As one of my country's key strategic emerging industries, the new energy vehicle industry has experienced explosive growth in recent years. Power batteries are the "heart" and "soul" of new energy vehicles, representing the highest value-added link in the new energy vehicle industry chain and ranking first among the three core technologies for new energy vehicle development. The development of the power battery industry and breakthroughs in related technologies are effective ways to overcome the power bottleneck in new energy vehicles, crucial for boosting the growth and strength of my country's new energy vehicle industry, and will ultimately determine whether my country can transform from a traditional automobile powerhouse into a modern automobile superpower.
In recent years, my country's power battery industry has experienced strong growth. According to statistics from GGII (Gaogong Industry Research Institute), my country's power battery shipments reached 44.5 million kilowatt-hours in 2017, a year-on-year increase of 44%, accounting for more than 70% of the global market share, making it the world's largest industry. However, along with the rapid development of the industry, four major challenges have emerged: a sharp decline in corporate profits, a lack of core technologies, overcapacity, and difficulties in recycling. These challenges require proactive measures to address.
The development of the power battery industry is facing a situation of "too many soldiers and too few generals".
First, the profits of power battery companies have decreased significantly, and industry consolidation is accelerating. Statistics show that in 2017, the overall revenue growth of the new energy vehicle industry was 13.2%, a decrease of approximately 4.6% compared to the previous year; net profit attributable to the parent company increased by 7.9% year-on-year, a decrease of approximately 20% compared to the previous year; and the gross profit margin was 31.4%, a decrease of 1.4% year-on-year. Furthermore, the consolidation within the power battery industry has been accelerating recently. In 2015, there were 150 power battery-related companies nationwide, but by the end of 2017, this number had decreased to around 100.
Secondly, multinational corporations exert patent control over my country's power battery industry technology. According to a search of the latest International Patent Classification (IPC), the top ten companies in the global power battery industry in terms of patent numbers are dominated by countries such as Japan, the United States, South Korea, and Germany, with a total of 3,278 patents. No Chinese company is among the top ten. This indicates a significant gap between Chinese companies and developed countries in the number of power battery patents, resulting in weak market competitiveness for Chinese companies and the lack of established patent barriers for my country's power battery industry.
Third, the power battery industry faces severe overcapacity. Data from the Gaogong Industry Research Institute shows that in 2017, China's power battery production reached 44.5 million kilowatt-hours, exceeding the total installed capacity by 8.1 million kilowatt-hours. Overall inventory accounted for approximately 18.2% of total production, and the national power battery capacity utilization rate was only 40%. Despite the current huge production capacity, the power battery industry still suffers from the fundamental weakness of "low-end technology level." This structural overcapacity—an oversupply of low-end products and a shortage of high-end products—is a prominent problem currently hindering the development of my country's power battery industry.
Fourth, the pressure on power battery recycling is constantly increasing. It is estimated that by 2020, the cumulative amount of scrapped power batteries in my country will reach 120,000 to 170,000 tons, with approximately 50 million kilowatt-hours of retired lithium batteries from new energy vehicles. This is accompanied by the currently excessively low recycling rate of power batteries in China. In the future, if these increasingly large amounts of used power batteries cannot be effectively handled, it will cause serious resource waste, environmental pollution, and may trigger a new energy crisis. Improving the capacity for processing used power batteries and building a comprehensive power battery recycling system is now imperative.
Three major factors affect the healthy development of my country's power battery industry
First, there is a double whammy from both upstream and downstream of the industry chain. Upstream, raw material prices are soaring. Downstream, many vehicle manufacturers are facing financial pressure due to the sharp reduction in subsidies. While significantly lowering the price of power batteries, they are also continuously extending debt terms and delaying remittances, directly passing on the cost pressure to upstream battery manufacturers. This has led to a sharp decline in the profits of many power battery companies and intensified industry consolidation.
Secondly, weak R&D capabilities among enterprises have led to a lack of core technologies and patents in the industry. The power battery industry is a capital- and technology-intensive sector. Currently, the overall R&D capabilities of my country's power battery-related enterprises are relatively weak, lacking core technologies and patents with significant industry influence. In terms of high-end technologies, there is still a considerable gap compared to developed countries. At the same time, a shortage of high-end talent and high employee turnover result in a lack of continuity in R&D.
Third, the rapid expansion of new energy vehicle production capacity has led to a significant accumulation of excess capacity in the power battery industry. The new energy vehicle industry is characterized by its large market potential, high government subsidies, and lucrative profits, attracting substantial capital investment in recent years and driving its astonishing growth in a short period. This rapid increase in new energy vehicle production capacity, while driving explosive growth in demand for power batteries and related supporting products, has also directly resulted in overcapacity in the power battery industry.
Multiple measures to solve the development problems of the power battery industry
First, we must strengthen top-level design and guide the healthy and orderly development of the industry.
First, we will research and formulate a medium- and long-term development strategic plan for the power battery industry, further clarifying the technological level and standardization of the industry. Second, we will optimize government subsidy methods, raise the technical threshold for subsidies, and shift from universal subsidies to rewarding excellence and supporting leading companies, encouraging them to grow stronger through mergers and acquisitions, and extending the industrial chain. Third, we will seize the significant development opportunities brought about by the Belt and Road Initiative, encouraging leading domestic power battery companies to develop overseas markets.
Second, enhance enterprises' R&D capabilities and strengthen the competitiveness of core technologies in the industry.
First, we will continue to rely on industry-academia-research alliances to develop breakthroughs in core common technologies for power batteries. We will fully utilize science and technology innovation platforms such as the National Power Battery Innovation Center and the China Automotive Power Battery Industry Innovation Alliance to strengthen the development and industrialization of new power battery material systems. We will rely on independent innovation to improve the patent portfolio of Chinese companies in the core technology field of power batteries, thus breaking free from the current dependence on imports for core technologies. Second, we will accelerate the introduction of incentive measures for the industrialization of power batteries. Third, we will encourage leading domestic power battery companies to strengthen technological research and development cooperation with internationally renowned vehicle and power battery companies.
Third, reduce the production costs of power battery companies and improve their economic efficiency.
First, we encourage enterprises to promote the lightweighting and standardization of power batteries. Second, we promote the integration of big data, the Internet of Things, and other technologies with the manufacturing of power batteries and their production equipment, and encourage enterprises to build intelligent manufacturing systems for power batteries. Third, we encourage enterprises to implement a "high-quality power battery project," strictly control product quality, and improve the efficiency of final product inspection; we also encourage capable enterprises to implement "machine replacement" to improve the economic benefits of power battery companies.
Fourth, establish a comprehensive recycling system to improve the efficiency and level of power battery recycling. This includes: 1) strengthening the construction of information platforms and networks for recycling; 2) encouraging the research and development and application of key and new technologies; and 3) actively promoting the tiered utilization of power batteries.
Fifth, strengthen cooperation and talent cultivation to improve the level of healthy industrial development.
First, we will promote cooperation and development among domestic vehicle and power battery companies to build a complete industrial chain ecosystem characterized by complementary advantages and symbiotic cooperation. Second, we will promote cross-sectoral collaboration within the industry. Third, we will strengthen the training of high-end professional and technical personnel.
