On September 4th, at the 2018 China (Qinghai) New Energy Entrepreneurs Summit hosted by Start-up Research and other organizations, Huang Shilin, Vice Chairman of CATL, discussed the current overcapacity problem in the power battery industry. He stated that the planned capacity in 2017 was 228 GWh, but by 2019, less than one-fifth of that capacity had been used. The capacity of small and medium-sized manufacturers and outdated manufacturers may be very difficult to absorb, and their survival space will be continuously squeezed. The overcapacity situation in the power battery industry will continue until 2023.
"Many people have asked whether excess production capacity can be used for energy storage, but there is a big misunderstanding here. Energy storage batteries have much higher requirements than power batteries. Currently, 1,500 to 2,000 cycles are sufficient to meet the requirements of passenger vehicle power batteries, but energy storage batteries require at least 8,000 cycles. Energy storage batteries have much higher requirements than power batteries, (so) outdated production capacity may be gradually phased out," said Huang Shilin, vice chairman of CATL.
Consolidation and reshuffling have become the two major themes in the industry.
According to Huang Shilin, the domestic new energy vehicle industry is currently facing enormous challenges. On the one hand, multinational automotive giants are ramping up their efforts, launching newly designed models in response to the complete withdrawal of subsidies in China after 2020. Furthermore, tariff reductions will further intensify the impact on the domestic new energy vehicle market, leading to increased competition. On the other hand, due to insufficient risk forecasting, irrational investments in power batteries and automobiles in recent years have resulted in significant structural overcapacity, which is now gradually becoming apparent.
Regarding the current industry trends, Li Zhenqiang, general manager of Qidian Research, told reporters: From a policy perspective, the decline in subsidies this year is much different from what companies expected. Many companies did not anticipate such a large gap. In terms of technology selection, battery companies that originally focused on lithium iron phosphate and could not meet the minimum energy density requirements have been impacted. Meanwhile, upstream battery material and equipment manufacturers now have to be very cautious in choosing customers.
Reporters noted that, in terms of the integration of the power battery industry chain, automakers are also strengthening their integration with upstream battery companies, and the linkage between upstream and downstream is very obvious. Many automakers have formed joint ventures with battery manufacturers, such as BMW and CATL, Daimler and BAIC.
Li Zhenqiang believes that in the next two to three years, the industry's first theme will be consolidation, and the second will be a reshuffling. Companies without technological advantages, financial advantages, or strategic advantages will definitely be "washed out" of the market.
Market concentration will first decrease and then increase.
Li Zhenqiang stated that a notable phenomenon is the renewed increase in market concentration in China's power battery market. In the first half of the year, the top 10 companies in terms of installed capacity accounted for 89% of the market, an increase of 29 percentage points compared to the same period last year. However, he predicts that over the next two to three years, the market concentration of the power battery industry will likely decline in the first year, followed by an increase again in the following year or two.
Li Zhenqiang explained that the main reason is the diversification of downstream automotive suppliers and the continuous launch of new battery technologies, which may bring more variables to the market. "Besides the top two, BYD and CATL, the landscape of the next eight companies is very unstable, with significant fluctuations in market share each month. This month, one company might be third, and next month it could be another. This also means that opportunities still exist. Many second-tier battery companies are now increasing their market and technology R&D efforts and capital investment to challenge the top-tier brands," Li Zhenqiang said.
In addition, Li Zhenqiang believes that Panasonic, LG, Samsung and other companies have been increasing their restructuring of the Chinese battery market since last year, and overseas battery companies will also have a share of the Chinese power battery market. This is one of the reasons for predicting a future decline in market concentration.
Regarding the future, Huang Shilin discussed the technological aspects, noting that the development of power batteries in recent years has been rapid, with significant cost reductions. He expressed hope that the energy density of power batteries could reach 300Wh by 2020. From a cost perspective, he anticipates that by 2020, the cost of power batteries will definitely be lower than 1 yuan/Wh.
"We have also made some suggestions to the government." Huang Shilin also mentioned that he believes future policies will lean towards several aspects, such as: supporting enterprises to grow bigger and stronger, forming 2 to 3 globally renowned vehicle and battery companies, independently mastering core technologies, and occupying a significant share in the international market; establishing comparative advantages, and increasing support policies for the use of new energy vehicles. Currently, there are still many gaps in the use of new energy vehicles, such as the lack of a sound management system for mandatory annual inspections, insurance, and scrapping policies. He believes that these aspects will be strengthened in the short term.
