New energy vehicles this cup of wine, home appliance companies drink fragrant?

In April 2022, Li Bin, who lives in Shanghai, was forced to "exchange green onions for salt" in the WeChat group due to the tight supply of daily necessities. Li Bin, who lacks salt, can still live optimistically, but the Weilai electric vehicle he founded has suspended production due to supply chain problems.

This is another embarrassing situation encountered by China's soaring new energy vehicle market in 2022. Prior to this, the "slope" of the national subsidy policy and the serious shortage of charging piles in winter have poured cold water on the new energy automobile industry at the outlet.

However, the cooling new energy vehicle market has not affected the huge expectations of the upstream and downstream of China's home appliance industry chain for the new energy vehicle market. In the past two years, upstream and downstream enterprises in China's home appliance industry chain have entered the new energy vehicle market, although the layout methods are not the same, but this trend has become a rising trend.

Shrouded in the shadow of the global economic and energy crisis, will China's emerging new energy automobile industry be the key to breaking the situation in China's home appliance industry?

Home appliance companies tap the next incremental market

China's home appliance industry has been developing for more than 40 years, and now it has become the world's irreplaceable home appliance manufacturing base, with a huge scale of manufacturing and an increasingly upgraded manufacturing level, making the upstream and downstream enterprises in China's home appliance industry become the existence of leading global development in both precision manufacturing and scientific and technological research and development. However, at the same time, many home appliance categories, including refrigerators, washing machines, air conditioners, kitchen appliances, etc., have fully entered the bottleneck period of scale increase, and the stock market has become the norm. Whether from the perspective of expanding revenue performance or increasing investment hotspots, many Chinese home appliance companies have reached an important period of urgent need to find the next incremental market.

Just after the Spring Festival in February 2022, Fang Hongbo, chairman of Midea Group, personally rushed to Anqing, Anhui Province, to attend the groundbreaking ceremony of the new base of Auto Parts in Anqing Welling. The investment in this base alone reached 11 billion yuan, becoming the largest investment project in the history of Midea Group, and this is only part of Midea's industrial technology investment in the field of new energy vehicles.

In the first three months of the Anqing Welling investment ceremony, Gree Electric Appliances controlled DunAn Environment with 3 billion yuan, and an important part behind this acquisition is the new energy vehicle thermal management system formed by DunAn Environment. Previously, Gree Electric Appliances fully acquired Yinlong through judicial auctions, and merged lithium titanate batteries and new energy buses into Gree Electric Appliances.

In the past two years, Hisense, Haier, Skyworth, Lake, Haili Compression, Dayang Electric Motor, Wolong Electric Drive and many other upstream and downstream enterprises in the home appliance industry chain have entered the field of new energy vehicles (see the follow-up report of the Electrical Micro Magazine for details), and the forward-looking analysis of the strategic layout of all the above enterprises regards new energy vehicles as the next huge incremental market.

Entering the new energy automobile industry, opening up a new incremental market track, and becoming the common choice of many upstream and downstream enterprises of home appliances.

So, how good is the prospect of the new energy vehicle market? The answer to this question, at least until NIO announced its suspension of production, was beyond any doubt.

New energy is the outlet of the global automotive market

From the overall situation of the industry, new energy vehicles are an important direction for the green development and low-carbon transformation of the global automotive industry, and also a strategic choice for the high-quality development of China's automotive industry. In 2021, the relevant state departments have issued a number of policies, which have effectively promoted the substantial growth of new energy vehicle production and sales. According to data released by the China Association of Automobile Manufacturers, the production and sales of new energy vehicles in China in 2021 were 3.545 million units and 3.521 million units, respectively, an increase of 1.6 times year-on-year, and the market share reached 13.4%. At the same time, China's exports of new energy vehicles in 2021 also achieved rapid growth, exporting 310,000 new energy vehicles throughout the year, an increase of more than 3 times year-on-year, exceeding the total historical cumulative exports. At present, new energy vehicles have shifted from policy-driven to market-driven new development stages, showing a good development situation of both market scale and development quality.

The "New Energy Vehicle Industry Development Plan (2021-2035)" puts forward the development vision of China's new energy automobile industry - by 2025, the sales volume of new energy vehicles in China will reach about 20% of the total sales of new vehicles; by 2035, pure electric vehicles will become the mainstream of new sales vehicles, public domain vehicles will be fully electrified, and fuel cell vehicles will be commercially applied. While there is huge room for the future development of new energy vehicles in China, with the introduction of multinational plans to ban the sale of fuel vehicles and subsidies for new energy vehicles, overseas markets have also shown huge growth space.

Fu Yongjun, president of Midea's industrial technology business group, said at the end of 2021: "A few years ago, many people in the industry doubted our prospects for developing new energy vehicle-related technologies, believing that the total amount of China's new energy vehicle market would not be too large. But today you can see that China's new energy vehicles sold 3.5 million units in 2021, and if all goes well, this number will reach 5 million units in 2022 and 10 million units in 2025. ”

Where is the incremental entrance to the field of new energy vehicles?

Judging from the current trend of home appliances and consumer electronics companies entering the new energy vehicle, only Skyworth has chosen the vehicle manufacturing route, which is still the curve strategy after Huang Hongsheng, the founder of Skyworth Group, personally controlled Nanjing Golden Dragon Bus. At present, the new energy vehicle market space valued by most home appliance companies comes from upstream supporting facilities.

Due to the completely different design concept from traditional fuel vehicles, the rapid development of new energy vehicles has not only spawned the competitive upgrade of the vehicle market, but also directly added the core components that are not in the design of fuel vehicles - in the "three electricity" system of new energy vehicles composed of motors, batteries and electronic control systems, the motor system of multiple links, the electric thermal management system of multiple spaces, and the intelligent control system of multiple interactions have become the core needs of completely new energy vehicles. According to the development speed of new energy vehicles, thermal management alone can add about 50 billion yuan of market demand (see the follow-up report of the electrical micro-journal for details).

In the process of development over the years, the upstream and downstream enterprises of China's home appliance industry have accumulated a large number of scientific research achievements and precision production experience in the field of drive control with the motor as the core and the temperature management field with the compressor as the core, plus the versatility of the underlying technology of the electronic equipment and the flexibility of low cost and high quality, which is almost perfectly in line with the new supporting needs driven by the new energy automobile industry. Such a degree of matching even makes some people judge that "new energy vehicles are home appliances with wheels".

Therefore, at present, most of the upstream and downstream enterprises of home appliances lay out the main direction of new energy, locked in the thermal management system, motor main drive/auxiliary system and intelligent control system of new energy vehicles.

In theory, if home appliance companies can successfully enter the market, the new energy vehicle supporting field will become a huge revenue increment point, and it will also become a key point to attract huge new investment due to the "outlet" attribute of the new energy vehicle itself.

The urgent need to "tailor-made" for home appliance companies

Another point worth scrutinizing is the potential demand for home appliance companies in the new energy vehicle industry chain.

In 2022, the Russian-Ukrainian war led to a sharp rise in international crude oil prices, but indirectly triggered the price increase of new energy vehicles. There are objective reasons for the decline in demand for fuel vehicles, and there is also the problem of gaps in the supply chain of new energy vehicles. Therefore, the old "card neck" problem in the fields of automobiles and chips has also appeared in the field of new energy vehicles.

Looking at the various subdivision parts of the "three electricities" system of new energy vehicles, it is not difficult to find that a variety of core components including main drive motors, EPS steering motors, electric air conditioning compressors, etc. are still controlled by foreign-funded enterprises. This situation not only makes the cost of new energy vehicles high, but also makes the supply chain security impossible to guarantee.

The new energy automobile industry, represented by China's new forces, urgently needs domestic enterprises with high-quality production, efficient turnover, high-performance products, low-price supply and other characteristics to come to the forefront to solve the shortcomings of the current supply chain controlled by foreign capital. And these characteristics are simply tailor-made for Chinese home appliance companies.

Fu Yongjun once said: "Since we can produce 100 million core compressors a year in the home appliance industry, I believe we also have the ability to provide optimal solutions in the core key components and core key systems of the automotive industry." ”

This is the unanimous view of all home appliance companies entering the field of new energy vehicles. Successfully practicing a new track is no easy task.

Opportunities and challenges that are visible to the naked eye

From the perspective of the explosive growth of sales of new energy vehicles in 2021 and the further increase in demand from the consumer side due to the soaring price of crude oil and policy support, even if it encounters the impact of the epidemic, the development trend of new energy vehicles is still in the "outlet".

The excessively rapid pace of development presents great opportunities, but it also means that it is difficult to grasp the opportunities. After communicating with the heads of a number of upstream and downstream enterprises of home appliances, there is a relatively unified view that time is the biggest challenge in this big opportunity.

The automotive industry is very strict about the suitability, reliability, life and other verification of parts, even if many new forces of electric vehicle companies are quite open to the matching verification of upstream new parts, the application of a new component often takes three to five years. For many home appliance companies eager to enter the new energy vehicle market, the low brand recognition and the long verification time have formed a fierce contradiction.

Therefore, some home appliance companies use acquisitions to directly cut into the new energy vehicle market, such as Hisense's acquisition of Japan's Three Electric, Lake's acquisition of Shanghai Pajet, and the future, including Midea's choice to seize time through acquisitions, is almost an inevitable choice. However, the risk of M&A operation is not low, in talent management, core technology delivery and integration, continuous investment integration and profit returns, there are coordination risks, the acquisition of relatively unfamiliar companies, the acquisition of relatively unfamiliar companies, the acquirer's management level puts forward high requirements.

On the contrary, with their own technology silently cultivated, not only face a huge time cost, but also to cope with the cruel competitive environment, in the technical threshold is not low in the field of motor, thermal management, home appliance companies to cope with the reserve of technical personnel, the speed of technology research and development, huge capital investment and other internal challenges, but also face strict verification standards, strategic balance between cost and price, monopoly competition and other external problems of foreign brands.

Taking history as a mirror, the history of China's home appliance companies 20 years ago to build a car into a dream of Huangliang is still vivid (see the follow-up report of the electrical micro-journal for details), I believe that the Chinese home appliance industry, which has now led the world in scale, technology and manufacturing technology, can once again make a historic breakthrough in the track of new energy vehicles this time, and become the core force that boosts the take-off of China's new energy vehicle industry.

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