Image source @ Visual China
Text | damask
Over the past three decades, the excellent electrochemical potential of lithium batteries, from powering mobile phones to driving cars, has been stimulated again and again. Nowadays, new energy vehicles have become the most beautiful boy in the spotlight, but new energy vehicles are not the end of lithium battery applications, but the starting point.
Around the New Year, there are always people with me to discuss the investment strategy of the lithium battery industry chain in 2022, as the dead bulls of lithium batteries, we are still optimistic about lithium batteries, but the fine-tuning of the view is reflected in: the investment opportunities of lithium batteries may not be limited to the beta of the leading white horse, and the opportunity will spill over to "new energy +", and the choice of individual stocks is better than the bets on the track.
What does "new energy +" mean? The popularity of new energy + mainly wants to express new energy is still very high, but mainstream companies have been fully priced and fully studied, and the difficulty of obtaining excess revenue has increased sharply, while the reshaping of the entire industrial chain and even the business world by new energy (especially lithium batteries) is taking place, which is expected to breed more alpha opportunities.
In 2022, we will also put more energy into this direction (there will be more related articles launched in the future), and today I want to talk to you about a trend that cannot be ignored - lithium battery breaking the circle, that is, the "new energy +" business form represented by lithium batteries.
Lithium batteries are well-known due to the heat of new energy vehicles, but in fact, this lightweight and powerful secondary battery has been changing people's lifestyles since its introduction, from early digital products to smart phones to electric vehicles, lithium batteries have been inseparable from our food, clothing and housing, so in fact, new energy vehicles are only a branch of lithium battery applications, and the highlight is still behind.
As an overview of the future trend of lithium battery, this article will talk about two issues: the first is which areas are "lithium battery"; the second is what new opportunities will be brought about by the penetration of lithium batteries. It should be pointed out here that our article only takes lithium batteries as a sample, with the breakthrough of battery technology at the electrochemical level, the carrier of "new energy +" in the future will not only be lithium batteries, but a new commercial pattern of diversified miniaturized rechargeable batteries.
01 Lithium battery "triple jump"
It is necessary to first introduce the development process of lithium batteries.
Rechargeable batteries are an indispensable part of people's lives, and have been commercially used in lead-acid batteries, nickel-cadmium batteries, nickel-metal hydride batteries and lithium batteries. Among them, lithium batteries are the latest to be industrialized, but they have made great progress in just 30 years, and have successfully replaced other types of rechargeable batteries in many fields, becoming the dominant player, and even replacing traditional energy sources.
Turning over the counterattack history of those who came later, lithium batteries mainly experienced three jumps.
Digital products lay the foundation for the development of lithium batteries
Back in 1991, Sony took the lead in mass production of lithium batteries and knocked on the door of lithium battery commercialization. At that time, Sony had built a huge consumer electronics kingdom, from Walkmans, tape recorders, and video cameras to laptops and mobile phones. Lithium batteries that have just been launched have rapidly become popular in portable digital products due to their small size, light weight, high capacity density, and no memory effect.
By 1998, Panasonic introduced cylindrical lithium-ion batteries for notebook computers, opening up the space for laptops to grow. Around 2000, consumer electronics accounted for 90 percent of lithium battery demand, with feature phones and laptops accounting for up to 75 percent. Thanks to the rapid development of portable digital products, the industrial chain of lithium batteries has begun to take shape.
Figure 1: Comparison of the performance of four secondary batteries, source: Compiled by The Brocade Research Institute
Smartphones take the baton
Since 2007, the increase in functional mobile phones and laptops, which are the main force of consumer electronics, has gradually slowed down, and its contribution to lithium batteries has begun to decline. At the same time, the financial turmoil in 2008 affected people's consumer demand, and the development of lithium batteries was suppressed.
During this period, smart phones and tablets began to appear on the historical stage one after another, on the one hand, large-screen smart phones gradually replaced functional machines, on the other hand, tablet computers opened up new markets, sales were hot, and lithium batteries returned to the fast lane.
More importantly, in the era of smart machines, because the quality and capacity of the battery directly affect the user's experience and choice, especially the comprehensive needs of tablet computers positioned in mobile office and video entertainment, this requires lithium batteries to be more prominent in the design of thin and light, long endurance and heat dissipation performance, and the technical level of lithium batteries has been further developed.
As a simple example, early digital products and functional machines, a single electronic product is a single cell, the battery management system (BMS) is relatively simple, and even the concept of battery modules is not even available. However, smart products such as tablet PCs generally use battery modules assembled from 2 or 3 cells, and battery management systems have begun to develop as indispensable components of lithium battery modules.
Figure 2: Domestic smartphones have become the main force of consumer electronics, source: Ministry of Industry and Information Technology
AtL, the parent company of the Ningde era, relies on the above two spring winds to become a hidden champion of consumer lithium batteries.
Wave of vehicle electrification
With the growth of digital products and smart phones, the performance of lithium batteries continues to improve, the cost is further reduced, and lithium batteries have also formed a perfect industrial chain system, but what really makes lithium batteries achieve a qualitative leap is electric vehicles.
First, cars require higher power battery capability density, longer cycle life, and stronger charge and discharge capacity.
Second, the power battery needs a larger number of cells to form a battery pack, which puts forward higher requirements for the consistency of lithium batteries, and is an extreme test for engineering manufacturing capabilities.
Third, when it comes to safety, the power battery needs to manage more cells, and the difficulty of the battery management system is multiplied, after all, a cell problem is easy to affect the whole.
Finally, when it comes to battery costs, due to the larger amount of power in the car, the required battery materials have increased thousands of times, and the industrial scale effect has led to a rapid decline in battery costs.
In the past decade, lithium battery manufacturers around the world have devoted themselves to automotive lithium batteries, almost all resources have been concentrated in the automotive field, and CATL, which was born from ATL, has also stood on top of the world. Today we are also fortunate to see that the technology and scale of lithium batteries have undergone earth-shaking changes.
Energy density. In 2011, the energy of the automotive lithium battery was only 80Wh/kg, and now the energy density has exceeded 270Wh/kg, an increase of 2 times, and the 800 km endurance that was out of reach that year was realized.
Battery cost. In 2011, the price of automotive lithium batteries was as high as 3800 yuan / kWh, and the sales of electric vehicles were driven by large subsidies, and today this price has dropped to 700 yuan / kWh, and electric vehicles are entering thousands of households.
Industry scale. In 2011, the sales volume of pure electric vehicles in mainland China was less than 10,000, and the installed capacity of power batteries was almost a fraction of the lithium batteries of consumer batteries. Looking at the present, in 2021, the sales of pure electric vehicles in the mainland will exceed 2 million, and the installed power battery will exceed 50GWh, which has become the main force in the demand for lithium batteries.
Figure 3: With the advancement of technology, lithium batteries have gradually become the leader of secondary batteries, source: Shenwan Research
Standing at the current point in time, our eyes should not only be limited to the application of lithium batteries in consumer electronics and cars, but should see that as lithium batteries are tempered by cars, they are reborn, and the application of lithium batteries in other fields should come naturally.
02 Lithium battery full out of the circle
The penetration of lithium batteries outside the consumer electronics and automotive fields is no longer a whimsical and whimsical one. What we really see is the comprehensive circle of lithium batteries:
Electric two-wheeler
When it comes to two-wheelers, people can't help but think of low-end, cheap labels. But in fact, the number of electric two-wheelers in the mainland exceeds 300 million units, which is the same level as the number of cars, and the annual sales of electric two-wheelers are stable at more than 30 million units, which is a solid 100 billion scale market.
In the past, electric two-wheelers basically used lead-acid batteries with low performance, heavy weight and serious pollution, and their proportion was as high as 90%. Since May 2018, the Ministry of Industry and Information Technology has issued the "New National Standard", which has been officially implemented since April 2019. However, at that time, in order to promote the orderly promotion of policies, most of them gave a transition period ranging from 2-5 years for over-standard vehicles.
Figure 4: Disposal plans for electric two-wheelers exceeding the standard in some local governments, source: the official website of local governments
In the short term, the tide of replacement for over-standard vehicles is the biggest opportunity for lithium batteries in electric two-wheeled vehicles. Referring to the technical specifications of the new national standard, about 70% of the electric two-wheelers on the market do not meet the requirements of the new national standard, which is equivalent to nearly 200 million new car demand, and the resulting large number of replacement demand will reach a high point from 2022 to 2024.
In the medium and long term, as the unit price of lithium batteries declines year by year, the price difference between lithium batteries and lead-acid batteries gradually narrows, and the cycle life of lithium batteries is basically more than 2 times that of lead-acid, and the advantages of lithium batteries will be further highlighted. Coupled with the increasingly high demands of young consumers on the endurance and performance of electric two-wheelers, traditional lead-acid batteries are difficult to meet, and the final choice is lithium batteries.
Figure 5: Price of lead-acid batteries and lithium batteries (yuan/Wh), Source: GGII, Changjiang Securities
Although the current penetration rate of lithium battery two-wheelers is only about 23%, which is not high, in the case of lithium battery trend, this can better illustrate its considerable growth space. In recent years, the vigorous development of express delivery, takeaway, sharing and other industries has not only brought about the growth of electric two-wheeler sales, but also promoted the development of the power exchange model, which has additionally increased the demand for lithium batteries.
Figure 6: China's lithium battery two-wheeler production and penetration rate in 2016-2020, Source: EVTank, Ive Think Tank
Figure 7: Electric two-wheeler replacement cabinet, source: Tianneng official website
Power tools "cordless"
Power tools are indispensable tools for the whole society, and nowadays cordless power tools are more and more favored by consumers with their light and portable advantages. Compared to corded tools, cordless power tools abandon wires and are powered by battery packs, providing significant safety and convenience benefits, especially in outdoor and high-altitude work scenarios. According to Frost & Sullivan data, the penetration rate of cordless power tools has reached 52.3% in 2020.
Under the trend of cordless, the major power tool head brands have competed to launch a lithium battery platform for power tools, which is equivalent to the same battery can power different types of tools, which will further enhance the convenience advantages and customer stickiness brought by ropeless, and is more conducive to the promotion of cordless power tools.
Figure 8: Common power tools, source: DEVON official website
Traditional tools "electrified"
On the other hand, the technology of lithium batteries is still breaking through, and traditional tools such as pneumatics, fuel, and hydraulics are gradually replaced by lithium battery power tools.
For example, as the main type of outdoor tools, the market size of lawn mowers exceeds 100 billion, and its lithium electrification is being rapidly introduced. At present, the lithium electrification rate of household lawn mowers is 30%, and the lithium electrification rate of commercial lawn mowers is only single digits, which is similar to the early sweeping robot, and there is a large room for improvement in both in the future.
Chervon Holdings (HK:02285), which has just gone public in Hong Kong, is one of the beneficiaries of cordless power tools. According to the prospectus, the company's revenue from lithium battery products increased from about $347 million in 2018 to $827 million in 2020, with a compound annual growth rate of 54.3%.
Figure 9: Lithium battery lawn mower, Source: DEVON official website
Electrification of construction machinery
At present, there are about 15 million heavy construction machinery and heavy trucks in the mainland, most of which use high-power diesel engines, and what is not well known is that the pollution emissions of a heavy truck are about equal to 100 small cars, and in the context of the "double carbon" goal, the electrification of construction machinery is imminent. In 2021, the penetration rate of domestic new energy passenger cars has exceeded 10%, and even exceeded 20% in some months, but the penetration rate in the field of construction machinery and heavy trucks is less than 5%, and the penetration rate is imminent.
Starting from 2020, the government has intensively issued a number of policies to promote the electrification of construction machinery and heavy trucks. According to GGII data, the power consumption of construction machinery vehicles is large, the average installed capacity of single-machine lithium batteries is about 5 times that of ordinary new energy vehicles, and by 2025, according to the penetration rate of 30% lithium batteries, the demand for lithium batteries in construction machinery vehicles will exceed 30GWh.
Figure 10: Relevant policies and regulations on construction machinery and heavy trucks, Source: Public Information Collation, Zheshang Securities
Smart terminal
At the eleventh anniversary conference of Xiaomi last year, Lei Jun brought Xiaomi's first bionic quadruped robot - CyberDog, which attracted the attention of many technology enthusiasts. Presumably, everyone's focus is on its intelligence, but another point that cannot be ignored is that the Intelligent Terminal of the Internet of Things, including intelligent robots, will be one of the next growth points of lithium batteries. After all, in the past, there have been a number of smart terminals that have been successful with the blessing of lithium batteries.
For example, AGV (handling robot) in the industrial field and service robots in the catering service industry; as well as the representative explosive product sweeping robot in the field of home appliances, according to Euromonitor data, the retail sales share of mainland sweeping robots increased from 2.4% in 2010 to 26.2% in 2020.
Figure 11: Xiaomi's first bionic quadruped robot, source: network
energy storage
At present, the mainland is building a new power system with renewable energy as the main body, and the importance of energy storage is becoming more and more prominent. At present, the energy storage of the power grid is mainly pumped storage, although the technology is mature, the cost is low, and the scale is large, but the response time is long, and the geographical dependence is strong, which is difficult to meet the future requirements of the new power system.
In contrast, the flexibility and convenience advantages of electrochemical energy storage have always been unmatched by other energy storage methods. In all electrochemical energy storage, lithium batteries have the advantages of high energy density and high cycle efficiency, coupled with the vigorous development of consumer electronics and new energy vehicles, which has cultivated a perfect lithium battery industry chain, so that the cost of lithium batteries has been reduced to the conditions for large-scale development.
On July 23 last year, the National Development and Reform Commission issued the "Guiding Opinions on Accelerating the Development of New Energy Storage", which was first proposed from the national level to reach a target of more than 30 million kilowatts of new energy storage capacity by 2025, and the installed capacity of energy storage will be expanded by 10 times in the next five years.
In addition to grid energy storage, there are also related energy storage needs of 5G base stations that are also worth paying attention to. According to operators' actual measurements, the power consumption of a single station of 5G base stations is 2.5-3.5 times that of 4G base stations, and the frequency of 5G is high, the power attenuation is fast, and the transmission distance is short, if full coverage is achieved, the number of base stations required is 3 times that of 4G base stations. Starting from 2020, Companies such as China Mobile and China Tower have begun to bid for energy storage batteries for base stations, and almost all of the relevant bidding projects currently disclosed are lithium iron phosphate batteries.
04 A new starting point: the tide of the electrification era
At this point, presumably the understanding of lithium batteries should be deeper: lithium batteries can not only be used as power batteries for automobiles, but as a standard basic industrial product, with strong ductility.
This means that investment opportunities are not only related to cars, but we need to look at "new energy +" related opportunities in 2022. And this opportunity can be divided into two, on the one hand, the domestic lithium battery industry chain ushered in the opportunity of value upgrading, on the other hand, the traditional enterprises in the carbon neutrality theme to accelerate lithium battery training in the next era of competitiveness.
Value appreciation under global industrial change
Before 2000, Japanese companies almost monopolized the global lithium-ion battery market by virtue of patent advantages and first-mover advantages, and also created lithium battery giants such as Sanyo and Panasonic. You can see the data of 2000, Sanyo, Panasonic, Sony three companies accounted for 24%, 21% and 19% of the global market respectively, ranking in the top three.
Figure 12: Japan monopolized the global lithium-ion battery industry market before 2000, source: "Evolution du march é mondial des batteries rechargeables", open source securities
In the following decade, South Korean companies quickly caught up with the help of a globalized supply chain, and by about 2008, South Korea's lithium battery shipments accounted for one-third of the global shipments, breaking the situation of Japan's dominance, while South Korea also appeared Samsung SDI, LG and other leading companies. In this period, China's lithium battery industry chain is not prominent, but has completed the initial construction, such as Beiterui, Dangsheng Technology, Xinjiubang, Xingyuan Material, Enjie shares and other enterprises were established in this period.
Figure 13: The core enterprise of lithium battery materials was established in 2001-2010, source: the official website of each company, open source securities
Since 2011, China's lithium battery industry began to enter the open and hanging mode, with the core technology step by step breakthrough, the comprehensive competitiveness of China's lithium batteries gradually rise, the global lithium battery industry chain from Japan and South Korea gradually transitioned to China, China from the runner slowly changed to the role of the leader. As we summarized in "The Global Lithium Battery Arms Race: The Cataline Era and Its Overseas Competitors", lithium battery giants such as Panasonic and LG have begun to turn their attention to China's supply chain system.
In the evolution of the lithium battery industry pattern, a large number of Chinese enterprises have come out of the fierce global competition and developed and grown. Today, we already have NINGDE Times, Enjie shares, BYD, Yiwei Lithium Energy and other world-class leaders, followed by Guoxuan Hi-Tech, AVIC Lithium Battery and many other backbones.
Therefore, under the long logic of lithium batteries fully out of the circle, China's industrial chain ushered in a historical opportunity for the value of international division of labor.
The power tool industry mentioned earlier is an example. Cordless power tool applications are mainly in the European and American markets, and large overseas companies such as Makita, Baide, Chuangke, Bosch and Baoshide occupy the main market share, but they have long chosen overseas battery cell suppliers such as Samsung SDI, Panasonic, LG, and Murata.
In recent years, with the rise of domestic battery cell manufacturers, more and more international manufacturers have begun to switch the lithium battery cells of Chinese manufacturers. At present, domestic lithium battery companies such as Ewell Lithium Energy, Tianpeng Energy, Lishen and BAK Battery are gradually entering the supply chain of overseas enterprises.
Figure 14: Domestic battery cell manufacturers entering the supply chain of overseas first-line brands, Source: Company announcement
Industries embracing lithium-ion will also be out of the loop
The penetration of lithium batteries is bound to have an impact on the traditional field, the manufacture of fuel heavy trucks to electrify, the production of lead-acid two-wheelers to lithium electrolysis... This is the trend of the "electric drive era". Just like the transformation of traditional fuel vehicle companies into electrification, lithium electrification is not just a car story.
The author has always been very praised for the flexibility of domestic enterprises, although the growth rate is acceptable compared to overseas competitors, but the Chinese entrepreneurs who are deeply influenced by Confucianism always have enough sense of distress. For example, at present, domestic heavy industry machinery manufacturers are actively engaged in electrification transformation, and have successively launched electrification products that meet market demand:
In March 2020, Zhejiang Dingli released 7 family-type modular electric arm series products.
In December 2020, the Liugong 856E-MAX electric loader was officially launched.
In November 2021, Zoomlion launched 8 series of 16 new energy products at its new product launch.
In November 2021, Sany Heavy Industry Intelligent Substation was unveiled, which will be adapted to a variety of models such as heavy trucks, dump trucks, mixer trucks, and loaders.
The pioneers of the construction machinery industry have actively explored the path of embracing lithium batteries under the theme of carbon neutrality, or in the lithium battery revolution, and mastering the lithium battery application technology will be similar to the digitization of the manufacturing process and become another core competitiveness of traditional industrial enterprises, which is a very worthy problem in the future. At present, it is very clear that Chinese industrial enterprises have been ahead of the world trend in this regard.
Written in the final wild hope: Perhaps in the near future, in addition to intelligence, the elements of Industry 4.0 will add a new dimension of electrification. The future of electrification will be written by China's manufacturing; and what you and I witness together is a new starting point for the tide of this era.