Electrical Equipment / Components & Telecoms

Smart electric vehicles are developing in an unprecedented trend. Correspondingly, the upstream and downstream companies in the power battery industry chain have also ushered in performance increases and investment booms from the second half of 2020.

"Starting from 2021, the global lithium battery market demand has increased significantly, but at present, the capacity supply of the entire industry chain is relatively slow, and the effective supply is insufficient." Zeng Yuqun, chairman of Ningde Times, believes that the demand for power batteries is growing exponentially, with full supply. The supply of chain capacity will face challenges.

In this context, several mainstream lithium battery listed companies are accelerating the pace of production capacity deployment. However, related problems have become increasingly prominent-power battery hype, structural overcapacity, and insufficient capacity utilization have emerged.

Fang Jianhua, partner and president of the National Science and Technology Achievement Transformation Fund New Energy Automobile Venture Capital Sub-fund, told a reporter from the Securities Daily that at present, the shortage of power battery supply and overcapacity coexist. On the one hand, the supply of high-end and high-quality production capacity is insufficient, and on the other hand, the production capacity of low-end products is insufficient to order. From the perspective of the supply side, the acceleration of production capacity expansion by head battery companies is to increase the supply of high-end production capacity.

Lithium Battery Industry Company

When the capital increase and production expansion are in progress

2021 is the year of capacity expansion of major power battery companies, and the establishment of new companies has become a common choice for many listed lithium battery companies.

On April 28, CATL announced that it plans to jointly fund the establishment of two joint ventures with ATL to engage in the R&D, production, sales and after-sales service of medium-sized batteries used in household energy storage, electric two-wheeled vehicles and other fields. One is a battery joint venture company, and Ningde Times invests 70%, and the other is a battery pack joint venture company, and Ningde Times invests 30%.

On July 6, Tianqi Lithium issued an announcement stating that the capital increase and share expansion signed with the Australian listed company IGO had been completed. According to the company's previous announcement, the funds obtained from the capital increase are intended to be used to repay the company's wholly-owned subsidiaries due to internal restructuring, and to supplement funds for the operation and commissioning of its Quinana lithium hydroxide plant.

On July 9, Yiwei Lithium Energy announced that it intends to acquire 28.125% of Jin Kunlun’s equity and cooperate with Jin Kunlun to establish a joint venture company in Qinghai Province with a phased investment of no more than 1.8 billion yuan to build an annual output of 30,000 tons of lithium carbonate and lithium carbonate. Lithium hydroxide project, the first phase of which is to construct an annual output of 10,000 tons of lithium carbonate and lithium hydroxide projects, Yiwei Lithium will hold 80% of the equity of the joint venture.

In addition, a number of listed companies related to lithium batteries have increased their lithium battery business through capital increase and allotment. The "Securities Daily" reporter noted that Guoxuan Hi-Tech announced on March 16 that the company's wholly-owned subsidiaries Hefei Guoxuan and Liuzhou Investment respectively increased capital in Liuzhou Guoxuan in cash to build a lithium battery production base for Liuzhou Guoxuan. Provide financial support to accelerate the layout of the Liuzhou new energy power battery market and expand the market space.

Ganfeng Lithium also placed 48.04 million new shares on H shares on June 10, and plans to use the total net proceeds of the placement of HK$4.855 billion for capacity expansion, potential investment, supplementary working capital, and general corporate purposes. Capacity expansion and construction mainly involve overseas lithium resource projects, and potential investments may include ore, brine, lithium clay, etc.

In just over half a year, major domestic listed lithium battery companies announced capital increase plans one after another, which shows how hot the lithium battery industry is. At the same time, under the dual guidance of carbon neutrality and echelon utilization of lithium batteries, many companies have also begun to deploy lithium battery recycling businesses.

Product structural overcapacity

Power battery safety issues are outstanding

According to the "Securities Daily" reporter, an important reason why lithium battery listed companies increase capital and expand production in various ways is that the current power battery is facing insufficient supply. "Everyone is expanding production wildly, and the production capacity is not enough. The next five years will be a period of high-speed expansion." Yang Hongxin, Chairman and CEO of Honeycomb Energy, once said that Honeycomb Energy's orders reached 8GWh at a certain time this year, but at that time it was only Can produce 5GWh.

However, on the one hand, various lithium battery companies are crazy to expand production, and on the other hand, the capacity utilization rate is questioned. Taking CATL as an example, according to the company's financial report data, the company's capacity utilization rate in 2019 was 89.17%, while the capacity utilization rate in the first half of 2020 was only 52.50%.

"This contradiction is that the market is not simply lack of batteries, but lack of high-end batteries." Sina Finance columnist Lin Shi said that products that can truly meet the performance requirements and market needs of vehicle companies have no excess capacity. In recent years, the savagely growing and speculative battery products seem to have a high output, but the vehicle manufacturers will not easily use them.

However, the reporter has noticed that in the face of increasing car orders, many car companies have taken the second place, choosing to use low-end batteries with relatively poor performance on some low-end models to meet the power battery gap. But this has also caused another problem in the current power battery industry-battery safety issues frequently appear. Recently, a large number of recalls have caused the industry to discuss the safety of lithium batteries again.

On July 16, due to the matching difference between the consistency of some power batteries and the BMS software control strategy, thermal runaway of the power battery may occur in extreme cases. Great Wall Motor recalled 16,200 Euler IQs; on July 23, Chery Automobile There may be consistency fluctuations in the assembly of some parts in the battery, and 1,407 Arrizo 5e electric vehicles have been recalled.

In terms of joint venture car companies, on July 23, General Motors announced that it would recall nearly 69,000 Chevrolet Bolt electric vehicles worldwide due to defective battery modules. The idle start-stop function is imperfect and the battery insulation performance is insufficient. In extreme cases, rear-end collisions may occur. The company will recall 12,955 imported Elfas.

In the next stage, the concentration of the lithium battery market will increase, and the industry reshuffle will continue. Fang Jianhua believes that 2021 is still a good year for the development of the lithium battery industry, but not all companies will usher in a good year. "In the early stages of industrial development, everyone will rush into the crowd, but in the end, companies that can withstand the test of the market must continue to develop their core competitiveness."

In terms of technology, in the field of power battery materials in 2021, there will be some new technology introductions and even breakthroughs in high nickel cathodes, silicon carbon anode materials, new composite current collector materials and conductive materials. Fang Jianhua said, “In the early days, power batteries excessively pursued energy density while weakening other aspects of performance. Now the above-mentioned new technologies will play a very critical role in improving the performance of power batteries.”

From the perspective of the capital market, “the cathode materials lithium hydroxide and lithium carbonate, the anode materials lithium hexafluorophosphate, the separator, the copper foil of the motor parts materials, and the lithium battery testing equipment are all within the hype line of the lithium battery concept.” Sina Finance columnist Lin Shi Said that for lithium battery stocks that are currently at a historical high, investors need to be alert to the impact of variables such as the long "exploration and conversion" work cycle of lithium mines and the tight market procurement of raw materials. Some fund managers even said that there is a psychological expectation of 15%-20% decline in stocks that are overheated on the lithium battery track.