In recent years, driven by the rapid development of my country's new energy vehicle industry, the power battery industry, as a core component, has also experienced rapid growth. In 2017, my country's power battery industry ranked first in the world in terms of scale. However, while the industry has developed rapidly, problems such as a sharp decline in corporate profits, a lack of core technologies, overcapacity, and difficulties in recycling have also emerged. These issues should be actively addressed by strengthening top-level design, enhancing corporate R&D capabilities, reducing corporate production costs, improving the recycling system, and accelerating talent cultivation to help my country's new energy vehicle industry grow stronger.
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. Statistics show that in 2017, my country's power battery shipments reached 44.5 GWh, a year-on-year increase of 44%, accounting for over 70% of the global market share, making it the world's largest industry. However, along with this rapid development, 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. In recent years, the rapid growth in the production and sales of new energy vehicles has driven the development of the power battery industry. From 2014 to 2016, the average annual growth rate of the domestic power battery industry reached 368%, 324%, and 78.6%, respectively. Data shows that in 2017, China's power battery production reached 44.5 GWh, exceeding the total installed capacity by 8.1 GWh. 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 of power batteries, they still suffer from the inherent weakness of "low technological level." The structural overcapacity of "oversupply of low-end products and insufficient 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. Generally speaking, the scrapping cycle of power batteries for commercial new energy vehicles is 3 to 5 years, and for private passenger vehicles it is 5 to 8 years. my country began promoting the development of new energy vehicles in 2010, which means that from 2018 onwards, a large number of power batteries in my country will enter their scrapping period, and the following years will see a peak in power battery retirement. It is estimated that by 2020, the cumulative scrapped power batteries in my country will reach 120,000 to 170,000 tons, with approximately 50 GWh of retired new energy vehicle lithium batteries. This is accompanied by the currently extremely low recycling rate of power batteries in China. Statistics show that in 2015, the total amount of scrapped power batteries in my country was 20,000 to 40,000 tons, with a corresponding recycling rate of only 2%. In 2016, the total amount of scrapped power batteries was less than 10,000 tons, with a recycling rate of less than 20%. In the future, if these increasingly large amounts of scrapped power batteries cannot be effectively handled, it will cause serious resource waste, environmental pollution, and may trigger a new energy crisis. Improving the processing capacity of scrapped power batteries and building a sound 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 should research and formulate a medium- and long-term strategic development plan for the power battery industry, further clarifying the technological level and standardization of the industry, and avoiding overcapacity of low-end products due to blind development. Second, we should optimize government subsidy methods, raise the technical threshold for subsidies, and shift from universal subsidies to rewarding excellence and supporting leading companies. This will encourage leading power battery companies to grow stronger through mergers and acquisitions, and by extending the industrial chain, preventing the industry from becoming homogeneous and developing in a low-end manner. Third, we should seize the significant development opportunities brought by the Belt and Road Initiative, encouraging leading domestic power battery companies to develop overseas markets, especially by conducting thorough research on the new energy vehicle markets of countries along the Belt and Road, and choosing suitable markets and opportune times to "go global," thereby mitigating the overcapacity crisis in the domestic market.
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 to improve the performance and lifespan of assembled power battery packs and accelerate the research and development of high-performance, high-safety power battery industrialization technologies. Third, we will encourage leading domestic power battery companies to strengthen technological research and development cooperation with internationally renowned vehicle and power battery companies, absorb advanced foreign battery technologies, and form complementary business cooperation models; we will also promote the active participation of leading domestic companies in international market competition, enhancing the technological level and international perspective of Chinese 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, increasing the energy density of battery modules of the same volume while ensuring battery safety, thereby directly reducing battery costs. 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, encouraging enterprises to build intelligent manufacturing systems for power batteries. Through intelligent manufacturing upgrades, we aim to achieve platformization, intelligence, and service-orientation of production processes and management control, thereby reducing manufacturing costs. Third, we encourage enterprises to implement a "high-quality power battery project," strictly controlling product quality and improving final inspection efficiency; we also encourage capable enterprises to implement "machine replacement," effectively reducing labor costs by decreasing the number of employees on the production line, thus improving the economic benefits of power battery companies.
Fourth, establish a comprehensive recycling system to improve the efficiency and level of power battery recycling. First, strengthen the construction of recycling information platforms and networks. Establish a nationwide vehicle power battery management information system to achieve unified management of new energy vehicle manufacturers, power battery manufacturers, after-sales service companies, and recycling companies, laying the data foundation for the next step of building a fund and deposit recovery system. Simultaneously, encourage new energy vehicle manufacturers, power battery manufacturers, and battery leasing companies to transform their existing operating networks into recycling networks to improve the efficiency of power battery recycling. Second, encourage the research and development and application of key and new technologies. Provide financial support for the research and development of key common technologies such as power battery retirement judgment standards and testing technologies, automated dismantling and material sorting technologies for individual cells, and provide tax breaks to power battery recycling companies that actively adopt new technologies, processes, and equipment. Third, actively promote the tiered utilization of power batteries. In response to the rapidly increasing number of retired power batteries, encourage relevant companies to strengthen cooperation with companies in the fields of emergency power supply, photovoltaic power generation, low-speed electric vehicles, and electric bicycles, 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 between domestic vehicle manufacturers and power battery companies, building a complete industrial chain ecosystem characterized by complementary advantages and symbiotic cooperation. We will guide large new energy vehicle companies to cluster in industrial parks, forming a synergistic development between vehicle manufacturing and supporting links such as power batteries; we will encourage leading domestic power battery companies to expand their business into vehicle manufacturing, while also encouraging large vehicle manufacturers to proactively plan for power batteries and other links in the industrial chain. Second, we will promote cross-sectoral collaboration within the industry. We will encourage power battery companies to strengthen connections and cooperation with domestic and international raw material producers such as lithium, nickel, and cobalt to improve resource security; and in response to the rapidly growing number of retired power batteries, we will encourage relevant companies to strengthen cooperation with companies in the fields of emergency power supplies, photovoltaic power generation, low-speed electric vehicles, and electric bicycles, promoting the tiered utilization of power batteries. Third, we will strengthen the training of high-end professional and technical personnel. In core technology areas such as battery materials and system integration, we will accelerate the training of a group of professional and technical personnel, build a local R&D talent team, and provide talent support for industrial development.
