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

Recently, the topic of "overcapacity of power batteries" has aroused heated discussion in the industry.

First, Morgan Stanley released a report that was bearish on power batteries, believing that the industry had "overcapacity", downgrading the leading company Ningde era from neutral to low, and maintaining the neutral rating of most other battery manufacturers; then Changan Automobile Chairman Zhu Huarong warned of power battery overcapacity, pointing out that China needs power battery capacity of 1200GWh by 2025, but the current capacity planning of the industry has exceeded 4000GWh. There is also the statement made by the leaders of the relevant departments on "avoiding blind expansion and disorderly development" at the power battery conference.

However, some institutions, such as Citic Construction Investment, believe that "it is too early to conclude industry overcapacity in the early stages of industry development." At present, the more recognized view in the industry is that there is a "structural surplus" in the power battery industry.

In the past three years, the proportion of cars loaded in the production of power batteries has indeed been decreasing. According to the data of the Federation of passengers, the battery installation rate of power battery loading reached 76% in 2020, 70% in 2021, 54% in 2022, and 51% in 2023 as of May.

Among them, the proportion of ternary batteries loaded has decreased from 80% before to 48% in 2023, and the proportion of lithium iron phosphate batteries has dropped from 71% to 56%. That is, whether it is ternary battery, or lithium iron phosphate battery, "structural surplus" and inventory pressure are important issues.

In the field of power batteries, there is not only a "structural surplus" of lithium batteries, but also a generally optimistic transition from sodium batteries to solid batteries.

Public opinion once said that 2023 was the first year of sodium battery, but now it is more than halfway through 2023, and there are not many models with sodium battery on the car. Moreover, the Securities Daily said that "sodium battery cars" may only be able to "focus on minicars" in the future. The Economic Daily published a commentary saying that in terms of application, sodium batteries still need to find suitable application scenarios, and sodium batteries may not be able to replace lithium batteries.

As for solid-state batteries with high hopes, Li Bin, founder of Weilai, has said publicly that mass production of all-solid-state batteries is still a long way off. The industry estimates that it will take 5-10 years for real all-solid-state batteries to be mass produced. At present, even the mass production and loading of semi-solid batteries is only at the stage of "putting on the agenda".

Energy storage has always been regarded as the second growth curve for power battery manufacturers. However, up to now, the energy storage industry is still facing the problem of profitability, and it is necessary to further explore feasible business models. Moreover, because the power battery capacity has been "structural excess", in order to digest the capacity, battery manufacturers have carried out the layout of energy storage business, which has led to the outbreak of price war.

Therefore, the current development of the power battery industry has entered a "platform", there is an urgent need to find a new breakthrough.

At present, it seems that Zhang Yongwei, vice chairman and secretary-general of China Electric vehicle Association, predicted that "the new energy vehicle industry chain will press the fast forward button", or the optimal solution to the current problem of "excess power batteries".

Focusing on the development status of the power battery industry, this paper tries to answer the following four questions.

1. Is the power battery overcapacity?

2. At present, the power battery industry turns to energy storage, can it solve the problem of "structural overcapacity"?

3. is it time for large-scale mass production of sodium batteries and solid-state batteries?

4. What is the optimal solution to the problem of "structural surplus" of power batteries?

1, capacity "structural excess" in the automotive industry, not only Changan Automobile Chairman Zhu Huarong publicly warned the problem of power battery capacity, FAW Group General Manager Qiu Xiandong also said a few days ago that in the power battery industry, from 2022 to the present, more than 50 enterprises have announced more than 125investment projects with a total investment budget of more than 1.4 trillion, and production capacity planning has exceeded 2500GWh. If these capacity plans are really realized, there will be the risk of overcapacity.

Ouyang Minggao, vice chairman of the China Electric vehicle Association and academician of the Chinese Academy of Sciences, has warned that by 2023, the demand for batteries will be around 1200GWh, but the actual production capacity may be greatly exceeded, reaching about 3000GWh.

However, some institutions, such as Citic Construction Investment, believe that "it is too early to conclude industry overcapacity in the early stages of industry development."

At present, the more recognized view in the industry is that there is a "structural surplus" in the power battery industry. This is because the general measure of power battery surplus needs to take the actual production and capacity under construction as the main reference, and capacity planning more reflects investors' expectations for future industrial development.

Bai Yiyang, vice president of the International Research Department of China Merchants Bank, also believes that the overcapacity of power batteries is mainly structural. At present, the competition pattern of the top 10 manufacturers of power batteries is basically determined, and the head battery factory is still relatively restrained. The possibility of landing capacity planning for other battery factories is relatively low.

It is undeniable that the problem of overcapacity also exists in the actual production and loading of power batteries.

The proportion of cars loaded in power battery production has been declining in the past three years, from 76% in 2020, 70% in 2021, 54% in 2022, to 51% in May 2023, according to the Federation.

In addition, the "surplus" can also be seen from the difference between the cumulative output of power batteries and the amount of cars on board.

According to the data of China Automotive Power Battery Industry Innovation Alliance, the cumulative output of power batteries in China reached 148.5% in 2022 compared with the same period last year. In contrast, the cumulative installed capacity of power batteries in China last year was 294.6GWh, an increase of 90.7% over the same period last year. It can be seen that the cumulative output of power batteries in 2022 is 1.85 times the cumulative installed capacity.

In the first five months of this year, the cumulative installed capacity of power batteries in China was 119.2GWh, an increase of 43.5% over the same period last year. The cumulative output of power batteries in the first five months of this year was 233.5GWh, an increase of 34.7% over the same period last year. By comparison, the output of power batteries in the first five months of this year is nearly twice the amount of cars loaded, and the output of power batteries is much higher than the demand.

This means that nearly half of the power batteries produced by battery factories cannot get on the bus and can only go into inventory. As a result, the "White Paper on the Development of China's New Energy vehicle Power Battery Industry (2023)" issued by the research institute EVTank shows that the inventory of power batteries in the whole industry chain in 2022 is as high as 164.8GWh, a record high.

In this regard, the views of Mo Ke, chief analyst of True Lithium Research, may explain this phenomenon of overcapacity.

He believes that to a certain extent, this is low-end overcapacity, but high-end, high-quality capacity is not enough. Cao he, president of Quanlian Automobile Investment Management (Beijing) Co., Ltd. also said that the battery products used in high-end models and low-end models must be different, and there are problems of insufficient high-end capacity and indigestible low-end overcapacity.

2, turn to energy storage, but not profitable, even if the power battery industry only presents a "structural overcapacity", it will have a certain impact.

For example, for those second-line battery manufacturers that are expanding rapidly, they may be hit hard because of the surplus. After all, these second-tier enterprises in the competition, can not rely on quality to win, have to adopt low-price strategy to compete for market share, their profit margins are relatively low. Therefore, in the "supply exceeds demand" market, in the face of the impact of the industry, these manufacturers do not have a strong ability to resist.

Morgan Stanley's research report believes that this round of "surplus" is very likely to lead to a new round of price war, which will accelerate second-line battery manufacturers to enter the stage of capacity integration and survival of the fittest. Even leading companies such as Ningde era and BYD will face the risk of a decline in installed capacity.

How to digest the "structural excess" capacity has become a bigger problem.

Generally speaking, energy storage is the second growth curve of these battery manufacturers, which can absorb some of the capacity. Take the Ningde era as an example, the energy storage system business is its revenue and share of the fastest growing business. According to the financial report, the revenue of the Ningde era in 2022 was 44.98 billion yuan, a year-on-year increase of more than 2.3 times, accounting for 13.69% of the total revenue.

For second-line battery manufacturers who already have excess capacity, energy storage business is more likely to help them release capacity or make planned capacity fall to the ground quickly. According to the statistics of the Energy Storage Branch of China Chemical and physical Power Industry Association, the industrial scale of the new type of energy storage may break through the trillion mark by 2025 and is expected to be close to 3 trillion yuan by 2030, which provides a huge market space for excess capacity.

At present, many enterprises have begun to take action. Ningde Times released the world's first zero auxiliary source optical storage fusion solution this year, and BYD also launched the BYD Rubik's Cube, the first energy storage system with integrated blade batteries. Honeycomb Energy has released a full range of short knife energy storage cells and products used in electric power, industrial, commercial and household scenarios. The Tesla energy storage superfactory is also scheduled to start in the third quarter of 2023 and start production in the second quarter of 2024.

Compared with the power battery business, the energy storage business has a huge problem, that is, it is not yet profitable.

As early as 2013, Zhang Yongwei, vice chairman and secretary-general of China Electric vehicle Association, suggested that China should form a business model for the application of energy storage and create a business model conducive to the realization of the value of energy storage. However, up to now, the energy storage industry is still facing the problem of profitability, and it is necessary to further explore feasible business models. Wu Yunliang, general manager of Zhejiang Wanliyang Energy Technology Co., Ltd., said that at present, there is not a truly profitable energy storage enterprise in China. Most energy storage companies rely on subsidies to survive.

Even, the energy storage industry started a price war before it made a profit. According to the Zhongguancun Energy Storage Alliance, the average bid-winning price of the energy storage system in the first quarter of this year was 1.47 yuan per watt-hour, down 4 percent from the previous month. Among them, the average bid-winning price in March dropped to 1.37 yuan per watt-hour.

It can be seen that turning to energy storage business is not the fastest and best way to solve the current "structural overcapacity" of battery manufacturers.

3. Sodium battery, solid-state battery? For the power battery industry, there have been two highly promising technology routes, one is sodium battery, the other is solid-state battery. This is also worth looking forward to to solve the problem of "structural overcapacity".

However, it seems that both of these two technical routes are not developing smoothly this year.

With regard to sodium batteries, many research institutions have previously believed that 2023 will be the "first year of mass production of sodium batteries", and even believe that sodium batteries are "replacement of lithium batteries" and will gradually replace lithium batteries. Now that we are halfway through 2023, the term "the first year of mass production of sodium batteries" does not seem to be accurate.

There are not many models with sodium batteries on the bus at present. According to the announcement of the 372nd batch of Road Motor vehicle Manufacturing Enterprises and products issued by the Ministry of Industry and Information Technology a few days ago, Chery's Qirui brand NEQ7000BEVJH11L pure electric model and Jiangling's Quechi brand JX7001ESMBEV pure electric model will be equipped with sodium battery models, but these two cars are mini cars. To this end, the Securities Daily said that "sodium battery cars" may only "focus on minicars" in the future.

Securities Daily reported that people in the screenshot industry questioned the claim that the sodium battery is a "lithium battery replacement". The Economic Daily published a commentary saying that in terms of application, sodium batteries still need to find suitable application scenarios. At present, it seems that sodium battery may not be able to replace lithium battery.

Economic Daily reported screenshots in addition, with regard to the technical route of solid-state batteries, as Li Bin, founder of Weilai, said, mass production is still a long way off. Academician Ouyang Minggao predicts that 2025 will be the key period for the transition from liquid batteries to solid-state batteries, and 2030 should be a key node for the development of all-solid-state batteries. Existing lithium technologies such as liquid and semi-solid batteries will remain absolutely dominant until 2030.

Therefore, it will take about ten years for all-solid-state batteries to realize industrialization and have an important impact on the market pattern. At present, even the mass production and loading of semi-solid batteries is only at the stage of "putting on the agenda".

Toyota recently announced great advances in solid-state battery technology, which seems to bring hope for the rapid landing of solid-state batteries, but judging from the information it has released so far, professionals are skeptical.

Toyota said it had halved the cost, weight and size of its solid-state battery, charging for up to 10 minutes before reaching 1200km, adding that "the solid-state battery can be produced now." The announcement has enabled Toyota's share price to rise rapidly.

However, it is contradictory for Toyota to announce that it is "ready to start production now" and "mass production time is 2027-2028" on the other. Moreover, Toyota did not disclose the energy density of its solid-state batteries, nor did it disclose what materials were used, so that the industry could only see in vain.

In this regard, Wu Kai, chief scientist of Ningde Times, said, "if Toyota says that today's energy produces all-solid-state batteries, I am skeptical. At present, no one in the industry has the ability to mass-produce all-solid-state batteries. As to whether it can be mass produced by 2027, as a technician, it is difficult for me to say accurately." This is because the industry believes that there are still some core problems in the all-solid-state battery industry that need to be solved.

4. Going out to sea, the best solution to go to sea at present may be the best solution to the problem of "structural excess" of power battery capacity.

The export of power batteries in China has been growing rapidly. From 2017 to 2020, China's lithium battery exports grew steadily at a rate of 20% per cent per year. By 2022, China's lithium-ion battery exports totaled 342.656 billion yuan, ushering in an explosive growth of 86.7%.

In 2023, this rapid growth trend has only increased. According to data released by the General Administration of Customs, China's lithium battery exports reached 109.79 billion yuan in the first quarter, an increase of 94.3 percent over the same period last year.

Even if the growth rate is so fast, the market space of China's power battery export is still not fully explored.

According to data released by SNE Research, the global installed capacity of power batteries reached 517.9GWh in 2022, an increase of 71.8 per cent over the same period last year. Among the top 10 companies in terms of installed capacity, Chinese power battery manufacturers occupy six seats, with a total market share of 60.4%. The data seems to be very large, but careful analysis will find that most of them come from the contribution of our market.

Photo Source: polar News Chinese power battery manufacturers rely too heavily on a single Chinese market, and Japanese and Korean enterprises have more competitive advantages in markets outside China. "Ningde's high reliance on Chinese customers is a weakness, while we are in the lead in winning global customers in Europe and the US," Quan Yingshou, LG's new energy CEO, said in an interview with local media. We are expected to surpass the Ningde era in global market share to become the first in the world. "

SNE Research data also support Kwon Yingshou's view that from January to September 2022, South Korea's LG New Energy ranked first in the ranking of battery installations in electric vehicles except China, with a market share of 30.1%. Moreover, three South Korean companies, including LG, SK and SDI, already account for 56 per cent of the market. There are only two enterprises on the list in China, Ningde era and BYD. Ningde era took second place with a market share of 18.9%, and tied for second place with Japan's Panasonic. BYD ranked 10th, accounting for only 0.4%.

SNE Research gets rid of the dependence on the single Chinese market and goes to sea quickly to seize the global market share that belongs to China's power battery industry, which has become an urgent task for Chinese battery manufacturers.

Not only power battery products need to be vigorously exported, but also the export of power battery industry should be promoted rapidly. With the industrial advantages and industry precipitation accumulated by Chinese enterprises in the field of power battery, our country has the strength of external export, and the power battery industry exported by our country can also feed the industry and bring more high-quality development.

At the 2023 World Power Battery Congress just held, Dong Yang, chairman of China Automotive Power Battery Industry Innovation Alliance, pointed out that the energy density of domestic ternary batteries exceeds 300Wh/kg, and the energy density of lithium iron phosphate batteries exceeds 200Wh/kg, reaching the world's advanced level, especially in the field of lithium iron phosphate. China has led the trend of power battery development in the world.

Since the beginning of this year, domestic power battery and upstream and downstream industrial chain enterprises have frequently won long-term large orders from overseas car companies, accelerated "going out to sea" and extensive layout, gradually expanded the scale of overseas production and R & D bases, and grabbed market share to seek their own development.

This validates Zhang Yongwei's previous prediction that "in 2023, the new energy vehicle industry chain will press the fast forward button."

Specifically, at present, Ningde era has overseas factories in Germany and Hungary, with a total planned production capacity of 114GW; this year, Ningde era has reached in-depth cooperation with Ford to build factories in the United States. In addition, Hefei Guoxuan, a wholly-owned subsidiary of Guoxuan Hi-Tech, plans to build power battery factories in Europe; Vision Power will set up zero-carbon battery factories in Britain, France and Spain; Honeycomb Energy will build two overseas factories in Germany. Yiwei Lithium has production bases in Malaysia and Hungary.

In short, accelerating exports, or the current optimal solution to the problem of "structural overcapacity" in the power battery industry. However, for the future of the power battery industry, it is equally important to speed up research and development and let sodium batteries and solid-state batteries land and "get on the bus" as soon as possible. At the end of 2022, Zhang Yongwei suggested that China should increase investment in the research and development of next-generation batteries, improve the industrial chain of new technology, and seek suitable application scenarios to promote technology landing and iteration.

[full text reference]

[1] "behind the alarm of power battery overcapacity: not enough high-end, low-end surplus", Beijing News

[2] "New momentum of China's Economic Development (3): high-quality Power Battery", China Electronic News

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

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