The power battery industry is accelerating its reshuffle, and listed companies are increasing their presence in overseas markets

Since the beginning of this year, the power battery industry has received much attention. On the one hand, the rapid decline in upstream battery grade lithium carbonate prices has led to a decrease in the cost of power batteries, and on the other hand, the booming production and sales of new energy vehicles downstream have led to an increase in battery demand.

It seems that the power battery industry is experiencing a two-way positive trend, but in reality, there has been an accelerated reshuffle, and "inventory" has become a hidden pain in this industry.

At the 20th Shanghai International Automobile Industry Exhibition held recently in 2023, a reporter from Securities Daily witnessed the popularity of China's new energy vehicles and also felt that the power battery industry has ushered in unprecedented changes.

As the leader of power batteries and known as the "King of Ning", Ningde Era also feels the challenges and opportunities of the industry. Through innovation and going global, it has taken the lead in breaking through the situation and opened up a new path for the development of the power battery industry.

Chaotic expansion triggers phased "inventory"

As early as last year, the lithium battery industry had already experienced a wave of expansion. In response, Lin Boqiang, Dean of the China Energy Policy Research Institute at Xiamen University, told Securities Daily: "Due to the rapid development of the new energy lithium battery sector in the early stage, as well as high prices and profits, capital has flooded into the market, leading to the formation of inventory, which is also a consequence of the cyclical nature of Volkswagen products." According to data from the China Automotive Power Battery Industry Innovation Alliance, in 2022, China's cumulative production of power batteries was 545.9GWh, while the cumulative sales of power batteries were 465.5GWh, and the cumulative installed capacity was only 294.6GWh. ".

The imbalance between supply and demand has greatly increased the pressure of destocking power batteries in 2023. Some A-share companies even announced the abandonment of their lithium battery business. Jiawei Xinneng announced in February that it will no longer consider lithium battery production as its future development direction.

The person in charge of Honeycomb Energy, which ranked seventh in the domestic power battery installation volume in March this year, candidly stated in an interview with Securities Daily: "The phased destocking of the lithium battery industry also has a certain impact on the company, but due to the company's acquisition of a large number of designated customers and the continuous ramp up of production, the impact of destocking on the company is limited."

"Due to the impact of the previous battery pricing mechanism (linked to resources), some power battery companies have maintained certain profits. However, as the adjustment continues, industry competition will highlight the Matthew effect, that is, the stronger will remain stronger, and the reshuffle will intensify," said Mo Ke, Chief Analyst of Zhenli Research, to Securities Daily

Backward production capacity faces reshuffle

In fact, the extensive expansion of inventory in the early stage has led to a shortage of orders for some power battery companies. People close to CATL have stated that CATL's capacity utilization rate has experienced a decline.

Industry insiders have analyzed that during the inventory clearance phase, the lives of small battery factories will be even harder.

According to data from the China Automotive Power Battery Industry Innovation Alliance, in 2022, CATL's market share of power batteries was 48.20%, continuously leading the way. In addition to the top 10 power battery companies such as BYD, China Innovation Aviation, Guoxuan High tech, and Xinwangda, the total market share reached 95%. The remaining 5% of the market share will be contested by the remaining dozens of companies, and the competition can be described as fierce.

The person in charge of a battery PACK factory in South China said, "When the industry is growing rapidly, just a few people can do it. But when everyone has no orders, suppliers start to work hard to find existing customers, and the competition is very fierce."

Qi Haishen, President of Beijing Teyi Sunshine New Energy Technology Co., Ltd., told Securities Daily reporters, "Inventory is mainly concentrated in outdated production capacity, and advanced production capacity is still insufficient. The orders of top enterprises are very full, while the pressure on waist enterprises is relatively high, and tail enterprises will face the possibility of being eliminated."

Securities Daily reporters visited the world's largest lithium battery new energy production base - Ningde Lithium Battery New Energy Town. Faced with intensified industry competition, Jiang Li, Deputy General Manager and Secretary of the Board of Directors of Ningde Times, was not afraid. He told reporters, "High quality products are what customers truly need, so high-quality power battery production capacity is still scarce." Ningde Times continues to invest in research and development and technology, and its product technology, quality, and manufacturing levels have always been in a leading position.

Entering the Z base of Ningde Times Headquarters, the reporter can see that the intelligent automatic production equipment is running by itself, and the material mixing, closed battery coating, automatic forklift transportation, etc. all show the intelligence and progressiveness of the production line of Ningde Times. "Our equipment is all researched and designed by ourselves, and only a small number of people use the system to check if there are any problems with the product to ensure product quality and safety." According to the relevant person in charge of Ningde Times Z Factory, "Intelligent factories not only shorten production time, but also greatly reduce product scrap rates."

Qi Haishen believes that the lithium battery industry is a capital intensive and technology intensive industry, with fierce internal competition. Industrial investment will face a two-way competition of "energy density efficiency and production costs".

"The first line products of lithium batteries with safety and high efficiency will be priced at a premium of more than 5% compared to ordinary products, and some segmented products may even be more than twice as high. This will lead to a strong demand for efficient and high-quality production capacity, which may be seriously insufficient, while low-level products may not be favored," said Qi Haishen.

Industry insiders predict that as leading power battery companies continue to expand production, the problem of overcapacity in the industry will become more prominent in the next two years, and the industry reshuffle will intensify. Some low-end production capacity without core technology is facing the risk of being eliminated by the market.

Accelerate innovation and overseas layout

At the 2023 Shanghai Auto Show, a reporter from Securities Daily saw that overseas car executives have a strong interest in China's new energy vehicle exhibition stands, while overseas car companies themselves are also developing new energy vehicles and showcasing them at the auto show. This is a signal of the acceleration of global electrification transformation, indicating that global competition for domestic power batteries will intensify.

On April 4th, CATL's first overseas factory located in Thuringia, Germany officially obtained a battery cell production license. Except for CATL, Guoxuan High tech, Honeycomb Energy, Yiwei Lithium Energy, Zhongchuangxin Aviation, and Yuanjing Power have all established overseas factories, mainly concentrated in Europe. Seizing the European market has become a consensus among Chinese power battery companies.

Ningde Times stated that "with the continuous launch of the company's overseas designated new car models, the increased production of German factories, the construction of Hungarian factories, and the promotion of cooperation with Ford, the company's overseas competitive advantages will become more obvious in the future, reflected in technological innovation, supply chain layout, extreme manufacturing, and other aspects.".

In the view of industry insiders, building factories overseas can meet the needs of automotive OEMs for nearby supporting supply, and can also expand to more international customers. However, in order to expand into overseas markets, it is necessary for enterprises to continuously iterate their core technologies and export high-end production capacity to the outside world.