Author | Cheng Xiaoyi
Edited by | Kang Xiao
Produced by | Deep net Tencent News Xiaoman Studio
On January 27, South Korean battery manufacturer LG New Energy (LGES), the biggest rival of CATL Times, was officially listed on the South Korean exchange with an opening price of $496, up 99% from the $250 issue price.
Amid hints of interest rate hikes by the Federal Reserve and a wail in global stock markets, LG New Energy closed up 68 percent at $98.3 billion, making it the second most valuable company in South Korea's Seoul benchmark Kospi index, behind Samsung Electronics.
LG New Energy became a domestic Tesla battery supplier in 2019, and in 2020, with the surge in domestic Tesla sales, the global share in the first half of the year once surpassed the Ningde era. Although the transcendence is short-lived, in the second half of 2020, the Ningde era quickly regained the position of the world's first, but it gave the power battery industry more room for reverie.
As a company that controls 20.5% of the global power battery market, second only to the Ningde era and wins the Ningde era, LG New Energy is naturally regarded by the industry as the "number one opponent" of the Ningde era. LG New Energy CEO Quan Yingshou even announced this year that it will surpass the Ningde era in global market share and become the world's first.
The possibility of surpassing the Ningde era, coupled with the South Korean consortium LG Group behind LG New Energy, jointly contributed to the largest IPO in Korean history.
After all, the total market value of CATL is about 1.3 trillion yuan (about 204.1 billion US dollars), which is about 3 times the pre-listing valuation of LG New Energy, which is higher than the total market capitalization of PetroChina and Sinopec combined.
The market's unlimited reverie for the power battery industry has made these two head power battery companies become the "Dinghai God needle" of China's A-share and South Korean stock markets. On the evening of January 27, NINGDE Times released the "greatly exceeded expectations" 2021 annual performance forecast, showing that the net profit of more than 10 billion yuan for the first time is expected to exceed the 15 billion yuan mark, and was immediately rated by retail investors as supporting the "backbone of A shares".
1990-2018: The pattern has been reversed several times
Most of the domestic impression of LG Group stays on LG mobile phones, which declined in 2018 and withdrew from China. But the reason why LG Group can be tied with Samsung, Hyundai and SK is the four major consortiums in South Korea. In addition to the profit scale factor, more importantly, LG Chem is also a pivotal petrochemical company in South Korea.
Similar to most startup stories of the time, LG started out as a "small business."
In 1947, the 40-year-old Gu In-hui took advantage of a series of policies of the Korean government to light textile industry and founded the "Lexi Chemical Industry Company" (the predecessor of LG Chemical) to produce daily necessities such as cream, toothpaste, soap, and toothbrushes. Based on the demand for daily necessities manufacturing, LG's business continued to expand into the petrochemical field, and in 1967, LG established Korea's first private oil refinery.
In the 1980s, South Korea began to encourage the development of the chemical industry. Gurenhui seized the opportunity of the times, established four large petrochemical plants in 3 years, and began to export chemical products to the world.
In 1985, Japanese chemist Akira Yoshino invented lithium-ion batteries, and six years later, Sony Corporation of Japan took the lead in applying them to mobile electronic devices such as mobile phones to achieve commercialization. LG has previously tasted the sweetness of the energy business, and after seeing the development opportunities of lithium-ion batteries, it began to study lithium-ion batteries in 1995.
LG's battery business was particularly difficult in the early stage, lacking talents inward, unwilling to cooperate with foreign and Japanese companies, stumbling down and researching, and only in 1999 did it achieve mass production of lithium batteries.
Also in 1999, Zeng Yuqun, the founder of the future trillion-dollar market value "Ning Wang", received an invitation from Leung ShaoKang and Chen Tanghua, executive presidents of Hong Kong ST Group, and co-founded his first new energy technology company (ATL) with the latter two. The registered place is located in Hong Kong, and the first factory is located in Dongguan.
At the beginning of the 21st century, these two companies, which will occupy half of the global power battery market share in the future, face very different situations.
LG did not see the profitability of the battery business in the short term, and began to discuss the whereabouts of the battery business. In the end, it was LG's third-generation leader Shigeru Kumoto who stood up and said that he should adhere to the battery business and not give up, and start to focus more on research and development again.
Zeng Yuqun's ATL successfully entered apple's supply chain, won 18 million iPod battery orders, soared revenue, and became a leading enterprise in the battery industry.
This situation was reversed again around 2007.
LG Chem changed its thinking, taking the lithium-ion power battery required for electric vehicles as a breakthrough, and successively won the battery order of the local Hyundai Automobile and the American veteran car company General Motors Electric Project. The battery business has taken a new turn for the better.
However, due to at that time, due to the rapid expansion of ATL in 2003, too much external investment funds were introduced, resulting in a small shareholding ratio of the founding team. After the investor cashed out at a high level, ATL's major shareholder became the parent company of Hong Kong's ST Group, Japan's TDK Group, which became a foreign-funded enterprise operated by Chinese. Therefore, it is limited to produce power batteries for new energy vehicles in China.
So in 2011, Zeng Yuqun spun off ATL's power battery business, and on the basis of the original team, established Ningde Times New Energy Technology Company (CATL) in his hometown of Ningde, Fujian Province, focusing on power batteries in the automotive field.
From 2015 to 2018, China launched the power battery whitelist policy, Zeng Yuqun seized the opportunity of the times, quickly swallowed the Japanese battery company Panasonic's plate in China, with the domestic new energy vehicles leading the rapid development of the world, surpassed the Japanese battery companies in 2017, and LG Chem opened the gap, topped and ranked in the global power battery market share ranking.
Zeng Yuqun, chairman of CATL, once said: "Japan has invented lithium batteries, South Korea has made it bigger, and China has made it the world's first." This sentence can be described as a high summary of the 28 years of lithium battery competition from 1990 to 2018.
2018-2021: Ningde era, LG two hegemony
LG's global market share ranking of power batteries can jump from fourth to second place in just two years from 2018 to 2020, and even has the qualification to compete with the Ningde era, which is related to the bold and flexible strategy of the current head of LG.
When Gu Guangmo took office in 2018, he immediately formulated an aggressive expansion policy: in 2018, he invested 2 billion US dollars (about 7.3 billion yuan) to build a new Binjiang factory in Nanjing, China, to build a power battery production line for high-performance electric vehicles with an annual assembly of more than 500,000 units. In January 2019, the company invested an additional USD 1.025 billion to expand the Nanjing Xingang Cylindrical Battery Plant.
Gu Guangmo seized the window period of speculation between Tesla and Panasonic cooperation, and with higher cost performance and active expansion plans, broke the situation of Panasonic's exclusive supply of Tesla and became a battery supplier for domestic Tesla.
In 2020, LG Chem ushered in the harvest period. The listing of domestic Tesla has caused LG Chem to surge its market share in China. At the same time, LG Chem's long-term layout of the European new energy vehicle market demand jumped, Volkswagen ID series, Renault Zoe, Hyundai Kona and other models sold well, Renault Zoe even topped the European new energy vehicle sales in 2020.
The substantial growth in revenue has allowed LG Chem to turn a profit in 2020, and the scale of revenue from the battery business has approached LG Chem's main business, the petrochemical business. Gu Guangmo saw the future prospects of the new energy industry and made another important decision: In December 2020, LG Chemical Battery Division was split into an independent wholly-owned subsidiary, LG New Energy, preparing for listing financing.
When Jin Zhong, head of LG Chemical Battery Division, became CEO of LG New Energy, he set a goal of reaching 13 trillion won (about 76.7 billion yuan) in sales in 2021 and more than 30 trillion won (about 177 billion yuan) in 2024, becoming the world's leading energy solution provider. According to the prospectus, LG New Energy has completed its first annual target ahead of schedule in the third quarter of last year.
Source: Everbright Securities
LG New Energy's ambitions have been hit twice in a row in 2021.
From the end of 2020 to 2021, LG new energy cooperative car companies General Motors and Hyundai Motor will frequently have spontaneous vehicle combustion accidents. Hyundai Motor was sued by 200 owners for compensation. Under pressure, GM announced a recall of all Chevrolet Bolt EVs produced from 2016, about 140,000 units, and recalled about 60,000 Chevrolet Bolt electric vehicles produced from 2017-2019.
LG New Energy's listing work was suspended, and product safety and quality were questioned. The final survey results of the two car companies showed that the battery products provided by LG New Energy did have manufacturing defects with the risk of fire. As a result, LG New Energy undertook most of the cost of compensation and recall, compensating Hyundai Motor about 980 billion won (about 5.6 billion yuan) and paying up to 1.9 billion US dollars (about 12.2 billion yuan) to General Motors.
The former LG New Energy CEO Jin Zhong now stepped down, LG New Energy immediately organized the board of directors, the extraordinary shareholders' meeting, and appointed LG Group Vice President Quan Yingshou as the new CEO of LG New Energy.
The next era
Huge compensation dragged down LG New Energy's financial statements, and the profit of $214 million in the third quarter of last year turned into a loss of $318 million. Even so, the capital market is still enthusiastic after LG New Energy restarts its listing work.
South Korea's KB Securities said that between January 1 and January 10, when LG New Energy began to accept investor subscriptions, the number of newly opened accounts increased by nearly 200% compared with the same period a month ago.
LG New Energy CEO Quan Yingshou gave investors a "reassurance pill" at the IPO media communication meeting on January 10, saying that LG New Energy will surpass the ningde era in global market share and "become the world's first".
According to SNE Research data, from January to November last year, LG New Energy accounted for 20.5% of the global power battery battery market, second only to the 31.8% of the Ningde era. Kwon Young-shou said LG New Energy still has a backlog of about $2200 trillion in orders. "The profit gap between us and the NINGD era will be greatly reduced."
On January 19, LG New Energy's IPO subscription application for retail investors ended on the same day, and the cumulative subscription amount and number of subscribers reached the highest record in South Korea. In addition, LG New Energy also received about $12.8 trillion in subscriptions from 1988 domestic and foreign institutional investors, also setting a new record.
After the listing, LG New Energy can make up for its own lack of profitability, supplement more capital and ammunition for expansion, and will also pose a greater threat to the Ningde era in overseas markets.
On January 25 this year, LG New Energy and General Motors announced that they will invest US$2.6 billion (about 16.45 billion yuan) to establish a third joint venture power battery plant in the United States, with a plan to achieve a first phase of mass production in early 2025, which is expected to meet the demand for about 700,000 high-performance new energy vehicles.
Up to now, LG Energy has a production base layout in China, South Korea, the United States, Europe and Indonesia, while the production capacity of catheter era was previously concentrated in China, and in recent years it has gradually built factories overseas. After the sales of overseas new energy vehicles increase, LG New Energy may enter a new round of harvest period.
The power battery war has just begun, and both battery manufacturers and automakers have seen the huge opportunities contained in this energy revolution. Tesla, Volkswagen, Great Wall, Geely and other car companies chose to participate in the next game, and second-line power battery factories waited for the opportunity. Anyone has the opportunity to turn around and become the writer of the next era, and in this competition that requires close hand-to-hand combat, it is more courageous and gambling than strength, than money.
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