Guoxuan Hi-Tech is deeply involved in the battery spontaneous combustion storm, and can the performance fluctuate and can it get out of the dilemma of betting on the wrong route?

Produced | new energy group of the company's research office

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A "whistle battery safety" meeting pushed Guoxuan Hi-Tech to the front of the stage.

In the field of domestic power batteries, under the aura of the Ningde era and BYD, the presence of Guoxuan Hi-Tech is getting lower and lower. Although in the rapid development of new energy vehicles, Guoxuan Hi-Tech, which adheres to the route of lithium iron phosphate, has not enjoyed the dividends of the early stage of the industry, and has been further and further away from the Ningde era and BYD, and has not opened up the gap with other competitors in the second echelon.

In 2021, lithium iron phosphate batteries regained market favor, and Guoxuan Hi-Tech slowly walked out of the predicament of previous years, but battery quality has become the lifeblood of Guoxuan Hi-Tech. Even with the blessing of the Volkswagen Group, if even the safety of lithium iron phosphate batteries cannot be guaranteed, the market competitiveness of Guoxuan Hi-Tech will probably gradually decline.

01. Ou Peng Dynamics is a year late for public accusations

On November 28, Anhui Oupeng Power Technology Co., Ltd. (hereinafter referred to as "Oupeng Power") held a "whistle battery safety - Guoxuan lithium battery suspected quality defect explanation meeting" in Beijing, at which it was pointed out that the lithium battery cells supplied by Guoxuan Hi-Tech were suspected of having quality problems, and the motorcycle equipped with the battery had many spontaneous combustion accidents, and the batteries stored in the Oupeng power plant naturally caught fire and exploded.

In the face of oupeng power's sudden accusations, on November 29, Guoxuan Hi-Tech said on the official weibo that this was a malicious slander of Oupeng power, and pointed out that Oupeng power owed it more than 20 million yuan in payment. Ou peng power responded that the unpaid payment is the balance of the battery involved, and asked Guoxuan Hi-Tech to respond positively to whether there is a battery quality problem.

From the responses of both sides, it is not difficult to see that Oupeng Power owes Guoxuan Hi-Tech more than 20 million yuan in loans should not be false, but the focus of the matter seems not to be robbed of this arrears, and whether there is a problem with the quality of Guoxuan Hi-Tech batteries should attract the attention of the industry and the public.

In October 2019, Guoxuan Hi-Tech, Oupeng Power and a home appliance bicycle company signed a tripartite procurement agreement. The agreement stipulates that Guoxuan Hi-Tech is responsible for providing battery cells, and Oupeng Power is responsible for producing battery packs with unified specifications and providing them to the above-mentioned motorcycle companies. From April 2020, Anhui Oupeng will supply batch supplies to shared electric bicycle companies.

Ou peng power complained at the whistle-blowing meeting: "A few months after the product was put on the market, dozens of spontaneous combustion and explosion accidents of battery packs occurred in succession. "In October 2020, Oupeng Power found that there was a problem of leakage of some batteries in the recalled battery packs, and after feedback to Guoxuan Hi-Tech, the latter promised to complete product quality rectification by November 30.

However, before the rectification deadline, a new accident suddenly came. In the early morning of November 11, 2020, the finished battery pack stored in the delivery area of Oupeng Power Plant suddenly spontaneously combusted, causing a fire. The fire caused a large area of damage to the plant of Oupeng Power, and the nearly 20,000-square-meter plant has been stopped so far, with heavy losses.

After the fire, Oupeng Power took the lead in checking the outer packaging products it purchased. According to the results of the investigation, there is indeed a problem with the outer packaging product, but it is not enough to cause spontaneous combustion. Subsequently, Oupeng Power confirmed the quality defects of Guoxuan Hi-Tech's batteries through a third-party testing agency, but Guoxuan Hi-Tech completely denied this and did not admit that there were any problems with its own products.

At present, Guoxuan Hi-Tech and Oupeng Power have their own opinions, and the incident has not progressed further for the time being.

02. The "4.16" fire in Beijing is also related to Guoxuan Hi-Tech

Why did Ou Peng Power stand up and publicly accuse Guoxuan Hi-Tech a year after the fire? This may be related to the recent investigation report on the "4.16" large fire accident in Fengtai District released by the Beijing Municipal Emergency Management Bureau, and the source of this accident also points to Guoxuan Hi-Tech.

At noon on April 16, 2021, near the South Fourth Ring Road in Beijing, a fire and explosion occurred at the Dahongmen Energy Storage Power Station of Jimei Home, and 15 fire stations, 47 fire trucks, and 235 commanders and fighters came to the scene for rescue, and the open fire was completely extinguished until the early morning of the 17th. According to reports at the time, when firefighters were dealing with the southern area of the power station, the northern area of the power station suddenly exploded without warning. The accident resulted in the death of 2 firefighters, the injury of 1 firefighter, the disappearance of 1 power station employee, and the direct property loss of the fire was 16.6081 million yuan.

Seven months after the accident, officials released an investigation report into the fire on November 22. The report shows that the direct cause of the fire in the south building of the power station is that the lithium iron phosphate battery in the west battery room has an internal short circuit failure, which triggers a thermal runaway fire in the battery. The direct cause of the explosion in the north building is that the single lithium iron phosphate battery in the battery room of the south building has an internal short circuit failure, which causes the battery and the battery module to spread out of control and catch fire, and the flammable and explosive components produced by the accident enter the energy storage room of the north building through the cable trench and diffuse, mix with the air to form an explosive gas, and explode in the event of electrical sparks.

According to the report, the batteries used in the accident project are all produced by Hefei Guoxuan Hi-Tech Power Energy Co., Ltd. In addition, it is worth noting that the investigation report mentioned that "the problems of battery pack leakage, heat and smoke occurred many times in the accident area, but continued to operate without completely eliminating safety hazards", which is an indirect cause of the accident.

Perhaps it is the words "leakage" and "fever" in the investigation report that attracted the attention of Oupeng Power, because the leakage of the battery pack is the key point of Oupeng Power's complaint against the quality of Guoxuan Hi-Tech batteries.

Oupeng Power said at the whistle-blowing meeting that the company's purchase of Guoxuan Hi-Tech 15AH model cylindrical batteries and Beijing Fengtai District "4·16" accident batteries are produced by Guoxuan Hi-Tech, which confirms that the problems with the Guoxuan Hi-Tech cylindrical batteries purchased by Oupeng Power are not accidental, and are common problems in the quality of the latter's products.

Oupeng Power took the remaining more than 10,000 sets of battery inventory to test, and the testing department took 14 sets of samples, of which 3 sets had spontaneous combustion hazards, which were judged to be unqualified, and the proportion of unqualified reached 21%.

03. Betting on the wrong route has led to a decline in market rankings

At present, the main routes of new energy batteries are ternary lithium batteries and lithium iron phosphate batteries, and the capacity density of ternary lithium batteries is higher than that of lithium iron phosphate batteries, but the safety is not as good as lithium iron phosphate.

In the past few years, due to the existence of subsidies, the market share of ternary lithium batteries is significantly higher than that of lithium iron phosphate, and Guoxuan Hi-Tech has bet on lithium iron phosphate batteries. In 2019, the installed ratio of Guoxuan Hi-Tech's lithium iron phosphate battery and ternary lithium battery was 9:1, and Guoxuan Hi-Tech, which chose the wrong route, fell in the ranking of the market competition.

In 2020, the installed capacity of Guoxuan Hi-Tech power batteries was about 3.27GWh, an increase of 2.2% over 2019, but the ranking fell from the third in the industry to the fifth in the industry. Among them, the lithium iron phosphate battery market, the installed capacity of Guoxuan Hi-Tech in 2020 was 2.9GWh, which was the same as in 2019, and the ranking fell from the second in the industry to the third. It can be seen that Guoxuan Hi-Tech is not only declining in the overall market ranking, but even the status of lithium iron phosphate has not been maintained.

From 2017 to 2019, the revenue of Guoxuan Hi-Tech was 4.838 billion, 5.127 billion and 4.959 billion, respectively, and the floating income could also reflect the difficulties faced by Guoxuan Hi-Tech at that time. In 2020, the revenue of Guoxuan Hi-Tech has improved, with an annual revenue of 6.724 billion, an increase of 35.60% year-on-year.

For battery companies, it is crucial to tie up downstream automakers. At present, the main customers of CATL include: Weilai, Tesla, FAW-Volkswagen, Dongfeng Nissan, GAC New Energy, Beijing Motor, etc. The main downstream customers of Guoxuan Hi-Tech include JAC Motors, Chery Automobile, SAIC-GM-Wuling, Geely Commercial Vehicles, Changan Automobile, SAIC Maxus, BAIC New Energy, India Tata, Formosa Plastics Group, EBUSCO, etc.

Compared with the Ningde era, Guoxuan Hi-Tech mainly supplies batteries to A00-level vehicles, while the A00-level electric vehicle market is fiercely competitive, and various automobile manufacturers pursue cost performance, squeezing the profit space of Guoxuan Hi-Tech.

According to Choice data, from 2017 to 2020, the gross profit margin of Guoxuan Hi-Tech battery business was 39.81%, 28.80%, 33.37% and 24.72% respectively; in the same period, the net profit of Guoxuan Hi-Tech was 840 million, 582 million, 0.48 billion and 147 million, respectively. Both gross margin and net profit fluctuate greatly.

In 2021, the market share of lithium iron phosphate batteries will increase, which will also drive the further recovery of Guoxuan Hi-Tech's revenue. In the first three quarters of 2021, Guoxuan Hi-Tech's revenue was 5.725 billion yuan, an increase of 40.40% year-on-year, but the company's gross profit margin further decreased to 18.30%, and the net profit was 0.84 billion yuan, down 14.28% year-on-year.

From the perspective of financial data, Guoxuan Hi-Tech has not yet completely come out of the dilemma of taking the wrong route in previous years. And just a little bit of improvement has been accused of safety hazards in the quality of lithium iron phosphate batteries, if even the quality of the battery can not be guaranteed, Where is the advantage of Guoxuan Hi-Tech in the new energy battery competition?

Perhaps the major shareholder Volkswagen China can give Guoxuan Hi-Tech a place in the market, and in July 2021, Volkswagen Group also announced a major goal of cooperation with Guoxuan Hi-Tech: to become one of the world's top three battery manufacturers. However, if the quality of Guoxuan Hi-Tech products is not passed, this goal may be difficult to achieve.