New energy vehicles, the lack of production capacity or stories

Image source @ Visual China

Wen | Lu Jiu Finance

Local governments give money, land, and policies to continue the lives of new car-making forces, expand production capacity, and tell bigger stories.

Because of the epidemic, the delivery of new energy vehicles has made it worse.

At the end of last week, due to the suspension of supply chains in Jilin, Shanghai and Jiangsu, WEILAI announced the suspension of vehicle production. Great Wall Motors also said on the 11th that due to the impact of the supply chain, the company's production capacity is limited.

BYD announced ten days ago that it would stop producing fuel vehicles, All in new energy vehicles. Industry analysts believe that this is BYD's trade-off for delivering the backlog of 400,000 new energy vehicle orders.

It is difficult for new energy vehicle companies.

Delivery is difficult, and even due to the epidemic shutdown at the same time, new energy vehicle companies are also crazy investment in the construction of factories.

Chongqing, Wuhan, Beijing Yizhuang, Shunyi, Hefei, Jinhua, Shangrao, new energy vehicle companies have fallen. The second plant of Ideal Automobile in Beijing has just been confirmed, and the news that the third plant has settled in Chongqing has come. NIO's second base in Hefei will also be officially put into operation, Xiaopeng Automobile's plant in Guangzhou will be put into operation at the end of 2022, and the Wuhan plant has also been finalized and put into operation in 2023.

The battle of new energy vehicle companies extends from the market to the factory.

What logic and secrets are behind this round of factory building war?

Binding places, there are policies and funds

New energy vehicle companies go to local cities to build factories, and the first consideration is the financial support of local governments.

"New energy vehicle companies need to expand production capacity to build factories, on the one hand, but more importantly, they hope to obtain some financial support from local governments to survive, which is of greater significance." Li Qiang, an industry insider in the automotive industry, said that although new energy vehicle companies also need to spend money, they are all small money, and the support of funds given by the local government, including the tax policy behind, can fully cover the cost of building factories. This is an open secret in the industry.

The unprofitable nature of new energy vehicles is the biggest problem at present. Li Qiang said that these enterprises are short of money and are looking for money, "You are looking for the government to invest, why should the government invest?" You move in with him, and he casts it for you. The government has given money, car companies can survive, and the capital side looks at it, and the government of a certain place has the strength to follow up. ”

He gave an example of a domestic automobile brand that has been very popular in the past two years and built a base in a prefecture-level city in Jiangsu. The prefecture-level city first negotiated with Geely, the condition at that time was to give 3 billion, Geely did not agree, and finally the local government and a domestic brand negotiated.

In addition to financial support, land, loans, government procurement and other policy conditions are another major reason for new energy vehicle companies to choose. Local governments will also give some preferential treatment in land, loans and taxes for car companies that build factories, because the profitability of new energy vehicle companies is weak, so these real policies are very important to them. For car companies, where the government gives good policies and strong support, they will go where they go.

Li Qiang told Lu Jiu Finance: "The local government will give car companies some support for local procurement. For example, when changing taxis or bidding locally, some conditions will be set for the company to support it. ”

He further revealed that AIWAYS has built a production base in Shangrao, Jiangxi, and the entire Shangrao government and even the Jiangxi government will create some conditions for Aichi automobiles to sell locally.

This is a common strategy used by local governments. THE same is true for BYD, and the Shenzhen government will also give a lot of support, such as Taxis in Shenzhen, most of which are BYD's, and there are oil cars and electric vehicles.

However, according to industry insiders, these expansion investments, in addition to the local governments to do very strict due diligence, and the terms signed by car companies also have detailed provisions, one is the special funds, in addition, the government also has a bottom guarantee for car companies.

So, why should local governments try their best to attract these car companies?

Li Qiang believes that this still goes back to the country's carbon peak and carbon neutrality policy around 2020. The state strongly supports it, and of course the local government vigorously follows suit. Local governments are grabbing the name of new energy capital, and it is not only the political achievements that can pull these car companies, because the automotive industry chain is long, and in the future industrial synergy and economic pull, there will be long-term value.

Expand capacity and tell bigger stories

In addition to getting government investment and good preferential policies, expanding production capacity also has a huge pulling effect on financing.

Su Xiaodong, an auto industry person in Wuhu, Anhui Province, revealed to Lu Jiu Finance that some new energy vehicle companies need to tell better stories if they want to go public, so they will also expand their factories.

"For example, Zero Run Car has submitted a listing application to the Hong Kong Stock Exchange in March this year. The original design capacity is relatively conservative, they talked to the Jinhua municipal government about a piece of land, the area is based on 250,000 production capacity to build. Now it needs to be listed to raise funds, and everyone can calculate its future turnover according to the production capacity of 250,000. ”

Su Xiaodong said that in order to do high valuation, zero running to do two things, the first thing is to take land to build a factory, and raise production capacity. According to public reports, the second factory of zero running is located in Dajiangdong, Hangzhou, and according to public reports, the production capacity is planned to be about 200,000, so that zero running will become a production capacity of nearly 500,000. In addition, Hangzhou state-owned assets invested 3 billion yuan to zero.

"The second thing is to do a new project. Nearly 500,000 production capacity, the need for new project support, to launch a new model to support, you found that the zero-running car this year suddenly on the 4 models, these 4 cars will be in 2022, 2024 are successively batch production, the next year will also batch production of two cars. ”

With a production capacity of nearly 500,000 and 6 models, the future expectation of zero running is very large. Compared with the current valuation, investors will feel that it can be expected in the future, which is very helpful for R&D investment and financing and listing. "Zero run is now more than 100,000 sales, there will be 500,000 production capacity in the future, it seems to be 5 times the growth, this capital story is very good."

A Q-starting domestic new energy car company has two low-end cars, one of which sells more than 10,000 a month, these two cars are produced in a certain place in Anhui, starting last year, the car company is talking with another prefecture-level city in Anhui about the problem of building a factory, this year has begun to build a factory, another model of the two cars, the future will be produced in the place.

"The local government provides support for land, factory construction, etc., and will subsidize nearly 3,000 yuan for the production of a car, in addition to some tax support." The car company plans to go public next year, Su Xiaodong believes that an important reason for the purpose of the separate production of the two models is to go public, and the other is to get subsidies.

Will this wave of wild running be a chicken feather?

At present, the new energy vehicle market is facing the dilemma of difficult delivery, so can the impulse of this wave of new energy vehicle companies to expand production capacity greatly alleviate the current market situation of short supply?

Not really. Li Qiang believes that the slow delivery of new energy vehicle companies this round is not because of production capacity, but because of the problem of the upstream supply chain.

"There is a big news in the industry in the past two days, that is, China's largest wire harness factory Ambiv has stopped production, and this upstream parts manufacturer, either because of the impact of the epidemic or because of the impact of the lockdown policy, has affected production, coupled with the shortage of chips, which has directly led to the problem of automobile delivery." Li Qiang said, "In fact, except for Tesla, I have not heard of any factory that affects delivery because of capacity problems." Wei Xiaoli's sales last year were about 100,000 units, and any one base can complete this production capacity. ”

A fuel vehicle needs 300-500 chips, a new energy vehicle, to use more than 2,000 chips, Lu Jiu Finance learned that the recent market is very short of EPS system (electric power steering) needs ecu chips, resulting in many car companies including ideals can not hand over the car. The delivery of fuel vehicles faces the same problem.

Su Xiaodong believes that the quality of many new energy vehicles still needs to be improved.

"Our original traditional car companies, all think about how to do a good job in quality, use materials well, and improve the performance of these hard things, as a result, new energy car companies believe that the car is a shell plus four wheels, they focus on intelligence, networking." Many foundries of new energy vehicle companies are looking for factories that are originally low-end cars, and hard things still can't be done. ”

At the end of last year, a giant launched the first smart car of cooperation, Su Xiaodong said, he just went to Chongqing during that time, looked at the factory that produced the car, "the giant's technology is very good, but you want to think, where is its foundry, before it was the production of vans, the hardware of the factory is relatively poor, the supply chain is also very general, the original craftsmen are doing vans, this car I also test-driven, feel general." At least worse than Chery and Geely. ”

However, the new forces of new energy vehicle companies have led a wave of wind, Su Xiaodong said, and now many traditional car companies have also begun to work intelligent networking and interiors.

The overcapacity of new energy vehicles has been repeatedly mentioned by the industry. According to data from the Passenger Car Market Information Joint Committee at the beginning of the year, the dedicated production capacity of new energy passenger vehicles in mainland China will be 5.695 million units in 2021, and the capacity utilization rate will be about 58.4%. Tan Xuguang, chairman of Weichai Power, mentioned the problem of "new energy disorderly capital expansion" at the company's 2021 performance conference.

At the end of March, at the 8th China Electric Vehicle 100 Forum, the relevant leaders of the National Development and Reform Commission said that before the existing base of new energy vehicles reaches a reasonable scale, no new production capacity will be added. At the government level, the brakes began to be applied to the expansion of new energy vehicle companies.

Mergers and acquisitions, revitalization of idle assets to increase production capacity, is a more pragmatic approach, this year's two sessions, the National People's Congress deputy, former president of Great Wall Motors Wang Fengying as one of the proposals of the two sessions. The acquisition of Zotye Linyi production base and the takeover of Cheetah's production base in Jingmen, etc., Great Wall Motors also did the same.

"Local governments generally hope that the original poorly managed automobile factories will be technologically reconstructed, and they will also increase funds to support technological transformation." The above-mentioned industry insiders said.

So, will today's factory construction boom be just a blindfolded run of new energy vehicle companies, and will there be overcapacity in the future?

Li Qiang told Lu Jiu Finance that in fact, in 2020, the national level has issued more than a dozen licenses for dual-qualification new energy vehicles, hoping that in this way, fuel vehicle companies can be driven to do new energy. At present, it seems that few of the enterprises that have obtained the qualification have survived.

In 2020, Jiangsu and Jiangxi provinces have been planted on the introduction of new energy vehicle companies and have become negative teaching materials. Since its inception in 2017, Byton Auto has raised about 8.4 billion yuan, but it has not been able to build a production car. New energy vehicle companies such as Sailin and Bo County have been criticized by CCTV.

This round of expansion of new energy vehicle companies, will it also be a chicken feather in the future?

Li Qiang believes that this wave of new energy vehicle companies running blindfolded, one is to improve market share, in the upstream supply chain negotiations, there will be a greater weight, to get a more advantageous price. In addition, car companies will also have an advantage in negotiations when talking with dealers and operating platforms such as taxis.

Su Xiaodong has a positive evaluation of the new car-making forces, he believes that this wave of new forces has promoted the development of China's automobile industry, and the efforts in the direction of intelligence have also broken the traditional concept of car-making.

"They are losing money when they build cars now, and I don't think they should lose much." Because according to the industry's algorithm, the cost of the whole vehicle accounts for about 65%-70% of the sales price, the cost of the whole vehicle is here, and their price is also here. Coupled with the factory's shared manufacturing costs and operating costs, as well as subsidies from the state and local governments, it is actually impossible to lose much money. ”

He believes that the current high research and development costs of these car companies are because there are no models to share in the early stage. Later, with the increase in sales, the improvement of supply chain costs, and the maturity of the operating end, the upfront costs will be amortized. "These should be regarded as upfront investment." After the car sales are done, I don't think they will lose money. ”

"When the tide recedes, there will definitely be companies found swimming naked, but there will certainly be good companies that stand out, and now it is to see which companies can run out and really gain market recognition."