With LG and Panasonic grabbing customers, why did "Ning Wang" go to the United States to build a factory?

Author 丨 Wang He

Edited by 丨Pan Lei

Head map 丨 Figure worm creative

"The American market, the Ningde era must go in."

At last month's investor research event, Zeng Yuqun, chairman of CATL, made a bold statement.

Just one month later, the "King of Ning" strategy for going to sea has been put on the agenda.

Foreign media reported that CATL, which currently has the largest global power battery market share, is planning to invest 5 billion US dollars to build a power lithium battery factory in North America, with a target annual production capacity of up to 80GWh.

In this news, the relevant person in charge of the Ningde era expressed no comment to Chuangbang.

Lin Boqiang, dean of the China Energy Policy Research Institute at Xiamen University, told Chuangbang that if the Ningde era really has such a plan, it belongs to the layout of overseas markets in advance.

"The attitude of CATL is still unclear about whether to build a factory in North America, and if you want to go to North America, the customer should be the main driving factor." Yu Qingjiao, secretary general of the Zhongguancun New Battery Technology Innovation Alliance and chairman of the Battery Hundred People Association, told Chuang Chuangbang.

But he reminded that supply chain support is a problem that the Ningde era has to consider.

Building factories in the United States requires vigilance against repeated US policies

"The construction of a factory in North America in the Ningde era is the nearest supply." Mo Ke, founder and president of True Lithium Research, told Chuang Chuang Bang.

In other words, this time to build a factory in the United States and supply batteries for Tesla's American factory is one of the important purposes of the Ningde era.

Century Securities statistics show that according to the installed capacity, Tesla is the third largest customer in the Ningde era in 2020, and by the first quarter of 2021, Tesla has become its largest customer.

On June 28, 2021, CATL signed an agreement with Tesla to supply lithium-ion power battery products to Tesla from January 2022 to December 2025.

In the next four years, Tesla's Model 3, Model Y and other models will use battery packs from the Ningde era.

Zeng Yuqun also pointed out at the investor research activities that the company interacts with American customers more, including new forces and traditional car companies, and NINGDE times has previously discussed various possible supply and cooperation solutions with American customers, as well as the possibility of local production.

Lin Boqiang believes that in fact, it does not matter which company is nearby, because the battery market is a global market.

In addition to customer-driven, preempting the North American market in advance is the greater goal of the NINGDE era.

In the view of the Puritan, as the carbon emission policy continues to exert force, the New Energy Vehicles in the European and American markets are ushering in a substantial increase, and the current market penetration rate of New Energy Vehicles in North America is still low, and the entry at this time is mainly to more effectively control customer resources and seize the market.

Ping An Securities Research Report shows that in February this year, European electric vehicles stabilized month-on-month. In February, the sales of electric vehicles in Germany, France, Norway, the United Kingdom, Sweden and Italy reached 5.0, 2.3, 0.7, 1.5, 1.1 and 0.9 million units respectively, totaling 115,000 units, an increase of 29% year-on-year.

According to Argonne laboratory data, in February this year, the US market sold a total of 59,554 new energy vehicles, including 44,148 electric vehicles and 15,406 hybrid vehicles, an increase of 68.9% year-on-year.

Sales are comparable, but the penetration rate of new energy vehicles in Europe and North America is very different.

Guotai Junan Securities Research Report shows that the penetration rate of new energy vehicles in Europe in 2021 is 17%, ranking first in the world, while the penetration rate of new energy vehicles in North America is only 4.4%.

In addition, the favorable policies of the United States for battery suppliers will also promote the CATL era to build factories in the United States.

US President Biden has clearly pointed out that key components such as batteries and semiconductors needed to manufacture new energy vehicles must be made in the United States. As a result, traditional U.S. car companies that are accelerating their electrification transition, as well as global suppliers of U.S. car companies, will benefit.

However, Yu Puritan emphasized that in the Ningde era, when going to the United States to build factories, we must also be vigilant against the repetition of US policies.

According to news, the new Plant in North America of CATL mainly produces ternary batteries and lithium iron phosphate batteries, and the customer list includes Tesla, and the executives of CATL have flown to Mexico this month. At the same time, the United States and Canada are also within the scope of consideration for the location of the new plant.

"The news I got was to build a factory in Mexico. If the United States builds a factory, there is a certain degree of uncertainty due to the current Sino-US relations. Mercure said.

U.S. factories are expensive

Zeng Yuqun said that the specific situation of cooperation between CATL and American customers needs to take into account the impact of factors such as worker training, efficiency, and labor unions on quality and cost.

Foreign media reported that catheter times North American battery factory plans to hire nearly 10,000 employees. TradingECONOMICS data shows that as of February this year, the average U.S. manufacturing wage was $24.48 an hour, and nearly 10,000 employees had nearly $9.8 million a week in labor costs based on 40 hours of work per week.

"Excessive labor costs and trade frictions are common problems faced by domestic enterprises building factories in overseas markets such as Europe and the United States, and there is no good solution at present." Yu Puritan said.

So far, whether cataline times can build a factory in the United States can drive a group of upstream suppliers to the United States is still inconclusive.

On the other hand, the Ningde era will also face fierce competition from Japanese and Korean battery giants.

Previously, LG, SKI, Panasonic and other Japanese and Korean battery companies have built factories in the United States, and have completed the supply of binding with the head car companies, if the Ningde era also joins, it is bound to bring more fierce competition.

Bank of China Securities Research Report pointed out that the current US market power battery is mainly provided by Panasonic, LG Chem, SKI, of which Panasonic and Tesla binding, LG Chem and General Binding, SKI and Ford binding, the total production capacity of the three is about 90GWh.

Or to maintain hegemony

Zheng Yi, an analyst in the automotive industry, told Chuangbang that the business logic behind the construction of factories in the United States in the Ningde era comes from three aspects. One is based on the demand for its own business expansion in the Ningde era; the second is that American automakers will not produce their own batteries in the process of new energy transformation; and the third is the huge growth potential of overseas markets.

The monthly data of power batteries released by the China Automotive Power Battery Industry Innovation Alliance in February 2022 shows that the february loading volume of the Cataline Era was 6.57GWh, accounting for 48.02% of the market, still ranking first, but the pursuit of soldiers from home and abroad has arrived, and the market share has been affected to a certain extent.

BYD's battery installed capacity climbed rapidly, closely following the Ningde era, with a loading volume of 2.9GWh in February, and the domestic market share increased to 21.24%.

China Innovation Airlines, which ranks third in terms of loading volume, is impacting the Hong Kong stock IPO and is expected to raise nearly 10 billion yuan to expand production capacity, and the planned annual production capacity has been announced to reach 195GWh, which will be directly benchmarked against the Ningde era in the future.

It is worth noting that the market share of the top 3 and top 5 power battery installed in February was less than that in January, in other words, the market share of the second echelon of domestic power batteries led by Guoxuan Hi-Tech, LG New Energy, Honeycomb Energy, and Ewell Lithium Energy further increased.

The second echelon can counterattack, and it is not unrelated to the pursuit of lithium iron phosphate batteries that are the main enterprises such as Guoxuan Hi-Tech and Yiwei Lithium Energy.

From January to February this year, the market share of lithium iron phosphate batteries remained stable at more than 55%, and the loading volume reached 16.7GWh, exceeding the loading volume of ternary lithium batteries 13.1GWh.

According to the data of SNE Research, the installed capacity of the Ningde era in 2021 is 96.7GWh, and the global market share is 32.6%, ranking first in the world, and LG New Energy is followed by 60.2GWh installed capacity and 20.3% share. If the Cataline era excludes the installed capacity of the Chinese market of 80.51GWh, in the whole year of 2021, the market share of LG new energy will rank first in the world, and the CATL era can only rank fifth.

Under the tremendous pressure of the domestic market and the global market, the CATL era must turn its attention to overseas markets such as the United States.

Previously, Tesla and Panasonic jointly built a factory using power batteries provided by Panasonic. General Motors and Ford Motor have chosen to build a joint venture with South Korea's Samsung LG to build a plant.

Zheng Yi pointed out that the US government has been emphasizing the return of manufacturing in recent years, and has also invited many powerful companies to return to the United States to build factories, including Apple and Fuyao Glass.

"Therefore, the US market is a huge market waiting for the Ningde era to be tapped." Zheng Yi said.

In fact, the pursuit of overseas market breakthroughs stems from the declining gross profit margin of the Ningde era, and it is urgent to find new business growth points.

According to the 2020 annual report released by CATL, the operating income of CATL in 2020 was RMB50.319 billion, which was significantly slower than the growth rate of the previous two years. Among them, the revenue of the power battery system was 39.425 billion yuan, and the operating profit was 10.453 billion yuan, a decrease of 525 million yuan from the previous year; the gross profit margin was 26.51%, down 2.6 percentage points year-on-year, and it declined for three consecutive years.

Regarding the reasons for the decline in gross profit margin, CATL once mentioned that with the intensification of market competition or national policy adjustments and other factors, product prices and procurement costs will change adversely, and there is a risk of decline in gross profit margins.

Wu Feng, an academician of the Chinese Academy of Engineering, pointed out that there is structural overcapacity in mainland power batteries. At present, there are hundreds of power battery-related enterprises in the country, driven by the market, the average sales price of products in the Ningde era has also dropped from 1.41 yuan / Wh in 2017 to 0.9 yuan / Wh in 2020.

Zheng Yi also said that the competition for new energy vehicles in China is very fierce, and the market is difficult to expand. Although China is the world's largest new energy vehicle market, it has greater growth potential overseas.