market share. In the first quarter of 2018, the differentiation of power battery installations continued to increase, with the top three companies accounting for a total of 74%. Among them, 2.2Gwh was shipped in the Ningde era, accounting for 50% of the total.
At the same time, the industry shuffle has been accelerating. "The number of battery factories we counted in 2016 was about 109. By the end of 2017, there will be only about 80 companies, including 8 new ones. About 20 battery factories have fallen." Ke pointed out.
Breaking the capital chain is the direct reason for many companies closing.
Chen Haodong pointed out that "new energy vehicles are capital-intensive industries. No matter whether the initial investment or intermediate production requires huge amounts of money, for example, a battery plant with a capacity of 8 billion watt-hours/year will have to invest at least 6 billion yuan to build a production line. At the mass production stage, at least two billion yuan will be needed as working capital. The financial pressure is very high."
Chen Haodong said that with the gradual overcapacity, small and medium battery manufacturers are in a weak position in terms of technology and order acquisition. With the introduction of the “8 billion watt-hours†opinion draft at the end of 2016, many battery factories below this threshold will not be able to receive orders and will only be able to do OEM work for the big companies, or the production line will be idle.
"Now even OEMs can't do it." Chen Haodong exclaimed: "The production lines that were built up in the early stages did not work, and the profit margins in the middle reaches of the industry kept shrinking. The funds invested by small plants in the early stage could not be realized and the cash flow pressure was huge. In this case, how can a small manufacturer update its production line and conduct research and development?â€
Mo Ke told reporters that in the past two years, the automation of production equipment has been updated quickly. If the equipment was kept idle two years ago, even if orders are received now, the resulting batteries can hardly meet the standards. “Many parts of the production equipment need to be replaced, which is a great challenge for the companies with insufficient funds, and many battery manufacturers eventually closed down.â€
According to Yang Zao, the advantages of leading companies are highlighted. Leading companies have a large market share, which facilitates their negotiation with the upper reaches and obtains cheaper raw materials. At the same time, there is rapid technological change in the industry. Technical processes such as yield, stability and energy density need to be improved. Leading companies have sufficient funds for R&D. .
Mo Ke believes that with the policy subsidies to tilt toward high energy density, and cost pressures brought about by the rise in cobalt prices, some power battery companies started to improve the battery energy ratio from the perspective of reducing the cobalt content, high nickel 811 power battery is expected to develop rapidly. From the technical point of view, the production of NCM811 material power battery is not difficult, the main difficulty lies in how to ensure the consistent stability of the battery. This is a high demand for production equipment. Prior to the production of 523 materials, it was difficult to produce high-nickel 811 with good consistency and stability. The battery factory needed to invest a considerable part of the funds to renew the production facilities. However, under the circumstances where profit margins are squeezed and cash flow is tight, only leading companies have sufficient funds to research and develop and update production lines.
The above-mentioned executives of the cathode material listed company pointed out that the cost reduction is still a major issue facing mid-stream companies in 2018. “Leading companies have the advantages of scale, capital, and technology, and are more competitive in cost reduction. For example, they can reduce the unit cost by increasing the market share to scale production, strengthen internal control and improve yields, and upgrade production lines to increase automation. Productivity, etc."
"After heavy shuffling, it is expected that the industry will eventually be able to leave more than 10 mainstream battery factories. At this stage, the overall scale effect will be prominent. With the increase in output and efficiency, the unit battery cost will be effectively reduced and the battery plant's bargaining power will increase. In terms of downstream car companies, it is conducive to obtaining a continuous and stable supply, said Chen Haodong.
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