After the "frenzy" of 2015 and the "struggle" of 2016, 2017 marked a critical period for the development of China's power battery industry. However, the future of power battery companies, which are currently in a period of policy digestion, price competition, and industry reshuffling, remains uncertain, and the industry's development urgently needs to overcome numerous obstacles.
Against this backdrop, a forum on "The Market Prospects of Power Batteries in the Post-Subsidy Era" was held in Beijing. During the roundtable discussion, Qin Xingcai, President of Lishen Battery; Yuan Chengyin, Vice President of BAIC New Energy; Sun Yanxian, Vice Chairman of Zhejiang Chaowei Chuangyuan; and Chen Yanbin, Vice President of DangSheng Technology, gathered to discuss the theme of "How the power battery industry chain can develop collaboratively and seek market breakthroughs under the new subsidy policy." The roundtable forum was moderated by Fang Jianhua, Senior Advisor of the Power Battery Application Branch of the China Chemical and Physical Power Sources Industry Association.
Each step is interconnected, and every household has its own unique and difficult "price reduction strategy."
Against the backdrop of subsidy reductions in the industry, "improving quality and reducing prices" has become a "must-learn" course for every battery company. Qin Xingcai believes that the pressure brought by the subsidy reduction is indeed significant, but an industry cannot survive solely on government subsidies. Currently, the power battery industry is in a phase of rapid expansion, and the next stage will inevitably be a period of consolidation, that is, a phase of industry reshuffling. Sun Yanxian, who transitioned from the traditional lead-acid battery industry to the lithium battery industry, also feels this deeply. He stated that it is not a healthy development trend for power battery companies to lower costs when there are insufficient profits to support development. Therefore, power battery companies should be given sufficient profit margins, and the optimal way to reduce prices should be found throughout the entire power battery industry chain.
Indeed, power battery companies facing a "squeeze from above and pressure from below" predicament are not the only victims of subsidy reductions. Chen Yanbin bluntly stated that during the process of rising raw material prices, DangSheng Technology, which mainly supplies battery materials, is also under "immense pressure." According to him, DangSheng Technology's best-performing products currently have a gross profit margin of only about 15%, and the cost of purchasing raw materials such as nickel, cobalt, and lithium has reached nearly 80% of the company's product costs, leaving almost no room for further profit compression.
As a representative of vehicle manufacturers, Yuan Chengyin frankly stated that every link in the industrial chain faces its own pressures. "Recently, I have been reflecting on what the true survival model for vehicle manufacturers should be in the new era. If we continue to operate according to the traditional car model, we will basically have no chance. This is because traditional cars have a lot of room for growth; they are very mature in terms of industrial chain, channels, service systems, and cost analysis. New energy vehicles, on the other hand, require more innovative models."
Collaborative development to drive innovation in the industrial chain business model
The saying "if the lips are gone, the teeth will be cold" clearly applies here; the pressure from the new subsidy policy has obviously spread to the entire power battery industry chain. "Joining forces for mutual support" is a good approach, and "connecting the industry chain and innovating business models" was a unanimous call from company representatives at this forum.
In Qin Xingcai's view, the China Watma New Energy Vehicle Industry Innovation Alliance, as a typical case of upstream and downstream collaborative development, is worthy of study and reference by industry enterprises. More importantly, power battery companies should realize their internal strength and enhance their core competitiveness through "product standardization, production automation, management informatization, and enterprise scaling."
Yuan Chengyin also mentioned Wotema's innovative business model during the discussion and offered his suggestions from the perspective of OEMs. He said that power battery companies must first accurately understand customer needs, then step outside the industry's small circle and use new business models to solve the problems facing the industry, and most importantly, produce highly reliable and high-quality products. He further suggested that battery companies that want to successfully enter the vehicle market must hire experienced managers from OEMs; in terms of R&D and production, they must consider the entire life cycle value of power batteries, and "be patient and stay true to their original aspirations."
Chen Yanbin shared his thoughts on market diversification with the guests. He believes that the over-concentration of upstream raw material resources such as nickel and cobalt has led to a new round of raw material price increases. In this situation, considerations for power batteries cannot be limited to improving energy density, but must be balanced in terms of safety, economy, and reliability. "Taxis may only need a range of 200 kilometers through battery swapping or fast charging technology, while most of us only travel 40 to 50 kilometers a day. Our cars don't need to travel 300, 400, or even 500 kilometers or more." In Chen Yanbin's view, diversified supply, diversified vehicle models, and diversified applications, through market regulation, can better avoid the cost pressure brought by rising raw material prices.
A collision of ideas, envisioning a new future for the power battery industry
During the Q&A session, company representatives and media personnel engaged in lively discussions on a range of hot industry topics, including the construction of an industrial collaborative ecosystem, new models for the development of the sharing economy, the use of power batteries for backup, and overcapacity.
Yuan Chengyin believes that the upgrading of China's industry is not just a matter for individual companies; it includes the supporting equipment capabilities of upstream and downstream enterprises, the ability to coordinate development, and other verification capabilities. Furthermore, the value of power batteries is not only reflected in their life cycle; companies must consider more lifecycles in the early stages of product design. "When companies are making power battery modules, they must consider their manufacturability and remanufacturability, and implement full lifecycle management and traceability of their data. Therefore, if upstream and downstream companies in the industry chain form an alliance to work on projects together, everyone can use this data, and everyone will have greater confidence in how to proceed in the future." In addition, Yuan Chengyin introduced some of BAIC New Energy's ideas for building a complete industry chain ecosystem. By combining the innovation chain, industry chain, and service chain, they will launch an open cooperation platform and ultimately form a complete industrial ecosystem without any weaknesses.
Regarding the development strategy of the entire industry chain under the trend of the sharing economy, Fang Jianhua stated that, similar to the currently popular shared bicycle model, sharing new energy vehicles is the most suitable approach. "The real competitive advantage of new energy vehicles lies in the fact that the higher the frequency of use, the lower the cost of use. Therefore, car sharing can be considered an effective application model for promoting new energy vehicles. In the short term, we may encounter some product-related issues, infrastructure problems, and personnel quality issues, but the development trend of car sharing should not change."
Fang Jianhua also believes that leveraging the bridging role of industry organizations such as the Power Battery Application Branch of the China Chemical and Physical Power Sources Industry Association to enable higher-level authorities to fully understand the actual situation of the power battery industry development and formulate more reasonable industrial planning policies is an effective way to promote the healthy development of enterprises across the entire power battery industry chain.
