Power Battery Industry Worldwide Enters A New Round of Capacity Enlarging Competition

Power Battery Industry Worldwide Enters A New Round of Capacity Enlarging Competition

NEV industry, driven by green revolution, is advancing steadily. Supported by governmental initiatives and guidance in all countries, NEV industry is developing into mature stage. Power battery, as a core sector in NEV industry, is driven by both policies and market in China and Europe and enters a new round of capacity enlarging competition. Therefore, we can tell that all production chains in NEV industry, especially power battery sector are given more opportunities in the future.

1. Government Support Ensures Steady Development for NEV Industry Worldwide

Chinese government has always been one of the key roles in driving the progress of global NEV industry. After the stepping down of subsidy policy, Development Program for NEV Industry (2021-2035) newly released at the end of last year decides that NEV industry should make development under market orientation instead of policy orientation. The substantial change has introduced upstream and downstream industries of domestic NEV market to a real market competition and started a new climax.

In Europe, major countries have worked out their own timetable on strategic goals of clean energy and sales prohibition of fuel vehicles. EU requires that self-sufficiency needs to be realized as soon as possible. Many auto OEMs have worked out clear electrification goals, including Volkswagen, BMW and Daimler AG. Thanks to dual impetus of high-subsidy policies and strong-punishment policies, NEV sales of Q4 showed an increase miraculously.

SNE, an authoritative international institute, released its statistics concerning global lithium battery of 2020. Data shows that global installed capacity of power battery in 2020 reached 137GWh in spite of negative influence by epidemic, presenting an increase of 17%. Among it, Ningde Amperex Technology Ltd. installed capacity of 34GWh, ranking the first for consecutive 4 years. According to SNE, there will be a significant increase in demands for lithium battery globally, while the increase in whole chain of supply side is relatively weak, which means a shortage of effective supply.

(1) NEV’s volume of production and sales in 2020 exceeds 1300000 vehicles, which is beyond market expectation

According to latest production and sales data released by CAAM, in December, 2020, production volume of NEV was 235000 vehicles and sales volume of NEV was 248000 vehicles, presenting a YOY increase of 55.7% and 49.5% respectively and MOM increase of 17.3% and 22% respectively.

Production volume of NEV in 2020 was 1366000 vehicles and sales volume of NEV was 1367000 vehicles, presenting a YOY increase of 7.5% and 10.9% and manifesting a far-more-than-expected craze. Accumulative production volume and sales volume far exceeded 1100000 vehicles predicted in the middle of the previous year. It is predicted by CAAM that NEV will continue to enjoy a high-growth developing trend and the sales volume will greatly increase by 40% to 1800000 vehicles.

(2) NEV sales volume rose suddenly in December in Europe

NEV data in Europe has not been released yet. Taking data in France as an example, we can see two characteristics, i.e. NEV industry is developing steadily and market penetration rate of NEV is greatly increasing in December thanks to final stretch efforts in sales volume. Total sales volume of passenger cars in France in 2020 was 1650000 vehicles, dropping by 25.5％compared to 2200000 vehicles in 2019.

Sales volume of NEV was 185300 vehicles, increasing by 201.34% compared to 61500 vehicles in 2019, which fully manifests good developing momentum of NEV industry. Among it, sales volume of NEV in France in December was 35863 vehicles and market penetration rate surged to 19.2％. In addition, market penetration rate of HEV was 13.6%. As a result, market penetration rate of conventional fuel vehicle was compressed to less than 2/3. In this way, subsidy and determination from the government were fully reflected.

In the end of last year in Europe, sales volume of NEV surged, which is partially because of final stretch efforts in sales volume. But the fundamental driving force is policies and subsidies formulated by governments in Europe. The surge in NEV sales volume is a result co-generated by high-subsidy mechanism + strong punishment mechanism. The effect generated by government policies to the market and subsequent market expansion are obvious. It is predicted that at least 13 million electric vehicles will enter European market by 2025.

2. Auto Electrification Accelerates The Expansion of Power Industry

In the medium-and-long term, renewable energy generation will stimulate swift growth of stored energy and energy revolution worldwide will contribute to the formation of a new round of industrial opportunities. Demands for power battery will reflect a significant growth in the near future, therefore, power battery enterprises will need to store larger capacity to seize bigger market share.

Statistics show that planned power battery capacity worldwide will grow to 621GWh by 2022 so as to satisfy the demands of end market, and the capacity increase will be over 500% in the coming three years. It is predicted by GGII, shipment of power lithium battery in 2025 will be 850GWh, and the number predicted by Korea SNE is 1160GWh; Marcus predicted that scale of production of power battery in 2030 would reach TWh scale and single capacity would reach 20GWh.

Although there exists some differences among data from different agencies, overall direction still tells us there will be a big market growth after improving of capacity density. It also shows a leap of power battery capacity from GWh era to TWh era in the coming future, which means that the market will see a growth spurt in lithium battery industry in the coming 5 to 10 years and a competition for global market share in power battery will be triggered.

(1) Battery Industry Are Faced with Expansion Opportunities Driven by Policies and Market

1) Europe increases investment in power battery so as to achieve self-sufficiency

Major countries in Europe have formulated their own timetable for clean energy strategic goals and sales prohibition of fuel vehicle. EU requires that self-sufficiency of power battery be achieved as soon as possible, better by the year of 2025.

Based on current capacity, European battery plants will provide power for at least 6 million electronic vehicles by 2025. However, according to greenhouse gas emission reduction goal formulated by European Commission, battery cells of 500GWh, i.e. 13 million electronic vehicles are required. This means battery capacity of EU will have to expand by at least 10 times.

In recent years, several local battery enterprises have been established in Europe, including Northvolt of Sweden, Verkor of France, Britishvolt of Britain, Freyr of Norway, InoBat Auto of Slovakia. They have drawn up considerable power battery production plan, for the purpose of providing electronic vehicles in their countries and in Europe with local battery production supply, so that they can get rid of dependence on imports from Asia.

According to statistics, in 2019, European Battery Alliance (EBA) acquired investment of about EURO 60 billion for its entire value chain (RMB 469.5 billion), and it had acquired investment of EURO 25 billion (RMB 195.6 billion) by the end of 2020, respectively three times and twice the investment China has got in its value chain. It is predicted that, by 2025, the scale of auto battery industry chain in Europe will achieve EURO 250 billion (RMB 19565 trillion).

Driven by strict carbon emission policies and subsidies, Europe, following China, became another favored place for new energy field. As of the end of 2020, there had been 15 big battery plants under construction. In addition to local battery enterprises, Europe also introduced some foreign battery projects, such as LG Chemical, Samsung SDI, SKI, Ningde Amperex Technology, Microvast Power Systems and GS.

Among all, Tesla decides to construct a battery plant in Berlin Brandenburg, which is the biggest battery plant in the world with full capacity of 100GWh, even 200-250GWh per year. This far exceeds the annual capacity of its Gigafactory in Nevada. The driving force for Tesla constructing the “biggest battery plant” in German is the swift development of electrification in Europe.

2) “A rapid march” of Chinese pioneering power battery enterprises before TWh

In China, capacity expansion in battery industry in 2020 mainly occurred among pioneering battery enterprises. There was a big increase in both investment volume and capacity scale, which means power battery enters mass production era and enormous market demand potential for lithium battery equipment has been released. As a matter fact, many power battery enterprises including pioneering battery enterprises are preparing for capacity expansion at full speed (see table 1). Based on planning and construction cycle, the year of 2021 will be a good year for concentrated release of power battery capacity.

(2) Market Competition Will Take Place Among Leading Enterprises in The Future

Power battery enterprises need to reserve capacity on a larger scale so as to seize bigger market share. High-efficiency and high-quality delivery is important core competitiveness for battery products. There are lots of quality improvements to make to reach this goal, such as weight and volume reduction, convenient maintenance and even perpetual freedom from maintenance, high-rate discharge, long service life, high security, high-intensity operation and versatility of battery standards. This requires joint efforts from upstream and downstream from multiple aspects and player manufacturers are faced with below comprehensive requirements:

1) Material system innovation. This is the most important part. Lithium iron phosphate and ternary are enjoying potential for improvements so they are definitely mainstream materials for application for a certain period in the future. New system will also appear in the future, which will help to break through the old material system and help to get rid of expensive precious metal so as to rationalize raw material cost performance and satisfy massive market demands in the long run.

2) System structure innovation. To optimize system and improve integration, including CTP and CTC of Ningde Amperex Technology, so as to reduce energy consumption and cost of system and improve efficiency.

3) Intellectualization of equipment technology. As capacity demands soar, capacity planning for single line also has been elevated, which means old-fashioned technologies and equipment fail to meet requirements. Smart system innovations are sure to be launched and upgraded driven by the demands of market.

4) Innovation of the ultimate building. There are three goals: a) Per-unit safety failure rate should be upgraded by three orders of magnitude from PPM level to PPB level; b) to ensure reliability of full life circle; c) to greatly improve production efficiency. By achieving the above three goals can we realize high-quality delivery of TWh-level capacity.

5) Innovation of business model. Only when the entire ecological chain consists of multidimensional partners, including raw materials, battery manufacturers, operation service and material recycling, can it provide support for lithium battery industry to win the fierce competition in the world as TWh era approaches.

As a conclusion, it is leading enterprises that will join in competition of capacity expansion and have the strength to win. When the time comes, a competition among world-class leading players will kick off.

(3) Frequent capital deployment in power battery industry in 2020

So far, many pioneering battery enterprises of China, Japan and Korea and local battery enterprises in Europe are making great efforts in expanding battery capacity, including Ningde Amperex Technology, BYD, China Aviation Lithium Battery, Samsung SDI, LG Chemical, SKI and Panasonic. In addition, international auto enterprises are accelerating their progress to self-production of cells, including Volkswagen, Tesla, BMW and Daimler.

Incomplete statistics of GGII (excluding auto enterprises) shows that there were 26 projects of commissioning and capacity expansion of power battery, with total amount of over RMB 137 billion and total capacity of 400GWh. Increased capacity planning in Chinese market exceeds 270GWh and increased capacity planning in European market exceeds 130GWh. The inspiring data indicates that power battery has entered a new round of capacity expansion competition, which will lead to “rapid increase in Europe and robust expansion in China”. Newly increased capacity will be intensively released in the future 3-5 years from 2021.

There were 26 new commissioning and capacity expansion projects in 2020, a big reduction in number compared to the same period in 2019. In Q3 of 2019, there were 30 commissioning and capacity expansion projects. However, comparatively speaking, single-item investment and capacity scale greatly increased. The average single-item investment reached RMB 5.2 billion; 7 projects each with investment of over RMB 10 billion; 17 projects each with planned capacity of over 10GWh.

In the meantime, thanks to favorable policies in Europe, Chinese lithium battery material enterprises gradually are constructing plants in Europe in order to provide convenient supporting for their European clients, thus further improving industry chain in European lithium battery field. Umicore, BASF, Johnson Matthey, CAPCHEM, Tinci Material, Jiangsu Guotai, Senior Material and Kedali are accelerating their material project construction in Europe and that is how they become important parts of European Raw Material Alliance.

3. Bidirectional Flow of Capital Is A Key Feature in The Commissioning and Capacity Expansion of Power Battery in 2020

(1) Competition is getting fiercer and concentration of power battery is increasing. Top 10 enterprises account for over 90% of total installed capacity, and top 5 enterprises account for as high as 85%. Pioneering battery enterprises are also acting as a leading force for commissioning and capacity expansion projects in power battery this year. Pioneering power battery enterprises like Ningde Amperex Technology, China Aviation Lithium Battery, Gotion High-Tech and BYD are creating new high in both investment in production base and capacity construction scale.

(2) The quantity of new comer enterprises greatly reduces. After several rounds of fierce competitions, there is a great reduction in the quantity of new comer enterprises that survive relying on their own strengths. However, the ones that did survive, represented by SVOLT, REPT and Ju Chuang, are getting stronger and growing into a non-negligible force in power battery field.

(3) Bidirectional flow of capital, i.e. foreign capital flows into Chinese market and Chinese enterprises go global. LG Chem, Panasonic, SKI and other foreign capital flow into Chinese market and competitive Chinese enterprises go global, such as Ningde Amperex, SVOLT and Microvast Power Systems. In the meantime, international auto enterprises like Volkswagen, Tesla, BMW are actively advancing their progress in self-production of cells.

4.Development Opportunities Brought by A New Round of Expansion Competition

Europe and China are continuously promoting and leading development of NEV industry, which attracts a great deal of investment deployment from pioneering battery enterprises. A competition for global battery market share is approaching.

The new round of expansion competition will result in reinforced market concentration of subdivided industries after vertical and horizontal mergers. It probably will also attract more cross-border capital for acquisition so that competition within the industry is getting intensified.

Besides, there appears a trend of cross-industry-chain merger and acquisition, i.e. promoting the integration of the entire industry by integrating all industry chains. This is to some extent beneficial to resource concentration and advantage matching. Integrating related industry chains of the industry helps to get a bigger leading voice in the market. It is the decision of market demands that leading voice goes to selling parties in upstream supply chain.