Shulou(Shulou.com)11/24 Report--

Original title: "King Ning" Saving Ford "

On February 17, "Ning Wang" lost 5% of the market value of 50 billion yuan in intraday trading, and the market was in an uproar.

The ex post facto analysis of the stock price of the Ningde era on February 17, without exception, pointed to the sudden national review of the Ningde era's agreement with Ford to build a lithium battery plant in the United States to ensure that the core battery technology of the Ningde era would not be leaked.

At present, the concerns of the market have been dispelled. Censorship is just a normal procedure, and the killing has become a false alarm. The technology of the Ningde era has been patented, is public, and enjoys the protection of intellectual property rights under the legal framework. However, this incident in turn shows that the market is very optimistic about the cooperation between the Ningde era and Ford, and is looking forward to entering the United States in the Ningde era.

In this incident, it is also worth noting that China is even worried about the leakage of core technology to the United States, which is in sharp contrast to the fact that the United States has often choked China in the high-tech field. It can be seen that in the field of power batteries, and even in the field of electric vehicles, the status of China and the United States has begun to reverse.

Some people have compared this cooperation with Ford's "technology export" to China in the fuel truck era: in 1924, Sun Yat-sen wrote a letter inviting Ford to go to China to develop the automobile industry, but he did not even get a response; it was not until 1995 that Ford began its journey to China and successively established Ford Motor Co., Ltd. and Changan Ford Motor Co., Ltd. to export technology to China in exchange for China's vast market.

Who would have thought that just over 20 years ago, China unexpectedly opened the export of technology to Ford, which was also a successful "technology-for-market" behavior in the Ningde era.

In the past 2022, the domestic market share and gross profit margin of the Ningde era have declined. Going out to sea to gain more room for growth is a good way to stabilize the position of the industry.

Previously, Zhang Yongwei, vice chairman and secretary-general of the China Electric vehicle Association, predicted that the new energy vehicle industry chain would press the fast-forward button in 2023, and the cooperation between Ningde era and Ford is the best example of this prediction.

Focusing on the incident of building a factory in cooperation with Ford in the Ningde era, this paper tries to answer the following questions:

1. Why did the Ningde era enter the American market?

2. Is it bad luck for Ningde era curve to enter the United States?

3. For Ford, what does this cooperation with Ning Wang mean?

1. Persistent going to sea was persistent in the Ningde era.

In addition to building factories in Germany and Hungary, at the investor conference in early 2022, Zeng Yuqun made it clear: "in the American market, the Ningde era must go in."

This is because, at present, in the field of power batteries, the Ningde era is still a "king", but its crown has begun to fade slowly.

First of all, in the domestic market, both market share and profitability, Ningde era is slowly declining.

In the past 2022, the installed capacity of 142.02GWh in Ningde era still ranked first, but its market share fell below 50%, 48.2%, compared with 52% in 2021. In 2023, the downward trend remains the same, and in January, the market share fell to 44%.

Even Cui Dongshu, secretary general of the passenger Association, recently posted an article on his official account that the gap between the Ningde era and BYD was narrowing.

Screenshot in Cui Dongshu's official account in the face of the rise of BYD and the continuous improvement of domestic power battery production capacity, the profitability of the Ningde era has also been squeezed. In 2019-2021 and the first three quarters of 2022, the gross profit margin of Ningde era was 29.06%, 27.76%, 26.28% and 18.95%, respectively, which continued to decline.

For the future, many experts say that power batteries will soon be in a state of overcapacity. At the media communication meeting of experts of the China Electric vehicle 100 Forum held on February 17, Ouyang Minggao made it clear that domestic lithium-ion battery shipments this year will be about 1 billion kWh (about 1000GWh), the growth rate will drop sharply. This means that the market share and profitability of the Ningde era will continue to decline slowly.

In order to maintain its market share, Ningde Times recently implemented a "lithium mine rebate" plan to a number of strategic customers, rarely taking the initiative to put forward a price reduction plan. At the same time, the Ningde era also set its sights overseas.

Ningde Times has won the champion of the global power battery market for six consecutive years, relying only on the rapid development of China's domestic market. According to the survey results of market research agency SNE Research, from January to September 2022, South Korea's LG New Energy ranked first in the global electric vehicle battery load ranking except China, with a market share of 30.1%. The Ningde era took second place with a market share of 18.9%, and tied for second place with Japan's Panasonic. This shows that there is still much room for growth in the Ningde era in foreign markets.

Apart from the Chinese market, there are two major overseas markets for SNE Research power batteries, one in Europe and the other in North America. The Ningde era has taken root in Europe, as exemplified by the Thuringen factory in Germany and the Debrecen factory in Hungary. However, the share of the Ningde era is obviously insufficient in the US market, with Japanese and South Korean battery manufacturers playing a leading role.

At present, the American power battery market has a trend of rapid growth. In August 2022, the United States announced plans to achieve a 50% car electrification rate by 2030. In February 2023, the American Lithium Bridge Alliance (Li-Bridge) released a report that the demand for lithium batteries in the United States is expected to increase more than sixfold by 2030, with the market reaching $55 billion a year.

Therefore, Zeng Yuqun shouted: "the American market, Ningde era must enter."

2. Curve into the United States the current American market is no longer what Chinese enterprises like in the Ningde era want to enter. Many Chinese companies are locked out of the United States because of the US inflation reduction Act (IRA), which removes subsidies for power batteries whose materials and key minerals are extracted, processed or recycled by "concerned foreign entities".

However, the cooperation model between Ningde era and Ford is a kind of innovation, which can make Ningde era avoid IRA and become beautiful.

Specifically, in this joint venture, Ford owns 100% of the plant, including construction and infrastructure, and the Ningde era does not require financial investment, which can be called "penniless". However, the completed plant will be operated by Ningde Times and will charge fees by providing patent licenses for battery technology and manufacturing.

This cooperation model, on the one hand, avoids the obstacles of IRA to Chinese enterprises, and enables the new factories of the two sides to obtain production tax credits according to IRA.

For the Ningde era, this is a "light asset operation" way. According to McKinsey's research, expanding with a light asset model can achieve stronger profitability, faster speed and more sustainable growth than operating with its own capital.

In particular, the light asset operation mode of "intellectual property is king" in the Ningde era has a more competitive advantage, because the intellectual property is the "franchise" advocated by Buffett. At the end of 2022, Ningde Times said on the investor platform that it had licensed and applied for a total of 7229 domestic and foreign patents, ahead of other battery companies.

Relying on the advantage of intellectual property to operate light assets is a typical "technology-for-market", which enables Ningde era to enter the American market quickly and at a low cost. Prior to this, Microsoft entered the major markets around the world through this mode of operation and achieved rapid development.

To say the least, even if the business environment in the United States changes in the future, this kind of "light asset operation" in the Ningde era does not have to think too much about sunk costs and effectively avoid risks.

However, in this cooperation, there are some different views in the industry on the possible risks in the future of the Ningde era.

Throughout history, when foreign technology such as the Ningde era surpassed the United States by a large margin, it was often "hit" by the United States. In the 1980s, when Japan surpassed the United States in semiconductor technology and production capacity, the pressure from the United States never stopped. In 1987, the US side also created the famous "Toshiba incident". One of the important details was that many technical documents within the Toshiba Group were taken away by the US side on the grounds of investigation. Since then, Toshiba's semiconductor development has stalled, in 2018, had to sell its chip business to the US M & A firm Bain Capital, sadly withdrew from the chip manufacturing industry.

Judging from history, cooperation with American enterprises should be "defensive" in the Ningde era, and even if the cooperation is deepened in the future, it should not be All in. In the previous much-hyped TSMC incident in the United States, TSMC "left a hand". Taiwan media reported that TSMC went to the United States to build 5 nm capacity, while 3 nm was already in mass production in Taiwan.

3. Saving Ford's cooperation is an important way to increase international market share for the Ningde era, but it is more important for Ford. In a sense, this partnership may save Ford.

In 2022, Ford has lagged far behind in the electric vehicle market because of the fierce offensive launched by Tesla and other electric car companies. Tesla has 65% of the u.s. electric car market, while Ford has only about 7.6%, according to market research firm Motor Intelligence.

In the financial statements, Ford also made a net profit of more than $17.9 billion in 2021, but turned directly into a loss of nearly $2 billion in 2022. By contrast, Tesla's net profit surged 50.6 per cent to $12.58 billion last year.

Entering 2023, Ford is in an even more dangerous position. Because at the beginning of the year, Tesla cut prices around the world, setting off a price war.

Prior to this, Ford was already accelerating electrification and launched a number of pure electric models, but it was constantly crushed by Tesla in the price war at the beginning of the year. In January, Ford sold 5247 electric vehicles in the United States, down 32.9 percent from the previous month. In order to boost future sales, Ford had to cut prices, but this led to a decline in its bicycle profits.

Reducing costs has become Ford's only option. Compared with fuel-fueled cars, power batteries account for a high proportion of costs in electric vehicles. Zeng Qinghong, chairman of GAC GROUP, revealed in 2022 that the cost of power batteries accounted for 60% of the total cost of electric vehicles and was growing. As a result, car companies are trying to build their own battery factories to reduce costs on power batteries, and Ford is no exception.

In an interview with the media, Ford CEO Jim Farley said: "the batteries in the new plant will be one of the lowest production costs and will reduce the pricing of electric vehicles, thus making carmakers more profitable."

At present, the North American power battery market has been occupied by Japanese and South Korean companies, and Ford has previously cooperated with South Korean enterprises to build battery plants. But why did Ford choose to cooperate with the Chinese company Ningde era this time? Ford CEO Jim Farley said in an interview with the media that for Ford, the Ningde era is the only option.

Because Japan and South Korea battery enterprises mostly take ternary lithium battery as the main product, from the cost point of view, ternary battery is not dominant. The production of lithium iron phosphate battery can easily achieve the stable purchase of materials, and the cost can be 20% lower than that of ternary lithium battery. Tesla's high gross profit is due to the lithium iron phosphate battery.

In order to reduce costs, Ford also chose lithium iron phosphate batteries, so it is looking for a partner to produce lithium iron phosphate batteries with core technology and large enough volume. At present, throughout the global power battery manufacturers, Ningde era is undoubtedly the best choice.

According to data released by market research firm SNE Research, in 2022, Ningde era installed 191.6 GWh of power batteries, with a market share of 37%, defending the champion for the sixth year in a row. Lithium iron phosphate battery is the pillar technology of Chinese battery manufacturers. The installed capacity of lithium iron phosphate batteries in the world in 2022 is also the first in the world in Ningde era.

According to Ford, in the future, the lithium iron phosphate battery jointly built with the Ningde era will be 15% cheaper than the ternary lithium battery used by Ford.

In short, the cooperation between the Ningde era and Ford opened the door for "King Ning" to enter the United States, cracked the IRA deliberately set up by the United States, made the people proud, and even aroused the "jealousy" of South Korean enterprises. In contrast to the Ningde era's partnership with Ford, Ford has cancelled plans to build a battery plant in Turkey with South Korean company SK On, so it is worried about the future of South Korean battery companies, South Korea's Central Daily newspaper said.

Looking to the future, che Bai think tank believes that the Ningde era into the United States, or the future of China's new energy vehicle industry chain into the United States in an all-round way.

[full text reference]

[1] "Ningde era: entering the United States in entanglement", Tiger sniff

[2] "the agreement between Ningde era and Ford will be reviewed", brokerage China

[3] "from the" Lithium Mine rebate "plan, look at the triple" careful thinking "in the Ningde era, China Automobile Daily

[4] "Ningde Times" joined "Ford Battery Factory: the Shadow of New Energy", China Finance and Economics

[5] "the thick Black History of the United States": from the Toshiba incident to the dismemberment of Alstom, people's Information

[6] "Foreign media revealed that Toshiba chips had been suppressed by the United States", reference news

[7] to "defuse" the misgivings of hollowing out Taiwan? TSMC's "rare big action" will be broadcast at a 3nm mass production ceremony, the Straits Herald

This article comes from the official account of Wechat: che Bai think Tank (ID:EV100_Plus). Author: Chen Zhongshan.

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