Watma's parent company owes more than 20 billion yuan.
According to Watma's previously disclosed financial statements, Watma's parent company, Jianrui Woneng, has total outstanding debts of 22.138 billion yuan, with 1.998 billion yuan overdue, including debts to upstream suppliers and bank loans. Currently, Jianrui Woneng's stock price has returned to pre-acquisition levels.
On the evening of April 2, Jianrui Woneng issued another announcement stating that because the company and its subsidiary Watma were unable to repay their loans upon maturity, the company had applied to the Intermediate People's Court of Wuhan City, Hubei Province, to freeze a total of 13 accounts belonging to the respondents Li Yao, Watma, and Jianrui Woneng, with a total deposit of RMB 62.5422 million.
Data shows that Watma's parent company, Jianrui Woneng, had a net profit of 752 million yuan in the first three quarters of 2017; however, according to its 2017 preliminary financial report, the company's net profit for 2017 was 522 million yuan. This means that in the fourth quarter of last year, Jianrui Woneng suffered a loss of 230 million yuan, and the company with the most severe losses was none other than Watma, a former industry giant.
The domestic power battery market is divided into three major segments.
According to statistics, in the 2017 ranking of domestic power battery installations, Wotema ranked third, only behind CATL and BYD. Details are shown in the table below:
This shows that CATL has taken the lead in the power battery market. Although BYD is "close behind" in the ranking, its annual installed capacity is nearly double that of CATL, which ranks first.
Watma, ranked third, has fallen far behind the top two in terms of performance, clearly marking a turning point for the third tier. Therefore, based on the overall situation, domestic power battery companies are basically comprised of CATL, BYD, and "other companies."
Undeniably, CATL's growth trajectory can be described as phenomenal. Founded at the end of 2011, CATL's market valuation has now reached $20 billion. Recently, CATL's IPO was approved in a lightning-fast process, achieving an unprecedented feat in the history of China's power battery industry. From third in the industry to a "unicorn," CATL took less than two years.
The reason for this is that while many companies were still using lithium iron phosphate batteries in their power systems, CATL had already adopted ternary lithium batteries early on. Since the country began to recognize the safety of ternary lithium materials for use in automotive batteries, ternary lithium batteries have gradually dominated the passenger car market, and the biggest beneficiary is undoubtedly CATL, which has specialized in ternary lithium batteries for the longest time.
To date, many new energy vehicles from BAIC New Energy, Geely, and SAIC are equipped with power batteries supplied by CATL.
In contrast, BYD, which once dominated the commercial and passenger vehicle markets with its mature lithium iron phosphate batteries, has been severely impacted by the increased crackdown on fraudulent subsidies for new energy buses. Its battery business, which is crucial to its profitability, has also failed to gain an advantage in the new round of technological revolution.
Fortunately, we are pleased to see BYD's technological transformation in passenger vehicles, with most of its currently sold new energy vehicles now equipped with ternary lithium batteries, which have higher energy density. Furthermore, there are rumors that BYD intends to supply its power battery products to other companies in order to further expand its market share.
Apart from the two well-known power battery manufacturers mentioned above, it seems that few other "peers" have the ability to shake the top two "positions". Even Watma, which ranks third, is currently in a precarious financial situation.
The power battery industry has already shown signs of polarization.
As we all know, with the vigorous promotion of new energy vehicle development in China, power battery products should be the "darling" of the automotive industry. However, with a large number of new energy vehicles slowly rolling off the factory, why is the "business" of power battery products becoming increasingly difficult?
In fact, Watma's major setback was not unrelated to its own shortcomings. In summarizing the lessons learned, Vice President Zhong Mengguang revealed the root cause of Watma's "embarrassing" situation:
1. Strategic failure, misjudgment of the new energy industry.
At the end of 2016, the government adjusted its subsidy policy for new energy vehicles, adding a new provision that "non-individuals who purchase new energy vehicles must operate them for at least 30,000 kilometers before they can receive subsidies."
Even though the impact of the subsidy reduction was manageable after the policy was implemented, the payment cycle was extended by at least a year and a half, making it difficult for operating companies to charge high prices during the leasing process, causing overall operational difficulties. At the same time, the significantly longer payment cycles from downstream customers increased the difficulty of inventory turnover. Because the company's huge repayments became increasingly difficult, defaults directly occurred.
2. Overly aggressive expansion led to cash flow problems.
Since being acquired by Jianrui Woneng in 2016, Watma has adjusted its strategy, significantly increasing its production scale in an attempt to achieve lower production costs and increase market share through larger sales volumes. However, behind this "Great Leap Forward" style development, Watma's problems have gradually emerged.
In 2018, new regulations for lithium batteries raised the requirements, and electric vehicles with a driving range of less than 150 kilometers were no longer eligible for subsidies. Unfortunately, behind Watma's simultaneous increase in production capacity and inventory, a significant proportion of the batteries already produced did not meet the stipulated energy density requirements, directly blocking the sales of these inventory products.
Left with no other option, Watma had to convert its inventory into energy storage batteries for sale, but its profit margins plummeted.
On the surface, Watma's current predicament seems primarily due to its flawed strategic planning and decision-making, a situation that could lead to disastrous consequences. However, setting aside Watma's overall strategic failures, the increasingly mature new energy passenger vehicle market in China clearly demonstrates that CATL seems to have "monopolized" the crucial component of power batteries for many highly popular models, exhibiting a clear trend of "the strong getting stronger."
Furthermore, it's easy to see that BYD's rapid transformation and determination to expand its market demonstrate its resolve to directly compete with CATL, with the two locked in a fierce battle for market share. In this situation, the most likely outcome is that both companies will see their domestic market share increase, further squeezing the survival space of third-tier competitors. In this battle of the strong, it is often the "lower-end players" in the industry who truly suffer.
This inevitable outcome may seem tragic, but even if we broaden our perspective to the global scale, only a handful of companies, such as Samsung, LG, and Panasonic, are truly thriving in the power battery field. Most companies remain relatively unknown, with their market share being rather dismal.
This means that the power battery industry is gradually shifting from a "win-win" model to a more polarized one, with the trend of survival of the fittest becoming increasingly apparent. On the surface, Watma's huge losses are indeed caused by human factors, but a comprehensive analysis suggests that even if Watma had always adopted a conservative, step-by-step approach, it might not have been able to secure long-term survival.
In other words, judging from CATL's rapid development over the past two years, its corporate strategy was also aggressive. When it was heavily investing in the research and development of ternary lithium batteries, the government had not yet approved their safety for use in passenger vehicles. Therefore, looking back, CATL was also engaging in a "gamble," and ultimately succeeded in its "bet." Conversely, Wotema undoubtedly failed to grasp the pulse of the times, and the disastrous outcome of this "misdiagnosis" is predictable.
In conclusion, regardless of how companies adjust their strategies, as the domestic new energy vehicle market continues to grow, industry reshuffling and survival of the fittest are inevitable, and only a handful of companies will survive to the end.
