Foreseeing 2022| talk to automotive supply chain experts: the battery field will not be the only one

The many challenges in the supply chain have given China's local auto supply chain companies the opportunity to accelerate their "getting on the bus".

Text | Zhang Ruosi

Recently, the shortage of chips and the rise in the price of raw materials, especially battery raw materials, have made supply chain security a hot topic of concern in the automotive industry.

Last year, the problem of "lack of core" is particularly prominent, battery supply is also tending to be tight, for their own long-term development considerations, many car companies have invested in battery companies, and even personally made batteries. In addition, the safety of automotive data has attracted attention, and the call for an autonomous and safe and controllable supply chain has become higher.

Entering 2022, the uncertainty of the automotive industry chain will not decrease but increase. Before the new round of the epidemic led to factory shutdowns, there was no significant improvement in the supply chain, such as chip shortages and rising raw material prices.

After the Spring Festival this year, the China Auto 30 Think Tank officially launched the "Foresee 2022" series of interviews, inviting experts in various fields of China's automotive industry to predict the pattern and trend of China's automobiles in 2022.

The guests of this dialogue are three supply chain experts from the automotive industry, namely Xu Xiangyang, professor of Beijing University of Aeronautics and Astronautics and executive deputy director of the National Passenger Car Automatic Transmission Engineering Technology Research Center, chief scientist of the Automotive Electronic Drive Control and System Integration Engineering Research Center of the Ministry of Education, Professor Touyan of Harbin University of Science and Technology, Cai Wei, founder of Jingjin Electric, and Liu Xiaozhi, founder and CEO of Aslan Technology Co., Ltd.

In response to the challenges of this year's automotive industry chain, Xu Xiangyang believes that the automotive supply chain situation such as insufficient supply and rising prices is "less optimistic" this year compared with 2021. However, in the long run, it also gives China's local auto supply chain companies the opportunity to accelerate their "getting on the bus". Xu Xiangyang said that last year, in addition to chips in the industry, other parts that used to rely on foreign capital also appeared in short supply, and many domestic car companies began to look for domestic suppliers to ensure production, and in the process of cooperation, it can be found that the product performance of these suppliers is also good, which gives the local supply chain the opportunity to start entering the industrial chain.

Cai Wei believes that some of the problems encountered in the industrial chain are not only affected by the epidemic, but also including the impact of energy, the development of the mainland's basic industries is uneven, the state must grasp the shortcomings and blank upstream industrial chains such as materials, and in addition, it is necessary to more actively promote the strengthening of exchanges and cooperation between Chinese and foreign science and technology and industry.

On the future development pattern of the battery industry, Cai Wei believes that as long as large enterprises ensure that they do not have directional problems in long-term research and development and industrialization strategies, it will still become larger and larger, but it will not be a monopoly, it will be a number of large enterprises occupying the industry, and small enterprises occupying niche markets such as some special needs of commercial vehicles in competition.

In creating an independent, safe and controllable industrial chain, Liu Xiaozhi believes that chips should learn from the experience in the field of batteries, and the main engine factory and the battery supplier are deeply bound to cooperate, such as establishing a joint venture, changing the single procurement and supply relationship, and ensuring the supplier's business while stabilizing the chip supply of the main engine factory under the win-win model. In addition, the establishment of standardization will help accelerate the development of the industry and solve the risks on the supply side. In the final analysis, the goal is to master the core technology.

The following is the content of the interview, with abridgements:

The supply chain security situation is not optimistic

Think Tank Jun: Last year's chip shortage had a very big impact on the entire automotive industry chain. With the pandemic still ongoing, rising raw material prices, and uncertainties such as geopolitics such as the Russian-Ukrainian conflict, what challenges will we face in terms of supply chain security in 2022?

Xu Xiangyang: In 2021, in terms of supply chain security, the most challenging thing is the chip, and other parts have not yet had a relatively large impact on the entire automotive industry.

But the situation has changed considerably in 2022. Previously, we expected that the chip supply tension in the second or third quarter of this year could be eased. But because of the Russian-Ukrainian conflict, there have been many geopolitical changes. On the one hand, it will continue to exacerbate the shortage of chips, so that the dawn that was originally seen is now confusing.

On the other hand, some non-critical components in the traditional sense will affect the development of our industrial chain because of geopolitical influences, such as wiring harnesses.

Third, China's new energy automobile industry exploded last year, and sales in January and February this year are still growing at a high speed. Such a growth rate is very strong for the demand for some core components that have not been used in the industrial chain. The current problem is the upstream parts or raw material suppliers, whether it can quickly pull up the output in the short term under the condition of ensuring quality, otherwise it is a big problem for the vehicle enterprise.

On the one hand, there is insufficient supply, on the other hand, there is a rise in prices, and I think the supply chain situation in 2022 is even less optimistic than in 2021.

Cai Wei: When it comes to the industrial chain, it is not only the chip problem, taking the drive motor controller as an example, several advantages of high-temperature capacitor film are foreign. Xiamen's Farah is among the best in the capacitor industry in China, but the high-end capacitor film it uses is also imported. Only a few ordinary capacitor films come from self-owned suppliers. Situations such as this show that our industrial chain has encountered the constraints of the short-board effect, and the epidemic has only worsened. A sound and sustainable supply chain needs to promote the shortcomings of basic industries.

Taking the motor as an example, the motor that is close to 20,000 rpm or even more than 12,000 rpm so far has almost no domestic bearings. Bearings not only encounter assembly challenges, but also have shortcomings in upstream bearing steels and wide temperature variable grease, for example, the temperature range of bearing grease is not up to standard, and it is unable to adapt to the temperature change requirements from minus 45 degrees to more than 150 degrees. In other words, even if a company can make bearings, the wide temperature change grease still depends on imports. The unevenness of basic industries requires full attention.

In 2015, I made a loud call that we should pay attention to issues such as autonomous chips. However, at that time, our international living environment was too good, continuing the dividends brought by reform and opening up, and we could not recognize the seriousness of the problem of short boards in the industrial chain, and we could not imagine that we would be sanctioned and could not buy chips. In addition to the strong demand for complete vehicles (especially new energy vehicles) exceeding the supply of the industrial chain, the price increase of raw materials is also related to the adjustment of energy structure and the international political and economic situation.

Recently, academic and industrial circles are still promoting the strengthening of exchanges between Chinese and foreign science and technology and industry. International relations will affect the development of the present and future years, and it should be recognized that the current development results are partly due to extensive Exchanges and cooperation between China and the United States, China and Europe, China and Japan, and the mutual opening up of some international platforms. While strengthening independent capacity building, we must face the problems encountered in international relations and make good use of the international platform of the supply chain.

Liu Xiaozhi: 2021 is a very difficult year for the automotive industry, chip shortages have forced many large automobile manufacturers to cut production, the global auto market has reduced production by about 10.2 million vehicles, at present, the supply chain tension will continue, at least until the first half of 2022.

In addition, under the current international political landscape, the automotive industry should pay attention to the risks in the supply chain. Nickel, aluminum, palladium, titanium, etc. are important raw materials for auto parts, Russia is the world's major metal exporter, the supply of nickel is limited, may affect the production of electric vehicle power batteries, affecting auto parts and vehicle prices. The situation in Russia and Ukraine may also affect the supply of neon, krypton and xenon, which are the key materials for the manufacture of chips, which may boost the price of chips further, but the impact on chip supply may not be large. In addition, affected by the conflict between Russia and Ukraine, the price of the international crude oil market has soared rapidly, and the cost of fuel vehicles has risen.

The occurrence of the Conflict between Russia and Ukraine has also put forward deeper requirements for car companies: do we need to continue to penetrate upwards from first-tier suppliers such as chip factories and fabs, and incorporate the risk of raw materials into the consideration of supply chain risks? It is necessary to strengthen the anti-risk ability of enterprises.

Opportunities for own brands

Think Tank Jun: In this complicated situation, what can Chinese parts and components companies do, and do they have opportunities or how should they seize them? Because in this round of new tracks, there have been world-class enterprises, such as the Ningde era, of course, there are a large number of new start-ups to follow.

Xu Xiangyang: Overall, the current situation is more favorable and opportunistic for the supply chain of China's parts and components enterprises, especially the supply chains of independent brands.

During the epidemic last year, in addition to chips, there are some other parts, such as some parts of some foreign-funded enterprises, and its supply has also had some problems. Many vehicle companies, including joint ventures, have begun to select two, three and four suppliers among China's own brand parts and components enterprises.

I have communicated with some car companies, and one of their conclusions is very representative: when choosing two supplies and three supplies, they are not particularly bottomed out at first, because (the parts of independent brand suppliers) have not been on the car in batches before, but after the products are on the car, they find that the performance of various performance is also good, and they can fully meet the requirements of the whole vehicle. The cooperation during the epidemic last year has provided some opportunities for our parts and components companies.

The supply chain problems we face this year are more complex than last year's, ranging from chips to common, non-core component challenges.

In the supply of some ordinary, relatively non-technical parts, our independent parts and components enterprises have some new opportunities. In addition, in the high-end, relatively high-tech components, the original independent supporting on the car has been more difficult, not that our parts are not doing well, technology can not keep up, but there is no opportunity to show and get on the car. Quantity can be qualitative, and in the process of interaction, continuous improvement, the product can be better and better. It's a great opportunity at the moment. It depends on whether our company can catch it.

Think tank Jun: Last year, the lack of core was very serious, and now the local chip companies, how are they currently developing?

Xu Xiangyang: Last year was a turning point, because of the lack of cores, these companies that we originally made chips began to seize the opportunity to enter the OEM. Horizon, black sesame, etc. have become tier 1 suppliers to automakers in the context of last year's lack of cores.

The two sides have become more cooperative. Cooperation has also begun to enter the industrial chain cooperation with capital as the link from the past only supplier relationship. These changes last year gave us a very good enlightenment: in the original place where we were relatively weak, we can actually do a good job, and we also have the opportunity to do a good job, once we enter the vehicle company, we can definitely do a good job, and we must have such full self-confidence.

Think Tank Jun: In the face of the severe situation of rising raw material prices, what kind of countermeasures should be taken by vehicle companies and parts companies?

Xu Xiangyang: I personally feel that the current rise in raw material prices in the new energy vehicle industry chain is not affected by foreign geopolitics or the epidemic. The main problem is that the market demand for the whole vehicle is too strong and the growth is too fast. Vehicle companies to seize the market, parts companies to seize the market, it will grab raw materials, monks more porridge less, the price will be adjusted, this is a market behavior.

In addition to paying attention to the rise in raw material prices, we should pay more attention to investors and do not have excess investment.

In the future, when new energy vehicles enter a relatively stable stage of development, will there be overcapacity, and finally lead to everyone to reduce prices and bargain with each other, causing harm to the industrial chain, which is what we have to pay attention to. Steady growth is a better development model.

I think new energy vehicles will have two or three years of rapid growth, after which, its growth rate will stabilize. When investing in raw materials, due consideration should be given to the timing of inputs and outputs.

The battery field will not be the only one

Think tank Jun: Recently, there are several companies in the new energy industry chain that have attracted much attention, one of which is Sunwoda, which recently raised funds, 19 vehicle companies invested in it, how to view the logic behind this incident?

Xu Xiangyang: I think the current power battery market pattern is too monopolistic and concentrated, and vehicle companies are subject to excessive concentration of the market, which is not a situation they are willing to see.

In this context, if the vehicle company wants to change, it has more say in the field of power batteries, so it chooses to support and participate in new power battery companies, which is a strategic consideration.

The cost of power batteries accounts for a very high proportion of the whole vehicle, which is much higher than the proportion of the engine in the traditional internal combustion locomotive.

In the traditional automobile era, almost all vehicle companies have their own engine plants, because this is the resource and core technology that it must master. In the era of electrification, vehicle companies will not look at the battery, which accounts for such a high proportion of a product in the vehicle value chain, and is always in a passive situation and has no right to speak.

Think Tank Jun: In the context of the accelerating trend of electrification, what are the opportunities and challenges facing transmissions now?

Xu Xiangyang: Any vehicle needs a drivetrain. Electrification is not a problem with the transmission, but after the power source changes, the transmission system has to adapt to the new power. The motor and the internal combustion engine have different characteristics, it has a faster torque response, has a higher speed, and the drivetrain has to adapt to this demand. In fact, the design and manufacture of the drivetrain is more complex than the transmission of a conventional car.

In the era of electrification, the variable speed part and the electric drive part are facing very big challenges, and if they do not pay attention to the challenge, they will be eliminated.

Everyone is used to talking about "three electricity" motors, batteries, and electronic controls, and actually ignores the fourth "electricity" - telex, and I have been calling on us to talk about four electricity.

Last year, we conducted the top ten transmission and electric drive selection, and when we selected it, we found a very important problem: the variable speed part, the fly-by-wire part of our own brand car, and the NVH performance did have a significant gap compared with some joint ventures.

In addition, after electrification, whether it is a passenger car or a commercial vehicle, it can be a multi-motor, which will bring many new possibilities. For example, when three motors or even more motors are combined to drive a vehicle, such as a heavy minecart or a commercial vehicle, how does the drivetrain adapt to this demand? Therefore, innovative electric drive solutions are a big challenge for driveline development.

Think Tank Jun: How do you think the pattern of power batteries in China and the world will change in the future?

Xu Xiangyang: Domestic and foreign car companies have put forward the strategic goal of electrification, when the global electric vehicle scale is millions or tens of millions, battery companies can not be a single one, because even if its production scale is large, it can not meet the degree of such a large market demand. The pattern of a monopoly will definitely change, it will change quickly.

Second, the vehicle enterprises, especially the large enterprises that are leading in electrification, will definitely master the battery technology and will go to their own battery production capacity. But it is impossible for all companies to do it, just like not all vehicle companies will do the engine, some smaller companies, it will still use external resources.

It is not that after some of the head vehicle companies do batteries, independent third-party battery companies will not have the opportunity, and it will always have the opportunity to meet the needs of these small-scale vehicle companies. But its monopoly position and voice in the industry,

It will certainly be diluted, and this trend is irreversible.

Cai Wei: Batteries are technologies that traditional automakers don't have, and their fields are not related to the original car manufacturing. In the early days, it was difficult for OEMs to enter this field. However, due to the cost it occupies in the whole vehicle, especially in the cost of new energy vehicles, the proportion of cost is nearly half or at least 1/3, so driven by money, driven by capital, many car companies will definitely consider doing it themselves.

But the battery industry will not be a monopoly, because the automobile industry is developed in competition, and it will not evolve into a dominant company. However, car building and battery making pay attention to scale, doing more than doing less has an advantage, therefore, small enterprises in the battery industry are difficult to compete with large enterprises, but there is still room for survival in a special environment. Innovative star small businesses stand out and become bigger with the help of capital.

As long as large enterprises ensure that they do not have problems in their long-term research and development strategy and industrialization strategy, it will become bigger and bigger, but it will not be a monopoly.

Large suppliers and large car manufacturers will have a good competitive advantage, but it will be a number of large enterprises to occupy the battery industry, small enterprises in the competition in addition to some special needs of the niche market force, it is difficult to achieve the overall competitive advantage.

Think Tank Jun: Do you think there will be more local companies going to make batteries in the future?

Xu Xiangyang: In terms of the impulse to invest, Chinese companies are always stronger than foreign companies. It is definitely a very important trend for Chinese car companies to do batteries. China's electric vehicle market is very large, and the demand for batteries by independent brands is also very large. The entry of independent brands into the battery field is an inevitable choice.

For example, BYD's electric vehicle business is developing rapidly, and its plug-in hybrid vehicles are priced close to the price of fuel vehicles, because they have a cost advantage in making batteries. BYD's market performance will certainly play a certain role in demonstrating other companies.

Open up the chain and practice internal skills

Think Tank Jun: How to solve the problems of chips currently encountered in the supply chain?

Cai Wei: I personally think that before 2025, it is unlikely that we will replace or be able to replace others on chips and algorithmic software.

Even if many companies that are known as rising stars of automotive chips, the chips they develop are only the tip of the iceberg of automotive chips, and it is still a small niche market that has passed the automotive-grade reliable durability performance. Another example is the third generation of wide bandgap power semiconductor chips, autonomous silicon carbide MOSFETs have not been installed in the drive motor controller of mass production vehicles so far.

The chip shortage is global, but after the chip supply chain is restored globally, we will still have challenges, which are unique to China. Up to today, our car control chips are basically no domestic ones, whether it is a traditional car, or a new energy vehicle, the car-level chip with computing power (such as MCU, etc.) can not get on the car. R&D has done a lot, but so far it has not really been used in mass production vehicles.

We must really sit down and do things, don't do things with your mouth, we have to do things with your hands.

Think tank Jun: The call for a safe, autonomous and controllable supply chain in the industry is very high, what aspects should we focus on or achieve what kind of goal?

Cai Wei: Any core components can be not done by themselves, but they cannot be not done, which is very important. When GM developed the dual-mode hybrid system, it was very clear that in the drive motor system, it should do 1/5-1/3, and the rest would find someone else to do. The aim is that neither the motor nor the controller can not do it.

I personally believe that the state should also control in this way, if there is no supply chain security problem in the entire global market environment, then it can mainly rely on international platform planning, but it is necessary to retain or create an independent real spare tire.

The problem we are encountering now is that we have independently developed and have not opened up the industrial chain. Major projects should be systematic, if you want to study the chip, study the package, and study the controller in a project, then the chip developed should be installed into the package module, the package module should be installed into the controller, and the controller must be installed on the car to complete the task.

Xu Xiangyang: On the one hand, for the security of the industrial chain, in fact, the national level attaches great importance to it. The state has given a lot of financial support, but we still have some problems in the implementation process of systematization, chain penetration, etc.

To solve the security of the industrial chain, we must start from reality, for example, which aspect of us is weak, or a part is weak, you go up to chase. You will find that to make a certain core component, almost all the links have problems, not a certain point, such as high-end electric drive motor bearing problems, push up you will find that it is not only a bearing problem, but also materials, lubrication and so on. How to open up all aspects of the product and finally truly realize independent control is really a topic that requires us to do a good job in practice through collaborative innovation.

Liu Xiaozhi: chips should learn from the experience of the battery field: At present, the world's major chip companies have gradually increased the production and supply of automotive chips, new production capacity will be released in the second half of 2022, it is expected that the shortage of automotive chip supply this year will gradually ease, for the long-term stable supply chain to build, some experience in the battery industry can be learned from the chip industry, the deep binding cooperation of OEMs and battery suppliers, such as the establishment of joint ventures, change the single procurement and supply relationship, In the win-win mode to ensure the supplier's business while stabilizing the chip supply of the main engine factory.

The establishment of standardization will help accelerate the development of the industry and solve the risks on the supply side: whether it is the battery or chip industry, it is necessary to gradually establish a "standardization" standard, and this standardization needs to be jointly promoted by car companies and battery companies. From the perspective of manufacturing efficiency, manufacturing costs and large-scale production, the standardization trend will accelerate in the next few years, thus largely solving the crisis of the supply chain.

In the final analysis, the goal is to master the core technology: for chips, increasing the research and development of key core technologies is the most fundamental way to solve the supply chain crisis, without mastering the core technology, the supply chain can never be guaranteed. We must create "strength" in a down-to-earth manner.