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The cost of power lithium batteries has accounted for nearly 60% of the cost of electric vehicles, and vehicle enterprises are working for battery factories. In July, Zeng Qinghong, Chairman of GAC Group, made a roast at the 2022 World Power Lithium Battery Conference, which seemed to speak out the aspirations of many car enterprises. As the price of upstream materials continues to rise and the cost of batteries continues to rise, many automobile enterprises have been suffering from batteries for a long time. How to reduce the battery purchase price? Maybe it's a good way to spell out. A few days ago, Honda China announced that it would jointly establish a battery procurement company with Dongfeng Group and GAC Group at the end of September to centrally purchase power lithium batteries from CATL.

01. Centralized purchase of batteries in exchange for bargaining power and delivery guarantee

Profit pressure, unwilling to work, car companies are seeking freedom of power lithium battery. Fan Yongjun, Secretary-General of Chengdu New Energy Vehicle Industry Promotion Association, said that the power lithium battery of electric vehicles generally consists of three parts: battery cell, module and battery management system. Many complete vehicle manufacturers purchase battery cells or modules from battery companies for self-assembly, and add battery management system to form battery packs, or directly connect the battery cells and chassis in series and parallel. But in fact, in the research and development and production of batteries, the most difficult and the most precise technology is the cell.

At present, there are many power lithium battery companies on the market, but there are not many battery companies that have the capacity to produce battery cells and are widely recognized by the market. There are more than 50 power lithium battery companies in the country, with the top five companies accounting for more than 85% of the market and the top ten companies accounting for more than 94% of the market. There are only several well-known companies, such as CATL, BYD, China Innovation Airlines, Guoxuan Hi-Tech, Honeycomb Energy, and Yiwei Lithium Energy. But all new energy vehicle companies need power lithium batteries, which leads to a serious imbalance in the number of supply and demand manufacturers, and the order of the original automobile supply chain is also quietly changing.

In the past, automobile enterprises were at the core of the supply system and occupied the absolute dominant position. But now, in order to get the battery, automobile enterprises have to accept the harsh conditions of the battery company, such as full payment in advance, deposit payment, and the battery company's leading production scheduling time. In order to bind batteries, many companies have also established joint ventures with CATL. Battery is the core part of electric vehicle. If the car enterprise uses the battery of an unknown company, its car will be difficult to sell, so the high-quality production of battery is particularly popular. Fan Yongjun said.

He further analyzed that Honda had rarely involved in the field of pure electric vehicles before, but was better at hybrid vehicles, so the demand for lithium batteries was not large. However, under the irreversible trend of electrification, Honda has also started the transformation of electrification, and the demand for lithium batteries has increased significantly, but it is still small compared with other car companies. A small number of sporadic purchases are bound to be difficult to obtain the best price, and more importantly, it is difficult to guarantee the delivery time. As for automobile enterprises, timely delivery is one of the most critical links in industrial production. Fan Yongjun told the reporter that companies with large procurement volume had already contracted the whole production line of CATL, such as Weilai and Xiaopeng, and the voice and bargaining power of the outsourcing line was obviously higher than that of sporadic procurement.

If Honda auto companies fight alone, their battery demand is likely to be insufficient to cover the line, but if they purchase collectively, they can cover the line to ensure the battery supply and obtain a lower purchase price. In addition, Honda is regarded as a family of three car companies connected with capital to some extent. When a family purchases batteries collectively, if the supply of batteries is insufficient, there is more room for discussion on how to coordinate the distribution and invoicing. In general, at present, it is necessary to combine Honda China, Dongfeng Group and GAC Group.

02. Not a long-term plan

Collective purchase can be said to be a strategy. Fan Yongjun analyzed that collective procurement can not only obtain cost advantages and delivery guarantees, but also provide more bargaining chips for auto enterprises when the procurement volume is large enough, and even can specify raw materials or directly purchase raw materials, so that battery factories can produce products on a commission basis, which is also known as ordering. At the same time, it is also beneficial for the alliance company to find the second and third supply in addition to CATL.

However, some people are worried that collective procurement will lead to the homogenization of the batteries of automobile enterprises in the alliance, and then lose competitiveness. Cao Guangping, an independent researcher of new energy and intelligent connected vehicles, explained that the temporary joint purchase of batteries between vehicle enterprises is conducive to the standardization of batteries, especially at the cell level, but the battery is a system in the vehicle. The module level and system level above the cell, as well as the battery management, thermal management, battery interface and battery package, can still be very different.

Fan Yongjun likened it to an egg cake, and the cell is equivalent to an egg, that is, the cell is the same, but the specific number of eggs to put and the ingredients to add can be designed according to the different requirements of each company. Moreover, the production line is flexible and can produce batteries of different capacities, even ternary batteries and lithium iron phosphate batteries. There is no homogenization. Fan Yongjun judged that under the situation of the high price of battery raw materials, there might be cases of centralized battery purchase in the future, but only if there is a family associated with capital and equity, such as Geely Group companies, FAW Toyota and GAC Toyota, FAW Audi and SAIC Audi.

Of course, centralized purchase is necessary, but it does not mean that it is a long-term plan. Cao Guangping believes that the current collective purchase of batteries by many automobile enterprises reflects the problem of the shortage of power lithium battery resources in the new energy automobile industry. It is a kind of expedient measure in the industry under the circumstances of policy incentives - increased sales of electric vehicles - shortage of battery resources - soaring prices of battery raw materials. It is also an anti-monopoly measure reached by some downstream companies under the partial centralized monopoly in the battery industry, which is essentially a passive action. It itself loses the initiative of the internal process and design modification of the battery cell, and the car enterprises also lose the soul of the battery cell. They can only innovate in the application of modules and systems on the basis of purchasing general battery cells. Moreover, the relationship between the group's joint procurement is also unstable. Not only are there competitive relationships between several automobile enterprises, but also in the long-term battery technology development process, there will inevitably be competition between automobile enterprises and battery companies, as well as among battery companies. The joint procurement of several parties, although it is to keep warm together, is loose after all.

03. Overproduction of batteries, the whole vehicle will be the king

Ensuring the safety and stability of the battery supply chain is an important basis for the healthy development of the automobile industry of all automobile enterprises. According to the feedback from various automobile enterprises at present, the automobile manufacturers seem to be held in a tight grip by the battery manufacturers, and even forced to embark on the road of joint procurement. But in fact, the wind direction is also changing quietly.

As the leading power lithium battery company in China, CATL's market share of lithium battery installed capacity exceeded 50% in 2021, followed by BYD, with a market share of 16.2%, followed by China Innovation Airlines and Guoxuan Hi-Tech, with a market share between 5% and 6%, while the installed market share of other power lithium battery companies remained below 2%.

This year, with the intensification of competition in the power lithium battery industry, the share of CATL installed capacity, which has been the top in the industry, has dropped to 47.7%, but BYD's installed capacity has increased significantly, with the market share rising to 21.6%, and China Innovation Airlines' market share rising to 1.7%. It can be seen that the competition between battery suppliers is also surging, and the competition between vehicle enterprises and users also makes battery manufacturers feel pressure. Fan Yongjun pointed out that the root cause lies in the large production planning of battery manufacturers.

According to incomplete statistics, up to now, the total output of power and energy storage batteries planned by domestic head battery companies has exceeded 3000GWh by 2025. On the one hand, most projects will be put into operation gradually in 2025; On the other hand, the head company has established and planned to build many or even more than ten large-scale production bases in China. According to the prediction of CSCI, the company will continue to announce new expansion projects in the next three years. It is expected that the output of CATL will reach 1000GWh in 2025, becoming the world's first TWh-level battery factory.

Fan Yongjun pointed out that according to the current design pattern of power lithium battery in China, the output of CATL alone can meet the national demand by 2025, and the new output of other companies will be several times the actual demand in total. When there is overcapacity, the relationship between automobile enterprises and battery manufacturers will change, and the competition between battery manufacturers will intensify, and the dynamic competition and cooperation relationship between automobile enterprises and battery companies will appear.

Cui Dongshu, Secretary-General of the National Passenger Car Market Information Joint Conference, believes that the vehicle companies will become increasingly powerful in the future, and the control over the battery companies and the upstream industry chain will be further strengthened, while the control over the downstream brand marketing capacity will also be further strengthened. He believes that under the system of new energy vehicles, the characteristics of the whole vehicle as king will continue to be reflected.

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