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The main points of this article

The reason for the layout of batteries in car companies

Which of the two modes of cooperation is better?

Will the industry pattern be subverted?

Some time ago, Honda announced a partnership with LG New Energy, which will set up a joint venture in the United States. The company will mainly produce lithium-ion batteries to supply Honda and Acura electric models in North America, Honda's first power battery factory.

The cooperation project has a total investment of US $4.4 billion and a target annual output of about 40GWh. Construction is expected to start in 2023 and production in 2025.

It is worth noting that Honda and LG New Energy own 49 per cent and 51 per cent of the joint venture, respectively, meaning LG is dominant. Honda's willingness to "give way" also illustrates its urgent need for power batteries.

This is not the first time LG New Energy has been "favored" by car companies. Earlier, LG New Energy also established a battery joint venture with General Motors in the United States and Stellantis Group in Europe. In addition to LG,SK Innovation's electric vehicle battery manufacturer SK On has also teamed up with Ford to build an annual 140GWh battery plant in the United States, with the goal of becoming the largest battery factory in the United States.

On the one hand, American and Japanese car companies choose to have deep ties with South Korean lithium battery manufacturers, while German BBA (Mercedes-Benz, BMW and Audi) is more inclined to Chinese brands, such as Ningde Times, Funeng Technology and Guoxuan Tech.

Judging from the domestic situation, the cooperation between car companies and power battery manufacturers has become a trend.

So, what impact will the increase in the combination of European and American, Japanese and South Korean car companies and power battery manufacturers have on the overall pattern?

Is the car company forced to go up to Liangshan? Car companies build batteries in the final analysis, of course, in order to maximize business and make more money.

From the direct motivation, it can be divided into two categories-"going to Ninghua" and "overtaking at the bend".

The power battery manufacturers represented by the Ningde era have almost grasped the throat of the car companies. Power batteries account for 40% or more of new energy vehicles, which is a huge cost variable for car companies. Although Ningde era, Guoxuan Hi-Tech and other power battery companies also complain about the rising cost of raw materials. But for the downstream car companies, controlled by others, often worried about the taste of being stuck in the neck is always uncomfortable.

In terms of bargaining power, car companies that do not have the ability to build batteries are also easy to lose the initiative. Zeng Qinghong, chairman of GAC GROUP, said publicly at the World Power Battery Congress last month that "the cost of power batteries already accounts for 40%, 50%, or even 60% of new energy vehicles, so am I not working for the Ningde era?" This complaint reflects the difficulties of many car companies.

Ningde era now has a large number of long-term orders, which further increases the sense of insecurity among new car builders. The long-term order list includes, but is not limited to, 4 years with Tesla, 10 years with Great Wall Motor, and 7 years with Mercedes-Benz commercial vehicles. These big car companies lock in a large amount of battery capacity in the next few years in advance, and companies that do not have time to sign orders may find it difficult to get an adequate supply of batteries from the remaining limited capacity.

With the goal of carbon neutralization and carbon peak being put forward, the global demand for new energy vehicles and power batteries is only increasing. Under this major premise, who has mastered the battery technology, in fact, is to master the most important voice.

At this point, traditional car companies, especially overseas car companies, have fallen behind in the development of new energy. European car companies, represented by Germany, focused on clean kerosene; Japanese companies, such as Toyota, bet on hydrogen fuel cells; and traditional American car companies focused on wait-and-see electric cars.

Missed the first wave, but do not want to fall behind the car companies can only choose to cooperate with the existing battery manufacturers, and then quickly enter the field of electric new energy vehicles.

At this stage, although the electrification transformation in the United States is relatively slow, American car companies are particularly active in building batteries; South Korea's Hyundai Motor and LG jointly announced plans to build a factory in Indonesia last year, and recently it was reported that Hyundai and SK On were discussing the construction of a plant in the United States; and the Japanese government said that it would invest about 3.4 trillion yen ($24.55 billion) to build a battery manufacturing base and begin the process of full electrification. Honda's first battery plant could become an entry point for Japanese carmakers to increase investment in battery production.

For domestic enterprises, power battery going to sea alone also has higher performance-to-price ratio and feasibility. China, as the country with the highest electric vehicle penetration rate, is less than 20%, and it is even lower in other areas, which means there is huge room for growth. Compared with the whole vehicle going out to sea is easy to be limited by brand awareness, consumer preferences, national policies (such as subsidies, tariffs, etc.) and other factors, power battery "debut" alone, the resistance will be much less.

Self-built or cooperates with BYD to build cars and batteries in one, with excellent financial results. Now batteries can not only be produced for their own use, but also sold to the outside world. It can be described as a bumper harvest of selling cars and batteries. It will also make many car companies feel that "I can do it."

However, this is probably an illusion, and BYD's success is not easy to replicate.

BYD started out as a mobile phone battery and accumulated battery technology, combined with the research and development of new energy vehicles to get twice the result with half the effort. Its unique stunt blade battery has a high technical moat-it not only retains the advantages of high stability, high safety and high life of lithium iron phosphate, but also further improves the energy density and can match the mileage of shoulder-to-shoulder ternary lithium battery.

As of May 2022, the power battery global installed capacity and market share ranking data source: SNE Research can produce and sell itself, and Honeycomb Energy. As a battery company incubated by Great Wall Motor, Honeycomb Energy has a stable and sufficient source of external customers, such as Guoxuan Hi-Tech, overseas car company Stellantis, etc., relying on the sales of new energy electric vehicles of Great Wall Motor, as well as the resources of its parent company.

In contrast, other car companies build their own battery factories are too risky, technical and cost disadvantages are two major obstacles.

Technological research and development requires a lot of capital investment, and the final result of self-research is also full of uncertainty. Especially in the three key areas of battery materials, system integration and battery management, a large number of patents are concentrated in the hands of battery manufacturers, and the self-research investment of car companies is likely to become a silent cost.

Take the leading company Ningde era as an example, its just-released Kirin battery (expected to be fully launched in 2023) is the integration of its third-generation CTP technology, with a group efficiency of 72%, exceeding the current CTC battery technology and setting a new record for battery package efficiency. This breakthrough is based on the technological context of the Ningde era-the intermediate link from the battery to the loading is gradually eliminated, and the efficiency of the system group is steadily improved.

The so-called "joint battery factories" generally have two paths: car companies and battery companies sign a long-term framework, or car companies and battery companies jointly set up joint venture factories.

Let's start with the signing of a long-term cooperation framework, which can theoretically ensure supply. However, if there is once again a substantial fluctuation adjustment of upstream raw materials, or insufficient factory delivery, it will seriously affect the production capacity of car companies. Affected by the epidemic, the delay in battery supply in the Yangtze River Delta industrial belt in the first half of this year directly affected the delivery of many car companies.

The complementary self-built + co-built model such as Honda and LG New Energy is the mainstream at present, which is the result of battery autonomy, R & D cost, risk balance and mutual compromise.

Will the pattern be subverted? According to public data, the planned investment of automobile enterprises in the layout of the power battery industry chain has reached 500 billion yuan, and it is expected to continue to increase in the future.

Judging from the performance of car companies, BYD and Tesla are the two major leaders; the performance of the new power of car building is not satisfactory; traditional car companies are mixed; new energy from Japan and South Korea is at risk of being marginalized; and the recognition of established strong teams such as BBA is still strong, but there are few new energy models to choose from.

Most of the domestic car companies have started power battery plant construction projects, but with the exception of BYD and Great Wall mentioned above, most of them are still in the testing stage, with a lot of thunder and little investment.

For example, Lailai Automobile plans to invest 218.5 million yuan in new R & D projects, including lithium ion battery trial production line and a battery pack pack line; Guangzhou Auto EA self-developed power battery trial line was piled and built in March this year and is expected to be completed by the end of the year, plus the self-built Juwan technology and research investment, a total investment of 1.336 billion Zero running, Weimar and Evergrande have also launched plans to build their own battery factories, of which zero running investment is expected to be 200 million. Weima and Evergrande's investment is unknown, but it is estimated that it will not be high.

These investments are dwarfed by the $4.4 billion spent by Honda and LG New Energy.

Of course, there is something special. Geely is a car company with few heavy battery factories, with a cumulative investment of nearly 70 billion yuan, including Yaoning, Weirui, Hengyuan New Energy and other self-built manufacturers. Geely is also the domestic car company with the highest investment in the joint construction battery factory, and the cooperation investment with Ningde Times, LGE, Funeng Technology, Xinwanda, Weilan New Energy and other battery manufacturers has also reached nearly 30 billion.

From an overseas point of view, the "boss" Tesla released the 4680 battery and CTC technology as early as September 2021. At the earnings conference in the first quarter of this year, Musk said it delivered the first batch of electric cars with 4680 self-made batteries. If the news is true, Tesla is also expected to join the "club" of self-production and self-sale in the near future.

Volkswagen was more aggressive, announcing that it would invest more than 7 billion euros to build battery plants and said it would build six plants in Europe by 2030 with a total capacity of no less than 240GWh, with a goal of surpassing Tesla in sales of new energy vehicles by 2025.

In addition, Toyota, GM, Fukuda, BMW and Mercedes-Benz also have their own actions. However, it seems to be in full swing, but few of these car companies can compete with battery manufacturers in terms of production capacity.

To make a profit, the annual production capacity of power battery needs at least 20GWhh; to achieve ideal operating efficiency, it is necessary to achieve 40GWh. To really have the market competitive advantage, it is necessary to cross the threshold of 100GWh. The number of cars corresponding to this threshold is about 1.5 million.

The reality is that there are no new energy brands that can sell more than one million units a year. Leading BYD and Tesla sold 600,000 and 930000 vehicles respectively in 2021. There are not many new energy brands that can even reach annual sales of 300000 vehicles and have the lowest capacity of 20GWH.

According to the statistics of South Korean market research institute SNE Research, the total output of electric vehicle power battery in 2021 is less than 300GWh (296.8GWh). Apart from the two major leaders, it is conceivable that the rest of the car companies will account for the proportion.

But all the carmakers seem to be in hot pursuit. Mainstream power battery research institutions such as Bloomberg New Energy, South Korea's SNE and GGII all expect the size of the global automotive power battery market in 2030 to be above 3000GWh.

Compared with the current output of less than 300GWh, there is at least ten times the incremental space. Coupled with the big "scuffle" of domestic and foreign car companies and battery manufacturers, the future pattern is full of variables and variables.

Reference:

[1] "Power Battery: a New Colosseum for Automobile companies", Source: titanium Media

[2] "car companies need to go through three hurdles to build batteries", source: eleven people of Finance and Economics

[3] "the logic behind the nearly 30 car companies' layout of the battery industry chain is to chase the trend or to prevent it from being pinched. Source: Sohu Automobile.

[4] "just buy the car body to change the electricity? Car companies are unwilling to be "beaters". Source: Autolab

* this article is based on public information, is for information exchange only, and does not constitute any investment advice.

This article is from the official account of Wechat: value Planet Planet (ID:ValuePlanet), author: Yang Chengchun, Editor: Tang Fei

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