Wotema was once a leader in lithium iron phosphate power batteries. Its focus on lithium iron phosphate enabled Wotema to achieve a leading position in the industry in terms of technology. However, at a time when Wotema was expanding on a large scale and the policies of the new energy vehicle industry were changing, Wotema fell into a cash flow crisis and became entangled in difficulties.
Recently, Wotema's parent company, Jianrui Woneng, announced that it will introduce Jiangsu Huakong Investment Management Co., Ltd. as a partner to revitalize Wotema's subsidiary, Hunan Wotema, and help it resume production. However, Jiangsu Huakong's involvement is not driven by its interest in lithium iron phosphate batteries for power applications, but rather by its hope that Hunan Wotema's production capacity will gain traction in the energy storage market.
Due to the lower energy density of lithium iron phosphate (LFP) batteries, the technological debate between LFP and ternary lithium batteries has never ceased. Does the shift in investor sentiment towards LFP signify its defeat in the power battery market? In fact, it has been noted that with the approaching phase-out of subsidies for new energy vehicles, some securities firms have begun to be optimistic about the investment prospects of LFP.
Can Watma regain its vitality?
A glimmer of hope has emerged for Jianrui Woneng, which is mired in crisis. Jianrui Woneng recently announced that, in order to help Hunan Watma, a subsidiary of its wholly-owned subsidiary Watma, resume production, the company has signed an "Investment Cooperation Framework Agreement" with Jiangsu Huakong to jointly establish a joint venture. Affected by this news, Jianrui Woneng's stock price hit the daily limit on April 19.
According to the agreement, Jianrui Woneng and Jiangsu Huakong plan to jointly invest in the establishment of Hunan Anding New Energy Co., Ltd. (hereinafter referred to as Anding New Energy). The registered capital of the joint venture is 200 million yuan. Jianrui Woneng or its designated third party plans to subscribe for 110 million yuan, accounting for 55% of the registered capital, while Jiangsu Huakong or its controlled third party plans to subscribe for 90 million yuan, accounting for 45% of the registered capital.
The establishment of the joint venture is seen as a self-rescue move by Jianrui Woneng. Since Wotema, Jianrui Woneng has repeatedly tried to save itself. In February last year, Jianrui Woneng disclosed a framework agreement with Jiayi Precision on the issuance of shares to pay cash for the purchase of assets, as well as a cooperation framework agreement with Altura Mining Limited. However, due to Jianrui Woneng's termination of the major asset restructuring plan, these two framework agreements were also terminated.
In addition, Jianrui Woneng disclosed the partnership agreement of Shaanxi Litong No. 1 New Energy Partnership (Limited Partnership) in October last year, thereby introducing strategic investors. The partnership has now completed its business registration procedures and been issued a business license, with the partners' funds totaling 23.5 million yuan already in place.
Of course, signing the framework agreement is only the first step. After that, Jianrui Woneng and Jiangsu Huakong will jointly negotiate with the local government on investment cooperation matters. Once the government approves and agrees, the two parties will sign a formal investment cooperation agreement and, after fulfilling their respective approval procedures, quickly promote the implementation of related matters such as company registration, capital implementation, factory buildings and equipment.
According to business registration information, Jiangsu Huakong's shareholders include Lu Zhongyi and Hua Jun, holding 70% and 30% of the shares respectively. Lu Zhongyi also serves as the chairman of Jiangsu Huakong. In July 2008, Jiangsu Huakong established a corporate RMB venture capital fund in Nanjing—Jiangsu Huakong Venture Capital Co., Ltd.—with a registered capital of 200 million yuan.
In an interview with eCompany, Lu Zhongyi stated that the cooperation between the two parties will be conducted through cash investment to ensure the normal production and operation of the joint venture. He told reporters that the joint venture will still utilize Hunan Watma's existing factory buildings and equipment for production, but the joint venture will be a clean new company and will not be involved in Watma's disputes.
In its announcement, Jianrui Woneng disclosed that Jiangsu Huakong has strategic partnerships with many well-known domestic and international investment institutions, demonstrating the company's outstanding strength and operational capabilities. Lu Zhongyi told reporters that Jiangsu Huakong had previously invested in new energy and lithium battery-related projects.
Judging from the stock price, the market has already reacted to Jianrui Woneng's self-rescue efforts. Jianrui Woneng stated that due to the large-scale anticipation of Watma, its production and operations have been severely affected, and existing orders cannot be fulfilled normally. Although the company is actively taking self-rescue measures, the relevant rescue work at the Watma level is progressing slowly. Establishing a joint venture will help the company resume production.
The debate over power battery technology has reignited.
“A year ago, we wouldn’t have paid attention to lithium iron phosphate batteries because their energy density is relatively low, and they can’t compete with ternary lithium batteries when used as power batteries,” Lu Zhongyi told reporters. He explained that the cooperation with Watma was due to the explosive growth of lithium iron phosphate batteries in the energy storage market. “Lithium iron phosphate has a relatively low cost, and its business model for energy storage is feasible.”
Lu Zhongyi told reporters, "We predict that lithium iron phosphate will be widely used in energy storage. If used for energy storage, a standard 40-inch container can hold about 2MWh of lithium iron phosphate batteries, which does not require much space."
So, is the application of lithium iron phosphate in power batteries really going to decline? The debate over the technical route of power batteries has been going on for a long time. In small vehicles such as passenger cars, lithium iron phosphate does not have a big competitive advantage. In large vehicles such as buses and logistics vehicles, although the requirements for battery size and weight have been relaxed, industry insiders are also worried that the growth potential of this market is limited.
However, reporters have noticed that recently there has been an increase in market optimism regarding the application of lithium iron phosphate batteries in the power battery field. For example, Orient Securities pointed out that this year's adjustment of new energy vehicle subsidy policies and industry development direction will lead to plug-in hybrid models and some low-end pure electric models switching to lithium iron phosphate batteries, and the recovery of lithium iron phosphate is imminent.
Specifically, current lithium iron phosphate (LFP) battery systems can achieve an energy density of 140Wh/kg, and their cost is 10%-15% cheaper than ternary lithium batteries. Lower-end models can save 3,000-6,000 yuan by switching to LFP batteries. Recently, the BAIC New Energy EC220 standard edition and JAC iEV7L have adopted LFP batteries. Furthermore, the 2019 facelifts of two plug-in hybrid models will also use LFP batteries.
Dongfang Securities previously predicted that the installed capacity of lithium iron phosphate batteries this year would be 24.24 GWh, based on the fact that lithium iron phosphate accounts for 5% of passenger vehicles. However, considering that some passenger vehicles are switching from ternary lithium batteries to lithium iron phosphate batteries, this shift will drive an increase of 13.26 GWh in the installed capacity of lithium iron phosphate batteries. Overall, the installed capacity of lithium iron phosphate batteries this year will increase by 73.85% year-on-year.
However, according to data from Zhenli Research, in the first quarter of this year, the total installed capacity of power batteries reached 12.57 GWh, a year-on-year increase of 180%, of which lithium iron phosphate batteries accounted for 2.94 GWh, or 23.34%. Compared with the same period last year, although the installed capacity of lithium iron phosphate batteries increased by 125%, its market share decreased by 6 percentage points.
In terms of market share, there were no signs of recovery for lithium iron phosphate batteries in the first quarter of this year. What is the reason for this? Dongfang Securities believes that the advantages of lithium iron phosphate batteries in passenger vehicles will only be reflected after the transition period of the subsidy reduction for new energy vehicles ends. At that time, as more models are launched with lithium iron phosphate batteries, their installed capacity will increase.
Looking at ternary batteries, CATL's ternary batteries achieved a record high energy density of 182.44Wh/Kg in the first batch of promotion catalogs for new energy vehicles in 2019. In contrast, the highest energy density of lithium iron phosphate batteries in the existing 13 batches of promotion catalogs is 153.59Wh/Kg, with the former being nearly 20% higher than the latter.
Reporters have learned that in the recent batches of new energy vehicle promotion catalogs, the signs of ternary lithium batteries and lithium iron phosphate batteries dividing up the market segments are becoming increasingly clear. Among them, ternary lithium batteries with higher energy density further cover the passenger vehicle market with higher range requirements, while lithium iron phosphate batteries with lower energy density cover the bus market and some special models with higher safety and cost requirements.
