The Ministry of Industry and Information Technology's battery capacity threshold accelerates the elimination of low-end production capacity

On November 22nd, the Ministry of Industry and Information Technology issued the "Regulations on the Standards of Automotive Power Battery Industry" (2017) (Draft for Comment), which greatly increased the production capacity of power battery companies. The annual production capacity of lithium-ion battery cells is from 2 Billion Wh suddenly increased to 8 billion Wh (8GWh), shocking the battery industry. However, the experts and battery companies interviewed by the reporter believe that the regulation and adjustment of the domestic power battery industry is imperative, and it is necessary to significantly improve the pattern of the industry due to the substantial increase in barriers to entry.

Wang Binggang, a special expert on the major technology of electric vehicles in the 863 Program, agreed with the direction conveyed by the Ministry of Industry and Information Technology: "The draft of the consultation issued by the Ministry of Industry and Information Technology should be viewed positively. China's power battery industry urgently needs to change the current situation of scattered, the government should concentrate Advantage resources support several large power battery companies that can participate in international competition."

However, he said that he did not participate in the formulation of this policy and could not express his opinion on the specific capacity threshold. However, he expressed his belief that the 8GWh threshold was based on the investigation of enterprises.

Xu Yanhua, deputy secretary general of China Association of Automobile Manufacturers, told reporters that the 8GWh production capacity threshold may be based on the market demand for 100GWh of power lithium batteries by 2020. At present, the China Association of Automobile Manufacturers is collecting opinions from enterprises and giving feedback to the Ministry of Industry and Information Technology.

It is understood that in the first half of this year, the Ministry of Industry and Information Technology conducted a capacity survey on battery companies, requiring all enterprises to report their production capacity truthfully. The 8GWh production capacity threshold should also refer to the data reported by various battery companies.

With reference to the above, if the total demand for domestic power lithium batteries is 100GWh by 2020 and the minimum capacity of each battery company is 8GWh, then the total number of battery companies will not exceed 20, and there will be 3-5 leading companies. Enterprises have a major market share. This is in line with the government's goal of cultivating several large battery companies and participating in the global power battery market.

According to an article published on the website of the Ministry of Industry and Information Technology, at present, the capacity of China's power battery industry has exceeded 100 billion watt-hours (100GWh). From January to September 2016, China's new energy vehicles produced 302,000 vehicles and sold 289,000 vehicles. The shipment of power batteries exceeded 12 billion watt-hours.

So, how many battery companies are these batteries produced? According to statistics, there are currently more than 700 lithium battery companies in China, of which 150 are lithium-ion battery companies. How is this similar to the market structure of electric vehicles? It is also very much in line with the Chinese characteristics of many new industries that are “slow up and die”, and lead-acid batteries and photovoltaic industries have experienced this stage.

Wang Binggang said that China's power battery industry should learn from Japan and South Korea's development strategy - concentrating resources to cultivate several large, core technology battery companies that can participate in international competition. At present, Korean batteries are very threatening to Chinese battery companies. If the political situation in South Korea is stable and Sino-Korean relations are stable, then this threat will be even greater.

I very much agree with the above point of view. If the Chinese government hopes to realize the leap from a big car country to a car power country by developing electric vehicles, then it is necessary to train 3-5 truly competitive international battery companies and firmly grasp the power of the core resources of the power battery. In the era of traditional automobiles, one of the important factors that Chinese auto companies can't surpass foreign automakers is that they have not established a supply system for core components. In the era of electric vehicles, it is obviously impossible to repeat the same mistakes.

Therefore, from the strategic point of view of the development of China's automobile industry, the Ministry of Industry and Information Technology has greatly improved the significance of the entry barrier for automotive power batteries. So, what chain reactions will occur after the threshold is raised?

First, can the new electric vehicle demand digest new power battery capacity? Xiao Bian believes that the current overcapacity of power battery is a very obvious structural excess. On the one hand, the supply of high-quality batteries of a few leading enterprises is in short supply. On the other hand, a large number of small and poor quality battery companies rely on low quality and low price, plagiarism. The competition strategy of other corporate intellectual property rights has also been done very well. This poses a huge risk, because low-quality and low-cost batteries will seriously affect the user experience, and ultimately destroy the current development of the hard-won electric vehicle market.

From the perspective of development, if domestic power battery companies want to participate in international competition, it is imperative to increase the scale of production capacity. In fact, some battery companies have begun to supply power batteries for multinational car companies and domestic joint venture car companies. As more and more foreign electric vehicles are introduced into China for localized production, the mileage of electric vehicles continues to increase. With the power distribution, the demand for power batteries will further increase.

Second, what is the fate of some small and medium-sized power battery companies?

Ping An Securities’ research report pointed out that “the rapid increase in capacity requirements has greatly increased the industry’s entry barriers. The national guidelines for eliminating small-scale, repetitive and inefficient construction of the power battery industry are evident. Even in the final document, the scale requirements are met. Downgraded, the increase in scale requirements in future industry normative conditions will also become a trend, and industry resources will accelerate to concentrate."

Qiu Ze, chairman of Hunan Miaosheng Power Technology Group Co., Ltd. said in an interview that large leading battery companies will acquire some high-quality small and medium-sized battery companies in order to meet the production capacity requirements of the Ministry of Industry and Information Technology. The battery companies that are almost the same are either eliminated by the market or transformed into energy storage batteries or other related products. At present, the lithium battery capacity of Miaosheng Power Planning has reached 13GWh, and 2GWh has been built. It was originally planned to reach 6GWh in June next year. Miao Sheng Power will adjust the new capacity building plan in a timely manner according to the requirements of the government.

However, Qiu Zeyou also believes that because the subsidies for new energy vehicles are not linked to the battery catalog (in fact, the subsidies only last until 2020), coupled with the local protection that is common everywhere, some small and medium-sized battery companies will not be very It is quickly eliminated by the market, which requires a process. However, "the adjustment is still too late. If a large number of small enterprises start to increase investment, the cost and cost of adjustment will only be higher."

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