International trade protection is back on the rise, and the power battery war has swept the world
In order to compete for the pricing power and dominance of global new energy, the fierce game and comprehensive competition of power batteries are sweeping the world.
More than ten days ago, on December 1, the U.S. Department of Energy (DOE) issued an explanatory document on "Foreign Entity of Concern" (FEOC), which once again caused public opinion and even industry shocks in the power battery industry.
In fact, the FEOC interpretation released by the DOE is intended to implement the requirements of the previous IRA (the Inflation Reduction Act). The document mentions that an entity is considered FEOC if it is owned, controlled by, or governed by China, Russia, North Korea, and Iran (the "Quad"), that EVs eligible for the tax credit in the U.S. market must not contain any battery components manufactured or assembled by the FEOC, and that EVs eligible for the tax credit must not contain any critical minerals extracted, processed, or recovered by the FEOC starting in 2025.
Back in August 2022, in the Inflation Reduction Act (Inflation Reduction Act) introduced in the United States, the U.S. government said that it would give certain tax subsidies to locally produced cars. In addition, electric vehicles must meet the conditions of "a certain percentage of critical minerals in the battery must come from the United States or a U.S. FTA country" and "a certain percentage of the battery components manufactured or assembled in North America" to be eligible for the $7,500 tax credit per vehicle, and only $3,750 tax credit if only one of them is met.
On the other hand, the U.S. government is also using policies to vigorously promote the construction of the domestic battery supply chain. Not long ago, the U.S. Department of Energy announced that it would provide $3.5 billion in funding for companies that produce batteries and critical minerals needed to produce batteries.
It is not difficult to see that the U.S. government is trying to implement a comprehensive "blockade" of Chinese companies that maintain their leading positions in multiple core areas of power batteries, from lithium mining to battery manufacturing. U.S. President Joe Biden has not shied away from saying on multiple occasions: "Our goal is to bring home the complete battery supply chain." ”
According to public reports, a series of U.S. government policies have indeed stimulated the electric vehicle and battery manufacturing industry in North America, and since the bill was passed in August, automakers and suppliers have announced more than $50 billion to invest in electric vehicles and batteries in North America. For example, on May 26, LG Energy Solution and Hyundai Motor Group signed a joint venture agreement for a battery plant in the United States, and will invest 5.7 trillion won to produce electric vehicle batteries in the United States at a 50:50 ratio. The joint venture is expected to build a battery plant in Georgia, with an annual production capacity of 30GWh, which will start as soon as this year and start production by the end of 2025, while Toyota also announced on June 1 that it will invest an additional $2.1 billion in a battery plant for pure electric vehicles that is scheduled to start production in the United States in 2025. With the announcement of the new investment, Toyota's total investment in North Carolina also increased to $5.9 billion.
According to Benchmark Mineral Intelligence, a data and market intelligence provider in the United States, the production capacity of lithium batteries in the United States will increase fivefold between 2021~2026 and achieve a growth rate of more than 80% between 2026~2031.
Generally speaking, it takes three to four years for a battery factory to be completed and put into operation, and it takes 5-6 years for "blood recovery". Previously, Wang Yu, chairman of Funeng Technology, said when participating in CCTV's "Dialogue" column that with 2026 as the watershed, the requirements of North America and Europe for battery localization production will enter the practical agenda.
According to this timeline, time is already very tight, in the first half of this year, there are executives of the head enterprises of the power battery industry chain to the 24 tide bluntly: "If you don't go to sea (build a factory), it will be too late." ”
According to the analysis of CITIC Securities, both the previous IRA bill and the FEOC rules announced this time reflect the localization requirements of the United States in the production and manufacturing of key raw materials for new energy vehicles, and the market has expected it before. Judging from the details of the FEOC, starting from 2024/2025, battery modules/critical minerals produced in China exported to the United States and applied to electric vehicles will be affected by the policy and will not be able to obtain subsidies, but from the perspective of the FEOC identification rules, Chinese lithium battery companies can still circumvent FEOC restrictions in a series of ways, including: 1) Overseas factories: the proportion of private or state-owned control is less than 25% 2) Technology licensing: Domestic lithium battery companies can cooperate with overseas companies through technology licensing, such as CATL authorized Ford Motor to build battery production capacity.
And that's exactly what happened. On September 6, EVE announced that it will establish a joint venture with Electrified Power, Daimler Trucks and North American trucking company Paccar to invest in the construction of power battery production capacity for commercial vehicles.
A few days later, on September 8, local time, the official website of the Illinois government announced that Guoxuan Hi-Tech would spend 2 billion US dollars (about 14.7 billion yuan) to build a new electric vehicle battery gigafactory in Manteno, Kankaki County, Kankaki County, USA. The plant is expected to produce 10GWh of lithium-ion battery packs and 40GWh of lithium-ion battery cells, with plans to start production next year.
The Illinois governor reportedly said Gotion Hi-Tech's gigafactory will create 2,600 high-paying jobs and is the state's "most significant new manufacturing investment in decades." The plant will focus on lithium-ion battery cells, battery pack production and energy storage systems, and will receive US$536 million (4 billion yuan) in incentives from the state. (Special note: At present, the largest shareholder of Gotion Hi-Tech is Volkswagen (China) Investment Co., Ltd., holding 24.69% of the shares)
However, the twists and turns of CATL's cooperation with Ford to build a factory have cast a shadow on the investment of domestic power battery companies in the United States.
The incident began in February this year, when Ford announced that it would spend $3.5 billion (about more than 25 billion yuan) to build a battery plant in Michigan. Although the plant is wholly owned by Ford, CATL participates as an exclusive technology partner. In short, Ford pays for it, CATL pays for technology, and the money earned is divided together.
But in July, a Reuters report said two committees of the U.S. House of Representatives were investigating Ford's partnership with CATL. The project was terminated in September, and it was not until November that Ford again announced plans to restart the construction of a battery plant, but the investment budget was reduced from US$3.5 billion to US$2 billion, and the industrial plan was narrowed from the original plan of 35GWh to 20GWh.
Mark Truby, a spokesman for Ford, said, "We're still very bullish on EVs and our EV strategy, but obviously, while there's growth in the U.S. and globally, it's clearly not as fast as we and others are expecting, so we're trying to be smart about this and how we move forward." ”
In the view of industry insiders, "the United States is determined to decouple from China's electric vehicle industry, at least in terms of lithium batteries, and will try its best to stifle China's role in the American electric vehicle supply chain." However, U.S. automakers don't want to cut off their battery supply chains with China. On the contrary, these "egoists" are more eager for technical assistance from leading manufacturers, including CATL, in order to make the EV business more competitive in the market. (Source: Tiger Sniff)
In any case, for domestic power battery companies, CATL's every move to build a factory with Ford will directly affect their judgment of the U.S. market, and even the layout and process of industrial investment. At present, the industry is most concerned about whether this "marriage plan" can promote the upsurge of technical cooperation between US automakers and Chinese battery companies after this "marriage plan" is back on track; second, whether the cooperation model of "exchanging technology for the market" of battery companies can be sustained, and how to avoid the risk of "raising tigers for trouble"; and third, whether the US government will restrict the investment layout of Chinese enterprises in the United States through other means in the future? This will all need to be verified by time.
In fact, the international situation is far more dangerous than that. At present, Europe has also clearly set local production capacity targets for strategic raw materials such as lithium, nickel, cobalt, graphite, and manganese, and has also set localized requirements in subsidies and trade. The European Commission proposed on December 6 to invest 3 billion euros to promote the development of battery manufacturing in the EU, which means that the current rules of origin for electric vehicles under the EU-UK Trade Agreement Agreement (TCA) between the EU and the UK will be extended until December 31, 2026.
Driven by policies and markets, a new wave of power battery investment is also emerging in Europe.
On May 30, the Franco-German automotive battery manufacturer ACC (Automotive Cells Company) announced that its "Giga Plant" in the Duvran industrial area in northern France has been completed, which will be operational by the end of the year, with an initial production capacity of more than 13 GWh. It is the first electric vehicle battery production plant built on French soil.
In addition, according to the statistics of the 24 Chao Industry Research Institute (TTIR), at present, 13 companies, including Tesla, Northvolt, LG Chem, QuantumScape, Italvolt, SKI, and Samsung SDI, will have 387.3GW and 971.3GW of battery production capacity in Europe by 2025 and 2030, respectively.
In 2025 and 2030, the total battery capacity layout of these three battery giants in Europe will reach 156GW and 268GW respectively.
According to comprehensive statistics, global battery companies plan to reach 569.3GW in Europe in 2025 and 1279.3GW in 2030. According to market estimates, the EU's power battery demand is expected to be 550GWh in 2025 and 1000GWh in 2030.
On June 9, Torre Sekenis, head of the European Battery Alliance, said at the World Power Battery Conference that there is still a gap between European battery production capacity and market demand, and the balance between supply and demand is expected to be achieved in 2030. He showed data showing that in 2012, Europe's battery production capacity was less than 1GWh, and the current battery production capacity has 80GWh. By 2025 and 2030, Europe's local cell production capacity will reach 458GWh and 1083GWh, respectively. This is almost in line with market demand and market capacity planning.
To sum up, an expansion war has begun to sweep the world, and whoever can complete the global production capacity layout faster in the future may seize the opportunity.
In fact, not only in the field of power batteries, but also in the entire domestic new energy vehicle industry chain is accelerating the process of going overseas.
According to the incomplete statistics of the 24 tide team, at present, the mainland's new energy vehicles, power batteries, cathode and anode materials, electrolytes, separators, lithium battery copper foil, lithium ore/lithium salt and other industrial chains have in-depth layout overseas, and the players almost cover the industrial giants of the industrial chain, with a total investment scale of more than 700 billion yuan (Note: The statistical information is for reference only, readers are welcome to correct and supplement), see the chart for details:
However, it should be noted that China's new energy companies are by no means a smooth road to the European continent. For example, as early as 2019, CATL began to build its first overseas factory in Thuringia, Germany, and it was not until the beginning of 2023 that the plant was announced to be put into production. With CATL's expansion experience and technical strength, it still lasted four years, and the difficulties can be seen.
In addition, overseas factories also face higher production costs and labor costs. Due to the incomplete overseas power battery industry chain, the main raw materials and production equipment still need to be imported from Asia, and the manufacturing cost of the products is high. In addition, overseas factories should increase personnel training and provide a compliant working environment in accordance with the requirements of local trade unions, which will cost more labor. According to the statistics of the German Federal Statistical Office, in 2020, employers in Germany's manufacturing and economic services industries paid an average of 36.70 euros per hour, and the average labor cost in EU countries was 28 euros/hour. If calculated according to 28 euros/hour, 5 days and 8 hours of work, the monthly salary of German workers is about 4,700 euros, about 35,700 yuan.
We must also admit that Japanese and South Korean enterprises have been deeply involved in overseas markets for many years, and mainland enterprises have insufficient overseas experience. Japan's Panasonic, South Korea's LG, Samsung SDI and other enterprises have entered the supply chain system of international car companies, and accelerated the industrial layout on a global scale. With the gradual production of local European power battery companies such as ACC, Northvolt, Verkor, Britishvolt, Freyr, Morrow, Italvolt, etc., mainland suppliers will face more fierce competition in the international market in their overseas layout.
Looking at the development trend and changes of the industry, in the future, global new energy enterprises will conduct a new round of competition around new technologies, new production capacity, new capital and other dimensions, and the success or failure of competition will have a profound impact on the future industrial pattern and development. According to the author's analysis, in the future, enterprises with the four major capabilities of "technological breakthrough and continuous innovation, advanced production capacity layout and efficient execution, global layout and development, financial health and strong capital strength" will have the genes and strength to go through the cycle and continue to grow and grow.
Considering the risk of sharp fluctuations in the global economic, financial and market environment, enterprises should also act within their means when deploying globally. Ren Zhengfei said in the article "Don't Be a Flash in the Pan", "If you don't have a solid foundation and expand without authorization, it can only be suicide." (This article is for informational purposes only and does not constitute investment advice)