With the acceleration of the global electrification process, the installed capacity of power batteries continues to grow. According to the latest data from South Korean market research firm SNE Research, the global installed capacity of power batteries was 32.9 GWH in September, up 30.6% from the previous month. From January to September, the global installed capacity of power batteries was 195.4 GWH, a month-on-month increase of 20.6%. The market predicts that the global installed capacity of power batteries will exceed that of 1TWh in 2025.
In the face of the strong global demand for power batteries, Chinese power battery companies have accelerated the pace of going out to sea. In recent years, enterprises represented by Ningde era, Guoxuan Hi-Tech and Honeycomb Energy have announced plans to build overseas factories one after another.
Power battery enterprises scramble for overseas markets
In October, American electric car maker Electric Last Mile Solutions ((hereinafter referred to as ELMS) announced a battery supply agreement with Ningde Times. Under the agreement, Ningde Times will provide ELMS with 42kWh lithium iron phosphate batteries and CTP (moduleless) technology, which is valid until 2025. At the same time, the two sides are considering working together to build a battery factory in the United States to achieve local production.
Although the above news is inconclusive for the time being, the Ningde era has already dabbled in the matter of building factories overseas. In July 2018, Ningde Times signed an investment agreement with the Thuringia state government of Germany to invest 240 million euros (about 1.9 billion yuan) to set up a battery production base and intelligent manufacturing technology R & D center in Elford, Thuringia. The battery production base, which is mainly engaged in the R & D and production of lithium-ion batteries, will be built in two phases and is scheduled to be put into production in 2021. After reaching production in 2022, the production capacity of 14GWh will be formed. In June 2019, Ningde Times announced an increase in investment in European production and R & D base projects, increasing the total investment to no more than 1.8 billion euros (about 14 billion yuan). In October of the same year, construction of the overseas factory officially began.
In addition to the Ningde era, Funeng Technology also reported that it would invest in a battery plant in Germany to ensure supply to Daimler and other car factories. In November 2019, Funeng Technology and Daimler signed a power battery supply agreement from 2021 to 2027, with a total supply of power battery 140GWh for 7 years. Since then, Funeng Technology has also reached a cooperation with the European OEM company TOGG to agree on the use of Funeng cells in all TOGG vehicle product lines. It is reported that the power battery cell will be provided by Funeng Technology, and the battery module and Pack will be jointly developed and produced in Turkey.
Honeycomb Energy announced in July 2019 that it would spend 2 billion euros (about 15.7 billion yuan) to build a large 24GWh power battery factory, a supporting cathode material factory and a battery technology center in Europe. According to reports, the first phase of the honeycomb energy plant in Europe will be completed and put into production in 2022, and the second phase of the project will be put into production in 2025. In the next five years, Honeycomb Energy will have a global layout of power battery projects with a total capacity of up to 100GWh.
In July 2020, the new European headquarters of Weihong Power and the production plant of the lithium-ion battery system plant in Germany were completed, and the plant is scheduled to launch its first production line in March 2021, starting to provide battery modules and packs to the company's European customers. The plant has a total investment of 43 million euros (340 million yuan) in the first phase of the project, with an initial planned annual production capacity of 1.5GWH, and later capacity expansion to 6GWh.
In July this year, Guoxuan Hi-Tech acquired Bosch Group's Gottingen factory in Germany, established its first new energy production and operation base in Europe, and reached a strategic cooperation with Volkswagen Group as a technical support party to assist Volkswagen Group in building a battery plant in Salzgett, Germany. In addition, after reaching a comprehensive strategic cooperation with France's Renault Group to supply 40GWh to 120GWh power batteries for five years, Vision Power also announced that it would build power battery factories in France's Douai, Sunderland and other places.
Judging from the sea path of the above-mentioned power battery companies, most of them have chosen to expand production in European countries, which has something to do with the rapid development of Europe in the field of new energy vehicles. Especially after the goal of "double carbon" has become a global consensus, many European countries have made clear the timetable for banning the sale of fuel vehicles, and put forward their own new energy vehicle strategies.
Under the guidance of a series of policies, Europe has become the region with the fastest growth rate of electric vehicles in the world in 2020, with the electrification permeability increasing from 3.3% in 2019 to 10.2% in 2020. However, this figure was caught up by China in the first nine months of this year. From January to September this year, the production and sales of new energy vehicles in China completed 2.166 million and 2.157 million respectively, an increase of 1.8 times and 1.9 times respectively over the same period last year, with a market penetration rate of 11.6%. Among them, the production and sales of pure electric vehicles completed 1.803 million and 1.789 million respectively, a two-fold increase over the same period last year.
From the perspective of the development of new energy vehicles in Europe, the relative weakness of the local power battery supply chain may, to a certain extent, restrict the ambition of the European government to electrify the transformation. According to SNE Research's forecast, by 2023, European demand for electric vehicle batteries is expected to reach 406GWH and available capacity is expected to be 335GWH, which means there will be a 16.5 per cent shortage in the market. By 2025, the supply gap will widen further to about 40 per cent.
Multi-factors force power battery enterprises to speed up going out to sea.
"prompting Chinese power battery companies to generally choose to build factories in Europe, mainly in order to support European car companies nearby, the demand side and the supply side close is the lowest cost." Cai Jinshu, vice president of Hubei Yiwei Power Co., Ltd., said at the 2021 global new energy and smart car supply chain innovation conference. She also stressed that "going out to sea is the only way for first-class power battery enterprises, and there are many reasons for the internationalization of China's power battery enterprises."
First of all, there is a large demand space in the overseas market. At present, the global sales of more than 90 million vehicles are in the overseas market of 2max 3, and the market of 1max 3 is in China. Some analysts pointed out that global electric vehicle sales are expected to exceed 10 million units in 2022, a year-on-year growth rate of 70%. Among them, the penetration rate of new energy in China, Europe and the United States will reach about 20%, 25% and 12% respectively, and the corresponding sales volume will be 500,300 and 2 million vehicles respectively, representing a year-on-year growth rate of about 50%, 50% and 150%, respectively.
Secondly, the protection of the local industrial chain and the localization requirements of various countries pose a certain threat to domestic power battery enterprises. Some foreign enterprises require that 65% of the value of the procurement chain need to be purchased locally, which also means that Chinese power battery companies must go out to sea. "Volkswagen's cars in Europe must be equipped with European-made batteries, which does not count in China in the past, which requires a factory to be built in Europe." Xu Xingwu, executive vice president of Guoxuan Hi-Tech Industrial Research Institute, said this may be one of the biggest reasons for its acquisition of Bosch's German plant.
Thirdly, seek resources and global strategy to promote Chinese power battery enterprises to go out to sea, achieve the best allocation of resources, and build global business advantages. In the first half of this year, under the development trend of new energy vehicles, a number of domestic power battery listed companies have achieved double growth in revenue and profits. Judging from the composition of the main performance, in addition to the strong growth of the domestic market, the overseas business of these enterprises is also growing by leaps and bounds.
According to the financial report, in the first half of this year, the overseas market revenue of Ningde era reached 10.2 billion yuan, an increase of 355.45% over the same period last year, and the proportion of revenue increased to 23.14% from 15.71% last year. Yiwei LiNeng's overseas revenue exceeded domestic revenue for the first time with 3.6 billion yuan, a year-on-year growth rate of three times, and the revenue share increased to 54.95%. Guoxuan Hi-Tech's overseas revenue share doubled from 2.36% to 4.74%. Funeng Technology also revealed in the 2021 semi-annual report that in addition to the significant increase in shipments due to the relief of COVID-19 's epidemic, supplying goods to Daimler has also become an important factor in performance growth. In terms of gross profit margin, the gross profit margin of Ningde era and Guoxuan Hi-Tech overseas market all exceeded that of the domestic market, which reached 44.51%, nearly 26 percentage points higher than the domestic business.
Risks and challenges faced by power battery enterprises going out to sea
To sum up, the layout of the European market has become the only way for Chinese power battery enterprises to develop overseas. Domestic battery companies either set up factories overseas, or through sole proprietorship, acquisition, strategic alliance and other ways to deepen upstream and downstream to accelerate internationalization. However, it should also be noted that there are many risks and challenges behind the road to internationalization.
The first thing to face is more stringent carbon emissions requirements. In December 2020, the European Commission introduced new battery regulations to ensure that batteries put into the EU market are sustainable and safe throughout their life cycle, starting from July 1, 2024. In the dimension of sustainability, the new EU battery law increases the requirements of recycling efficiency and material recycling targets for electric vehicle batteries, stipulating that only power batteries that meet the requirements can be sold in the EU market.
At the above supply chain innovation conference, Liang Rui, president of Xinwanda battery, said frankly: "in the context of environmental protection in the European Union and abroad, customers have put forward very clear requirements for carbon reduction and recycling for us, such as BMW, Volkswagen, Mercedes-Benz, Renault, Volvo and other vehicle companies, which have very clear requirements for low-carbon production, material recycling and LCA (battery life cycle carbon emissions). This is a great challenge for power battery companies. "
In the view of Wang Pan, senior director of Sinochem data Co., Ltd., a "carbon trade barrier" covering the whole life cycle of the battery has actually been formed. With the tightening of overseas policies and regulations, there are several points worth paying attention to: at some point in the future, all batteries going to Europe will need to be accompanied by a carbon footprint declaration. it is necessary to indicate the performance level of the carbon footprint and to meet the carbon footprint limit requirements at a future point in time. In addition, the proportion of recycled materials is required, and the content of recycled materials contained in cobalt, lithium, nickel and new battery materials should meet the proportional requirements, which directly promotes the development of battery recycling industry. " From this point of view, the recycling of waste power batteries will become the focus of the future layout of global enterprises.
Secondly, the lack of cooperation and supporting experience of international car companies, differences in culture and working methods, as well as the political environment, emissions, infrastructure, patent disputes and so on are also another major challenges for domestic car companies in their overseas layout. Cai Jinshu mentioned that in the past, it was to attract foreign investment, but now it is going out, and this is a historic change. "it may take us eight to 10 months to build a factory at home, but it is not so easy abroad. We have to face all the things that impact the culture, such as corporate culture, talent management and customer requirements." However, she also pointed out that the strong supply chain relationships, large-scale benefits, and product and technology leadership that Chinese power battery companies have accumulated in the past two or three decades are also the advantages of relevant power battery companies and materials companies to go abroad.
