Multiple capitals compete for the new energy vehicle market, and the entry threshold is rising. The industry competition is fierce.

With the industry entry threshold raised and foreign auto companies expanding faster in China, vehicle manufacturers, parts manufacturers, and upstream and downstream industry chain manufacturers are all trying to share the "cake" of new energy vehicles. Recently, Hangzhou Hi-Tech, Huafeng Co., Ltd., CITIC Heavy Industries, Kangsheng Co., Ltd. and many other auto machinery-related listed companies announced that they would increase their investment in the new energy vehicle industry, and the industry competition is fierce.

Increasing investment in new energy vehicle business

On the evening of June 19, Hangzhou Hi-Tech announced that it plans to acquire 100% of the equity of Aoneng Power Supply for 560 million yuan in cash. Aoneng Power Supply mainly engages in AC and DC charging systems and power supply systems for electric vehicles.

On the same day, Huafeng shares announced that it would suspend trading to plan the purchase of assets in the new energy vehicle and electrode foil industries, with the transaction amount being approximately RMB 900 million to RMB 1 billion. Heshun Electric announced that it had won the bid for a new energy electric vehicle charging pile (station) project worth RMB 31.2452 million.

Several suspended automobile machinery-related listed companies revealed in their major asset restructuring progress announcements that they would enter the new energy vehicle industry, and some companies even directly announced plans to acquire new energy vehicle upstream and downstream related companies.

CITIC Heavy Industries, which suspended trading in April this year to plan major events, disclosed the acquisition target on June 17. The company plans to issue shares to purchase Tianjin Songzheng. After the acquisition is completed, the company will become the controlling shareholder of Tianjin Songzheng. CITIC Heavy Industries is engaged in heavy equipment manufacturing business. Since its listing in July 2012, its operating income and operating profit have been on a downward trend. Among them, the company achieved revenue of 3.771 billion yuan in 2016, a year-on-year decrease of 6.20%; and a loss of 1.584 billion yuan. In order to seek business growth points, CITIC Heavy Industries has set its sights on the new energy vehicle industry. According to data, Tianjin Songzheng is a leading domestic hybrid bus system assembly provider, with major customers including Yutong Bus, Xiamen Golden Dragon, Suzhou Golden Dragon, Zhongtong Bus, etc., and has a domestic market share of more than 20% for two consecutive years.

Kangsheng shares intends to issue shares privately to Zhongzhi New Energy and 46 natural persons including Yu Zhongguo to purchase their total 95.42% equity in Yantai Shuchi and 100% equity in Zhongzhi Yike. The transaction amount of the target assets is preliminarily determined to be 1.482 billion yuan. At the same time, the company intends to raise supporting funds of no more than 1.255 billion yuan for the technical transformation projects of Yantai Shuchi and Zhongzhi Yike new energy buses. It is reported that the main businesses of Yantai Shuchi and Zhongzhi Yike are the research and development, manufacturing and sales of new energy vehicles, buses and special vehicles respectively. The company stated that after the completion of this transaction, the listed company will enter the field of new energy vehicle production and manufacturing, realize the extension of the new energy vehicle parts business to the downstream, and enter the new energy vehicle terminal product consumer market.

Jinguan Electric plans to acquire 100% equity of Hongtu Membrane, a lithium battery diaphragm company, for a total price of RMB 1.476 billion. According to a research report by a securities firm, the lithium battery diaphragm that Hongtu Membrane specializes in is a core part of the lithium battery industry. Among the four major materials of lithium batteries, the cost of diaphragm materials accounts for a large proportion and the technical content is relatively high.

Previously, Jinguan Electric's acquisition of 100% equity of Nengrui Automation through a private placement has been approved. Through the acquisition of Nengrui Automation, Jinguan Electric has entered the field of new energy vehicle charging facility manufacturing and charging network operation. The acquisition of Hongtu Diaphragm will improve the layout of the industrial chain.

Higher barriers to entry

The entry threshold of the new energy vehicle industry is rising. The National Development and Reform Commission and the Ministry of Industry and Information Technology recently issued the "Opinions on Improving the Management of Automobile Investment Projects" (hereinafter referred to as the "Opinions"), proposing to guide existing traditional fuel vehicle companies to accelerate the transformation and development of new energy vehicles, and at the same time standardize the investment conditions of new energy vehicles and guide enterprises and social capital to make reasonable investments.

The "Opinion" reiterates that applications for new pure electric passenger vehicle investment projects should comply with the requirements of the "Regulations on the Management of New Pure Electric Passenger Vehicle Enterprises", and also puts forward clear requirements for new pure electric commercial vehicle enterprises.

The Opinion also clearly stipulates for the first time that foreign investors can set up joint venture pure electric vehicle production enterprises in China without being restricted to two companies. The provisions of the Automotive Industry Development Policy on the approval of new Sino-foreign joint venture car investment projects and the number of Sino-foreign joint ventures only apply to traditional fuel vehicles. New Sino-foreign joint venture pure electric passenger vehicle investment projects shall be approved in accordance with the New Pure Electric Passenger Vehicle Enterprise Management Regulations.

Industry insiders said that as the policy clearly lifts the number restrictions on new energy vehicle joint ventures, foreign automakers will accelerate their new energy vehicle layout in China. Industrial Securities pointed out that when overseas automakers build factories in China, the supporting parts and components will most likely turn to domestic production, and leading companies in the supply chain of first-tier automakers will have greater opportunities.

Technological breakthrough is the key

"Whether the process of technological progress can match the pace of the decline in supporting policies is the key to whether enterprises can successfully transform," said Chen Qingtai, chairman of the China Electric Vehicle 100.

Faced with the situation where vehicle manufacturers, spare parts, battery manufacturers and others are competing for a piece of the new energy vehicle "cake", for enterprises, the key to solving the problem is to shift from scale expansion to competitiveness improvement.

Taking power batteries as an example, the "Parallel Management Measures for Passenger Car Enterprises' Average Fuel Consumption and New Energy Vehicle Credits (Draft for Comments)" proposes to implement dual-credit parallel management for car companies. The evaluation system of the draft for comments is biased towards car companies with a high proportion of new energy vehicle production in the company's total production, and models with high mileage, low power consumption, and lightweight body will benefit. Since the dual-credit management measures have put forward requirements for the energy density and mileage of new energy vehicle batteries, high energy density batteries will be the development direction of future automotive power batteries.

In the 5th batch of "Recommended Model Catalog for the Promotion and Application of New Energy Vehicles" recently released by the Ministry of Industry and Information Technology in 2017, the average energy density of pure electric passenger cars and buses is 119Wh/kg and 116.5Wh/kg respectively, and the averages of the first 1-4 batches are 108.6Wh/kg and 113.1Wh/kg respectively. According to the "Medium- and Long-Term Development Plan for the Automobile Industry", by 2020, the energy density of power battery systems will reach 260Wh/kg, more than double the current 120Wh/kg. This means that power battery companies need to achieve further technological breakthroughs in the next few years.

China Merchants Securities pointed out that currently most high-quality companies in the new energy vehicle industry chain have been securitized. In the future, technological innovation should be the key factor that will widen the gap between companies, and competition among companies will shift from expanding market size to enhancing competitiveness.

It is understood that against the backdrop of crackdowns on subsidy fraud, adjustments to battery catalogs, and a decline in subsidy policies, new energy vehicle sales exceeded 500,000 units in 2016, reaching 507,000 units, a year-on-year increase of 53%. For the second consecutive year, production and sales surpassed the United States to rank first in the world.

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.