CATL vs BYD: Who will be the final winner?

Another daily limit, another daily limit! After the latecomer CATL passed the review in 24 days, it continued to be favored by the capital market and continued to hit the daily limit in the days when the market plummeted. As of today's (June 21) close, CATL (300750.SZ) hit the daily limit for the eighth consecutive trading day after its listing, with a closing price of 70.54 yuan, while BYD (002594.SZ) only rose 0.84%, closing at 45.77 yuan.

Although the stock prices of the two companies differ by only RMB 20, CATL, founded in 2011, has created a miracle of a power battery company in just 7 years, with a total market value of over RMB 100 billion. BYD, which has been the industry leader in China, is now stuck in the dilemma of declining profits in the post-subsidy era. Will BYD sink into the abyss and be powerless to fight back?

Who is blocking BYD's sky?

Undoubtedly, BYD has always been the king of lithium batteries in China, and has attracted the favor of Warren Buffett, the stock god, and is also one of the companies that I am most optimistic about. However, BYD, which was the first in China and the second in the world in power batteries in 2016, suffered its worst "Waterloo" in history in 2017, as CATL emerged.

As we all know, BYD is one of the earliest car companies in China to develop lithium iron phosphate power batteries. Since the national policy clearly supported lithium iron phosphate before 2016, BYD enjoyed this benefit for a long time. However, after 2016, the new energy vehicle subsidy fraud incident broke out, and then the policy cracked down on subsidy fraud, and the subsidies for new energy vehicles began to decrease in 2017.

Affected by this, the new energy bus industry suffered a heavy blow in 2017, with annual sales (about 85,000 vehicles) down more than 20,000 vehicles from 2016. As a result, the demand for power batteries for buses also declined, and BYD was unfortunately affected, and its business began to shrink. By 2017, CATL's power battery shipments increased by 73% to 11.8GWh, surpassing Panasonic and becoming the world's largest company in the industry. BYD also realized the seriousness of the situation and began to make changes in its business.

In fact, BYD has been using ternary lithium batteries in its passenger cars since 2017. In the first half of that year, BYD launched the hybrid models Tang 100 and Qin 100, both of which were equipped with ternary lithium batteries. BYD also uses ternary lithium in its pure electric models Song EV 300 and Qin EV 300. This year, BYD's latest Yuan EV360, priced at 79,900-99,900 yuan, is comparable to the price of fuel vehicles. It has a range of 360 kilometers, can be fully charged to 80% in 30 minutes, accelerates from 0 to 50 kilometers in 3.9 seconds, and has amazing battery energy density and power consumption per 100 kilometers. The cost per kilometer is only 8 cents.

It is worth noting that BYD is also splitting its power battery business into an independent operation and supplying it to other new energy vehicle companies. The direct effect of this move is that BYD's potential customers for power batteries in the passenger car market will be several times the original. According to Shen Xi, deputy general manager of BYD's lithium battery business unit, in an interview with Auto Headlines APP, the power battery business will be split off by the end of 2018 or early 2019 and is expected to be listed within five years.

Worrying about the sky falling anytime soon - which part of the sky are you worrying about?

Speaking of BYD's development in 2018, the author learned from professionals that BYD has formed five major industrial clusters, namely the Electronics Business Group, the Passenger Vehicle Business Group, the Commercial Vehicle Business Group, the Cloud Track Business Group, and the Battery Business Group, plus ten business units to provide industrial support. In addition, BYD has also comprehensively laid out the fields of lithium mines, lithium salts, and lithium battery equipment, strategically laid out the entire lithium battery industry chain, and has formed a complete closed loop from mines, raw materials, production, sales, use, and after-sales.

BYD's perfect industrial layout can't help but make the outside world panic. The author learned that BYD released the "33111" strategy at the 2018 Beijing International Auto Show: it is a highly integrated system of five modules of new energy vehicles, including CPU, motherboard, hard disk, memory bar, graphics card, etc., and the same is true for future new energy vehicles. "33111+body" is the future new energy vehicle.

The first "3" is the three-in-one drive system integration of motor, electronic control and transmission; the second "3" is the three-in-one high-voltage system integration of DC-DC, charger and distribution box; the first "1" is the highly integrated ten-in-one circuit board of control modules such as instruments, air conditioning, audio, smart keys, etc.; the second "1" is a large screen equipped with the DilinK system; and the third "1" is a battery compared with CATL.

According to the latest news, Dongfeng Motor was the first to announce the adoption of BYD batteries, and then BAIC, Great Wall, Changan, FAW and other companies have had substantial contact with BYD's battery division and BYD's various parts divisions. An unnamed BYD insider revealed that as long as new energy vehicle companies need it, they can buy it at BYD, and they will definitely buy the best!

BYD Giant: Split into N CATLs?

Not only can the battery be split and listed, BYD's three-in-one drive system of motor, electronic control and transmission can also be fully integrated. An industry insider said that if BYD can achieve seamless integration of software and hardware, it will be a headache for global parts manufacturers. If BYD completely opens up its parts industry to the outside world and splits these businesses and lists them, how many CATL will there be?

According to reports, BYD's automotive IGBT module won the title of "Best Power Device of the Year in 2018 China IC Design Company Achievement Award" issued by AspenCore, the world's largest media group in the field of electronic technology. This is one of the important technical awards in the Chinese electronics industry and the highest honor in the Chinese IC industry.

It is foreseeable that BYD will break the 90% market share of automotive IGBTs that has been monopolized by Japanese Mitsubishi and German Infineon. After years of actual vehicle verification, BYD IGBT has been fully applied to the electric drive systems of new energy passenger cars and electric buses. Many of BYD's EV products also benefit from the unique advantages of BYD's self-developed on-board chips, and are in the leading position in the industry in terms of technology, performance, safety and other aspects.

What will happen if BYD's 600V, 1200V high-voltage and ultra-high-voltage IGBTs are split and listed? Perhaps BYD will not take any of the CATLs seriously.

Judging from the current market share of new energy vehicles in various regions, BYD's pure electric buses and pure electric taxis have almost taken root in large and medium-sized cities such as Shenzhen, Taiyuan, and Hangzhou. In addition, new energy passenger vehicles, commercial vehicles, special vehicles, mines, sanitation, logistics, airports, ports... BYD's pure electric vehicles can be seen in more than 50 countries and regions on six continents and nearly 300 cities around the world!

It is reported that as the world's first private enterprise engaged in rail transit, BYD Yun轨 has also signed contracts with international customers such as the Philippines, Cambodia, Morocco, Egypt, Brazil, etc. Although CATL is supported by major customers such as BMW, the production capacity of the 3D glass factory put into production by BYD is comparable to that of Lens Technology.

In my opinion, BYD's power battery business split plan has been approved by the top management, and it is just waiting for the next announcement. "In the past, it was all supplied within the group, but now we encourage the battery business to go abroad. Later, the battery business was also established as an independent business group, and we are encouraged to take more external orders. In the future, it will be separated from the group and become an independent company." A BYD executive told me.

China's new energy power battery market is maturing and growing from the subsidy era to the "post-subsidy era". Although CATL is favored by the capital market in all aspects, the era of large-scale integration of domestic power battery companies is also coming. Is BYD's worry groundless or self-deprecating? Can it return to the throne and achieve a king's comeback in the future? This will be the biggest highlight of China's power battery market in the future.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.