Why has the power battery industry become a hunting ground for capital players?

Recently, four landmark events have shocked the power battery industry. The ecosystem spawned by "winds from all directions" is taking shape, and the industrial layout centered on building an ecosystem may be launched. A new model sweeping the power battery industry is being born.

First, GSR Ventures will spend US$1 billion to purchase a total of 51% of AESC's equity from Nissan;

The second is CATL, the world's third largest power battery manufacturer, whose valuation in the latest round of private equity financing has reached 84 billion yuan.

Third, BYD, the world's second largest and China's largest power battery manufacturer, has officially split its battery business into independent operations. The automotive lithium iron phosphate and ternary lithium batteries it produces will be supplied to all automakers in the market.

Fourth, Shenzhen Waterma, which Jianrui Fire Protection "married", was suspected by the outside world of manipulating huge orders with invisible related parties because its performance increased a thousand times. Waterma's related transactions have not yet been confirmed, and there are different opinions on whether the related transactions are model innovation or illegal.

So, what is the cause of the "wind from all directions"? Where will the power battery industry in the "eye of the storm" go?

In recent years, with the explosive growth of new energy vehicles, various capitals have been competing for the beachhead. Some have become "dragons in the clouds" in the power battery industry, calling the wind and rain, and riding the clouds; some have a speculative mentality of "making a fortune", "where the wind blows, I will run there", and become "wind-blowing pigs" who simply pursue profits. Data show that in 2015, the investment amount in the power battery segment alone exceeded 90 billion yuan. From the perspective of capacity expansion, as of the end of 2016, the new capacity of the power battery industry increased by nearly 35GWh compared with the same period, and the total amount was almost three times the annual shipments two years ago. In 2016, the funds invested in the power battery field exceeded 100 billion yuan. The number of domestic power battery companies has also rapidly increased from about 50 at the end of 2014 to 150 in 2016, an increase of nearly 3 times. Among the more than 100 new companies, some have transformed from traditional digital batteries, some have extended from upstream and downstream, and some have crossed over from different fields such as real estate, steel, fire protection, and home appliances. Most of these companies are speculative companies with the purpose of getting rich quickly. They have little technical strength and copy and imitate, and produce shoddy products. As a result, the small, scattered and chaotic industry has been further aggravated, leading to overcapacity at the low end. In addition, false reporting of production capacity, blind expansion, low-price competition and incurable local protectionism have led to the formation of a huge bubble behind the prosperity of the power battery industry, and hidden dangers and chronic diseases are becoming increasingly prominent.

Earlier this year, Miao Wei, Minister of Industry and Information Technology, spoke frankly about the pain points at the Electric Vehicle Hundred People Conference, "Our core technology of power batteries has not yet achieved a revolutionary breakthrough, performance needs to be greatly improved, and the construction of charging infrastructure still needs to be accelerated." At the Hundred People Conference, Miao Wei said that in the field of new energy buses and trucks, there are signs of structural overcapacity, and the problems of insufficient high-end power battery production capacity and overcapacity at the low end are also further exacerbated. "Not only that, the key problem in the field of power batteries is the low technical level and lack of battery standards. At the same time, there are many problems such as low manufacturing qualification rate, poor safety, and high cost."

Some analysts say that overcapacity has become a "nuclear threat" to my country's power battery industry, and is becoming increasingly universal, serious and sustained. Large-scale and sustained overcapacity may trigger an industry crisis.

It is in this context that the "Automotive Power Battery Industry Standard Conditions" (hereinafter referred to as "Standard Conditions") are about to be released. It is reported that the "Standard Conditions" have completed multiple rounds of solicitation of opinions and will be officially announced soon.

It is understood that the "Standard Conditions" have raised the requirements for research and development and power battery performance. At a forum, Song Qiuling, deputy director of the Economic Construction Department of the Ministry of Finance, said when talking about the new policy ideas for new energy vehicle subsidies, "(The new policy for new energy vehicle subsidies) strengthens support for power batteries. In passenger cars and special-purpose vehicles, the technical indicators of power batteries are specially added, and the subsidy method for new energy buses is adjusted to focus on power batteries, battery capacity and battery performance as the standard, which more objectively reflects the production cost and technical level of vehicles."

Some analysts believe that once the "Standard Conditions" are issued, the reshuffle mode will begin, and 80% of companies will not be able to escape the "Book of Life and Death", while giant companies with a high market share will usher in broad prospects. Relevant data also confirms this judgment: In 2016, domestic power battery shipments reached 28GWh, a year-on-year increase of 79%. Among them, BYD, CATL, Watma and Guoxuan High-tech's power battery shipments were 7.4 GWh, 6.7 GWh, 2.5 GWh and 1.86 GWh respectively. The shipments of these four companies alone accounted for 66% of the domestic power battery market. "By 2020, the leading position of power battery companies will be established, and the top five power battery companies in the future will account for more than 70% of the market share." On June 18, Fang Jianhua, partner and president of the National Science and Technology Achievement Transformation Fund New Energy Vehicle Venture Capital Sub-Fund, said in an interview.

The rapid development of the new energy industry is continuously bringing policy and market dividends to these benchmark power battery companies.

Countless tragic facts have shown that an industry where capital games are prevalent cannot sustain healthy development. The nature of the real industry also determines that the power battery industry cannot become a permanent “hunting ground” for capital players.

At a time when the labels of "cross-border" and "trend" are flying everywhere, the most important task for enterprises is no longer to discover markets and opportunities, but to think about what their core competitiveness is and how to build a business model around core competitiveness and gain a unique position in the market!

The good news is that in 2017, leading enterprises such as BYD and CATL began to exert their strength in improving quality and expanding high-end production capacity. They are taking advantage of "scale advantage + technological advantage + new industrial model" to lead the transformation and upgrading of the industry.

BYD has started an industrial layout centered on building an ecosystem. The core business of the enterprise occupies a key position and becomes the center of the ecosystem, deriving a large number of small and medium-sized companies (business units, divisions) born within the system, forming a school of fish effect, and ultimately realizing a new industrial model. The core of this new business model of ecosystem is a symbiotic, win-win, and shared economic model. The basic concept is that any external opponent, or even the entire economic form, is a friendly cooperative relationship, not a competitive relationship. This idea of ​​symbiosis can be said to be a revolutionary change in thinking, changing the hostile thinking that has evolved from competitiveness in the business world.

The vitality of this new business model is particularly evident in BYD's battery business innovation.

Although BYD won the global new energy vehicle sales champion in 2016, its new energy vehicle sales have declined since this year, which has also affected its power battery installation capacity. BYD's power battery business has long been closed to internal supply, so other vehicle manufacturers cannot "enjoy it". In this case, external supply has become a wise move and the best way out for BYD's power batteries.

In addition to the export of power batteries, Wang Chuanfu also said that BYD Auto's industrial chain needs to be market-oriented. "Commercial vehicles, including buses and trucks, consume the most batteries. A bus battery consumes about 300 kWh of electricity, while a dual-mode vehicle consumes only 15 kWh. There is also a cycle time problem for battery export matching, which is not that fast. Whether it is lithium iron phosphate batteries or ternary batteries, our battery production capacity, quality, technology, and cost advantages are obvious." Wang Chuanfu said at the shareholders' meeting.

Moreover, the innovation, resources and integration under the fish school effect constitute BYD's key "points, lines and surfaces", and also become the core advantage of the ecological upgrading of the industry. In other words, there are both horizontal circles and resource platforms, and vertical upstream and downstream cluster development veins of the industrial chain. This criss-crossed three-dimensional ecology not only brings BYD comprehensive development momentum, but also makes the enterprises in the ecological group full of sustainable competitive vitality. BYD's layout of the upstream and downstream industrial chain of power batteries has already begun. Qinghai is the region with the richest lithium resources in the country, and its lithium resource reserves rank first in the country. At present, Qinghai has initially built a lithium battery industry chain from lithium extraction from salt lakes, lithium battery positive and negative electrode materials, lithium battery copper and aluminum foil and other supporting materials to energy storage and power batteries. In October 2016, BYD's annual production of 10GWh power lithium battery project and annual production of 20,000 tons of power battery material production and recycling project started in Qinghai.

Different from BYD's new industrial model, CATL's model path is also noteworthy. As Wang Binggang, leader of the National New Energy Vehicle Technology Innovation Project Expert Group, called for, my country's power battery industry and vehicle industry should establish a close alliance for common development, so as not to repeat the mistakes of the traditional automobile industry and suffer from "not mastering core component technology".

Contemporary Amperex Technology Co., Ltd. (CATL) published a listing guidance announcement in Fujian Daily on June 15, with CITIC Construction Investment as the sponsor, which means that this new energy battery giant has officially launched its IPO. CATL and SAIC have established a joint venture, becoming a model of "whole-component mutual trust" in the field of new energy vehicles. A domestic battery company that has only grown for 6 years, through technological innovation and the support of BMW technology, has a market value of nearly 100 billion yuan. While being favored by the capital market, it is also constantly reminding the outside world that the trend of automobile electrification is irreversible.

Unlike the positive energy released by BYD and CATL, Watma Battery has been caught in a whirlpool of public opinion recently. It started with a report published by a certain media titled "Jianrui Woneng's performance increased a thousand times: invisible related parties manipulated huge orders", questioning that Jianrui Woneng used invisible related transactions and "reverse customization" to construct related sales and inflate operating income. The company received a letter of concern issued by the Shenzhen Stock Exchange the next day. In response, Jianrui Woneng issued an announcement on the evening of June 20 to clarify that its wholly-owned subsidiary Shenzhen Watma Battery Co., Ltd. did not have the so-called "reverse customization" reported in the media during the product sales process, and there was no hidden relationship between Shenzhen Xinwo Yunli Automobile Co., Ltd. and the company. Even so, the industry's doubts about Watma's continuous self-hype and high market value have not subsided.

As for Jinshajiang Venture Capital, it may lock in the supply relationship with Renault-Nissan within a few years. In addition, AESC will undoubtedly enter the Chinese market, on the one hand, it will take over the electric vehicle market share of Renault-Nissan-Mitsubishi in China; at the same time, with the help of the Hubei Provincial Government, it is very likely to obtain the supporting qualification of Dongfeng Motor Group. As for AESC, it can become a member of the Chinese team to participate in the global power battery market competition and strive to be in the top 5.

"The gap between my country's power battery technology and that of Japan and South Korea is not that big. There is no difference in the technology itself, but there is still some gap in manufacturing and management level." said Fang Jianhua, partner and president of the New Energy Vehicle Venture Capital Sub-Fund of the National Science and Technology Achievements Transformation Fund.

To sum up, as the core component of new energy vehicles, the product quality and technical performance of power batteries directly affect the quality and performance of the entire vehicle. In other words, the hope of China's automobile industry to overtake others lies in new energy vehicles, and the key to the strength of the new energy vehicle industry lies in power batteries. With the innovation of benchmark companies and the rapid increase in industry brand concentration, the time for Chinese power batteries to win global voice may come ahead of schedule.

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.