(Report Producer: Minsheng Securities)
1 Guoxuan Hi-Tech: Deeply cultivate the field of lithium iron phosphate batteries, and increase the vitality of Volkswagen's shareholding
1.1 Development history: Deeply cultivated in the field of lithium battery for 17 years, and made concerted efforts at home and abroad
It is a leader in the domestic power battery industry, and the market at home and abroad is constantly expanding. Founded in May 2006, the company is one of the earliest enterprises engaged in the independent research and development, production and sales of lithium-ion batteries for new energy vehicles. In 2007, the lithium iron phosphate material production line was put into operation, in 2010, the first pure electric bus equipped with Gotion batteries was put into operation, leading the technological development of the global battery industry, and in 2014, the company's power battery shipments were second in China and sixth in the world, and 100 JAC IEVs equipped with Gotion batteries were exported to the United States, marking the company's successful stride International market;In 2015, the company was listed on the Shenzhen Stock Exchange through the backdoor of Dongyuan Electric, becoming the first listed share of domestic power batteries;In 2017, it signed a cooperation agreement with Shanghai Electric to jointly invest in the establishment of a joint venture company to develop the field of energy storage;In 2021, the introduction of Volkswagen's war investment was completed, and Volkswagen became the company's largest shareholder, with Chairman Li Zhen as the actual controller;In 2023, the company became a designated supplier of Volkswagen's lithium iron phosphate standard battery cell power lithium battery products in overseas markets, and cooperated with BASF, ABB, Ebusco, Ficosa and many other internationally renowned enterprises signed contracts, and new breakthroughs have been made in overseas layout.
The company is mainly engaged in the research and development, production and sales of batteries and their supporting products, and its business covers three major sectors: power lithium battery systems, energy storage systems and power transmission and distribution equipment. In the power lithium battery system sector, the main products are lithium iron phosphate materials and cells, ternary materials and cells, power battery packs, battery management systems, etc., which are widely used in new energy fields such as pure electric commercial vehicles, passenger cars, special vehicles and hybrid vehicles; In recent years, it has also expanded its business of power transmission and transformation operation and maintenance services and EPC project general contracting construction.
1.2 Equity structure: Volkswagen has a new look of equity investment, and a new chapter of mutual benefit and complementarity
Volkswagen became the company's largest shareholder, and Li Zhen remained the actual controller. In May 2020, the company announced a plan for a non-public issuance of A-shares, and introduced Volkswagen China strategic investors through share transfer and private placement. In December 2021, the non-public offering was completed, and Volkswagen China became the largest shareholder of the company with 26.47% of the shares, and Li Jin, Li Chen, and Nanjing Guoxuan Holding Group were the unanimous controllers. As Volkswagen China undertakes to irrevocably relinquish its voting rights in part of the shares of the listed company within 36 months from the date when the relevant shares of the listed company involved in the non-public offering and share transfer are registered in the name of Volkswagen China or within a longer period as determined by Volkswagen China on its own initiative, Li Zhen remains the actual controller of the company. As of November 18, 2023, Volkswagen China holds 24.74% of the shares.
The company's management has rich industry experience in the field of lithium batteries, and two senior executives of the Volkswagen Department have settled in to further add vitality to the company's management and operation. Li Jin, the actual controller, chairman and general manager of the company, established Hefei Guoxuan in 2006, has been deeply engaged in lithium iron phosphate power lithium batteries for many years, and many executives have rich experience in technology research and development and operation management in lithium batteries and other related fields. As a world-class automobile company, Volkswagen Group has a mature R&D and manufacturing system, advanced company management capabilities, and a perfect marketing and sales system.
1.3 The company's business: power energy storage products are abundant, and customers continue to expand
1.3.1 Power batteries are widely matched, and the customer structure continues to be optimized
Adhering to the strategy of "making refined iron lithium and strengthening ternary", its products are widely used in passenger cars, commercial vehicles, special vehicles, and low-speed vehicles. The company continues to break through the performance ceiling of lithium iron phosphate, the design of 230Wh/Kg lithium iron phosphate battery has been finalized, the industrialization of ternary high nickel and silicon oxygen anode batteries, the ternary semi-solid 360Wh/Kg battery has passed the strict acupuncture test, and through the new structural design, the L300, L600 and N300 third-generation battery cell products have been launched, of which L300 and L600 have been equipped with the industry's advanced lithium iron phosphate chemical system. The company's lithium iron phosphate battery and ternary battery products have been widely used in passenger cars, commercial vehicles, special vehicles, and low-speed vehicles. At present, the company is cooperating with strategic customers to develop high-performance lithium iron phosphate batteries to improve the battery life and safety performance of new energy vehicles.
The customer structure has been continuously upgraded, and the growth rate of business orders and revenue has been strong. In 2011, the company established a cooperative relationship with JAC and launched 585 first-generation JAC iEV new energy vehicles for demonstration operation, which is the first enterprise in China to equip passenger car models with lithium iron phosphate batteries. At present, the company's domestic electric vehicle customer structure has been continuously optimized, and in H1 2023, a number of new projects such as GAC Aion and Hezhong Nezha have been added, and strategic cooperative relations have been established with SAIC Maxus, Shangtong V, JAC, Chery Automobile, Changan Automobile, Geely Automobile, Great Wall Motor, Leapmotor, Hezhong New Energy and other car companies, and continue to supply goods to Rivian in the United States, Ebusco in the Netherlands, TATA in India, and Vinfast in Vietnam. The further release of market demand in the future and the successive mass production of new models of strategic customers will provide guarantee for the company's power battery business order volume and revenue growth.
1.3.2 Abundant energy storage products and accelerated business expansion
The company has a wide range of energy storage products, covering centralized, distributed, residential and other energy storage application scenarios. The company officially entered the energy storage business in 2014 and established the energy storage division in 2016, whose products mainly include energy storage cells, standardized battery boxes, battery clusters and Power Ocean, Power Star, Power Smart energy storage product series, etc., to meet the needs of centralized power energy storage, industrial and commercial energy storage and household energy storage in various scenarios, and has passed GB, NORTH AMERICA UL, IEC, Japan JET and other standard certifications, with the conditions for global product supply.
Vigorously explore the energy storage market at home and abroad, and the bidding of energy storage projects is frequent. Relying on the company's advantages in core technology research such as basic materials, intelligent manufacturing, and global supply chain, the energy storage sector is developing rapidly, and at present, the company is continuing to deepen its strategic cooperation with first-class enterprises such as Huawei, China Tower, State Grid, Sumec, Shanghai Electric, etc., and has successively cooperated with ABB, Nextera, Invenergy, Jinko, Borrego, Edison and other well-known international companies The company has established cooperation and vigorously explored the energy storage market at home and abroad, and the company's energy storage projects at home and abroad have frequently won bids and landed.
1.4 Corporate Finance: Rapid increase in revenue and accelerated development of energy storage
The company's revenue has grown rapidly, and the net profit attributable to the parent company has improved year by year. In terms of revenue, due to the rapid growth of the global new energy vehicle market and the continuous increase in the proportion of lithium iron phosphate battery installed capacity, the company's operating income has grown rapidly from 4.959 billion yuan in 2019 to 23.052 billion yuan in 2022, with a year-on-year increase of 122.59% and a CAGR of 66.89% in 2022, and a revenue of 21.778 billion yuan in Q1-Q3 2023, a year-on-year increase of 50.96%. In terms of net profit attributable to the parent company, as the company continued to improve the industrial chain and accelerate the development of international business, the company's net profit attributable to the parent company improved significantly, and the company's net profit attributable to the parent company increased from 51 million yuan in 2019 to 312 million yuan in 2022, with a year-on-year increase of 206.15% in 2022, and a net profit attributable to the parent company of 292 million yuan in Q1-Q3 of 2023, an increase of 94.65% year-on-year.
The development of energy storage business has accelerated, and the overseas business has expanded significantly. From the perspective of the business composition of revenue, with the transformation of energy structure and the energy crisis in Europe, the demand for energy storage batteries has surged, and the energy storage market has risen rapidly, and the company is actively expanding the energy storage market, with the company's energy storage battery revenue of 3.508 billion yuan in 2022, accounting for 15.22% of revenue, and 4.147 billion yuan in H1 of 2023, exceeding the annual energy storage revenue in 2022, accounting for 27.21%. From the perspective of the regional composition of revenue, domestic business still accounts for the majority, overseas business has expanded significantly, and the proportion of revenue continues to increase. Since 2020, the company has actively promoted the completion of the construction of overseas power batteries and supporting industrial bases, and the overseas revenue in 2022 has reached 2.980 billion yuan, accounting for 12.93%, and in 2023, the overseas revenue in H1 will be 3.063 billion yuan, accounting for 20.09%. With the continuous implementation of the company's overseas industrial layout and the accelerated fulfillment of existing overseas customer orders, the proportion of overseas business revenue is expected to continue to increase.
23H1 profitability has improved. Since 2019, the company's gross profit margin has shown a downward trend, with the company's gross margin of 17.79% in 2022, a decrease of 14.75 pcts from 2019, and the net profit margin of the company showing a fluctuating trend, with the company's net profit margin of 1.59% in 2022, an increase of 0.62 pct from 2019. The fluctuation of the company's gross profit margin and net profit margin is mainly affected by the increase in the cost of upstream raw materials, the end of the subsidy policy, and the decline in product prices brought about by fierce market competition. However, as the company completes the layout of the whole industrial chain from mineral resources, cathode and anode materials, battery cells and PACK to battery recycling, the company's gross profit margin and net profit margin will gradually increase. In Q1-Q3 of 2023, the company's gross profit margin was 16.99%, an increase of 2.87Pcts year-on-year, and the company's net profit margin was 1.66%, an increase of 0.34Pcts year-on-year.
During the period, the expense ratio showed an overall downward trend, and the results of cost reduction and efficiency increase were remarkable. Since 2019, the company has continued to expand, increased its sales scale, and continuously increased the scale of expenses during the period, but the expense ratio for the period has shown an overall downward trend. In 2022, the company's sales expense rate, management expense rate, R&D expense rate, and financial expense rate will be 2.04%, 5.69%, 7.78%, and 1.40%, respectively, with a change of -4.69/-2.33/-1.04/-4.47 pcts compared with 2019, and the expense ratio during 2022 will be 16.91%, a decrease of 12.53 pcts compared with 2019, and the company's expense ratio during Q1-Q3 2023 will be 14.73% Among them, the sales expense rate, management expense rate, R&D expense rate, and financial expense rate were 2.13%, 5.41%, 6.31%, and 0.88% respectively, and the company's management level and operating efficiency continued to improve, and the results of cost reduction and efficiency increase were remarkable.
2. Industry: The power and energy storage battery track is broad, and major manufacturers are racing to break through
2.1 Power battery: Lithium battery is accelerating its expansion, and the competition pattern is relatively concentrated
2.1.1 Lithium iron phosphate has obvious advantages, and the proportion of installed capacity continues to increase
Lithium iron phosphate batteries have obvious cost-effective advantages. Power batteries can be mainly divided into two categories: lithium iron phosphate and ternary. From the point of view of battery cost, ternary battery uses a variety of expensive metal materials such as nickel, cobalt, manganese, etc., and the cost of lithium iron phosphate raw materials is lower, coupled with the gradual decline of the national subsidy policy for new energy vehicles in recent years, compared with the lithium iron phosphate battery has more cost advantages; From the performance point of view, ternary batteries have a higher energy density than lithium iron phosphate batteries, so the endurance of ternary batteries is stronger, but with the technological innovation in the past two years, the energy density of lithium iron phosphate batteries has been greatly improved, which can meet the endurance of 400 to 600 kilometers, the blade battery released by BYD has a range of thousands of miles, and the Shenxing super-rechargeable battery of the CATL era also has the ability of "charging for ten minutes and lasting 400 kilometers".
The installed capacity share of lithium iron phosphate exceeds three yuan, and the proportion continues to increase. Lithium iron phosphate has obvious cost-effective advantages, and its share will begin to surpass that of ternary batteries in 2021. In 2019, the installed capacity of lithium iron phosphate was 20,219.4MWh, accounting for 32.50%, the ternary installed capacity was 40,529.8MWh, accounting for 65.15%, in 2021, the installed capacity of lithium iron phosphate exceeded the ternary installed capacity for the first time, accounting for 79,836.9MWh, accounting for 51.64%, in 2022, the installed capacity of lithium iron phosphate continued to grow, reaching 183,753.3MWh, accounting for 62.36%, and in 2023, the installed capacity of lithium iron phosphate continued to grow, reaching 183,753.3MWh, accounting for 62.36%, and in 2023, iron phosphate The installed capacity of lithium increased further to 261,000MWh, accounting for 67.32% of the total installed capacity.
2.1.2 The leading enterprises are developing rapidly, and the competition pattern is relatively concentrated
The market competition in the power battery industry is fierce, and the competition pattern is relatively concentrated. From January to November 2023, the global power battery industry market is highly competitive, with a market share of 73.20% in installed capacity CR4, an increase of 1.68pcts over the whole year of 22. Among the top 10 enterprises in the global power battery installed capacity, 6 companies in mainland China are on the list, accounting for 63.78% of the global market, an increase of 3.36pcts over 22 years, and occupying a dominant position in the global power battery market. Among them, from January to November 2023, Gotion Hi-Tech's global installed capacity of power batteries is 14.9GWh, the eighth in the world, with a global market share of 2.39%.
2.1.3 The rapid growth of demand for new energy vehicles has helped to increase the installed capacity of power batteries
The demand for new energy vehicles is growing rapidly, and the penetration rate is increasing. In recent years, the global new energy vehicle market has grown strongly, with China's new energy vehicle sales reaching 9.495 million units in 2023, with a penetration rate rising from 4.5% in 2018 to 31.60%, and global new energy vehicle sales are expected to reach 14.653 million units, with a penetration rate increasing from 2.2% in 2018 to 17.4%.
New energy vehicle sales forecast: According to the data of the China Association of Automobile Manufacturers, we expect domestic NEV sales to be about 11.49 million units in 2024, with a penetration rate of 37%, and in 2025, we expect China's NEV sales to maintain a growth rate of 20%, with sales of 13.79 million units, with a CAGR of 40.68% in 21-25 years. According to Canalys, we expect global new energy vehicle sales to reach 17.97 million units in 24 years, of which the sales growth rate in the United States will reach 40%, and the sales growth rate in Europe will reach 15%, and by 25 years, we expect the United States and Europe to continue to maintain high growth rates, with global new energy vehicle sales of 22.13 million units, and a CAGR of 34.81% from 2021 to 2025.
The high demand for new energy vehicles has helped the installed capacity of power lithium batteries to increase highly. With the gradual growth of demand for new energy vehicles, the acceleration of battery technology innovation, the improvement of product performance, and the increasing improvement of product structure, the power lithium battery industry is also continuing to expand, and the installed capacity of batteries continues to grow. In 2023, the global installed capacity of power batteries will be 732.7GWh, with a year-on-year growth rate of 41.02%. In 2023, China's power battery installed capacity will be 448.1GWh, with a year-on-year growth rate of 40.2%. Based on GGII and the above estimates of new energy vehicle sales, we predict that by 2025, China's single vehicle capacity will reach 53 kWh, and China's power battery installed capacity will reach 731 GWh, with a CAGR of 47.5% from 2021 to 2025, and the global bicycle power will reach 57 kwh, and the global power battery installed capacity will reach 1261 GWh, with a CAGR of 43.6% from 2021 to 2025.
2.2 Energy storage batteries: the market growth is strong, and the industry is ushering in large-scale expansion
2.2.1 Lithium iron phosphate batteries have become the mainstream of the energy storage market
Lithium iron phosphate batteries with high safety, long life and low cost have become the mainstream in the field of energy storage batteries. Energy storage batteries can be divided into lithium-ion batteries, lead-acid batteries, sodium-sulfur batteries, flow batteries, etc., lithium-ion batteries have the advantages of high energy density, long cycle life, strong rate performance, wide range of applicable temperatures, and small environmental pollution. At present, the lithium ion battery that is more used has lithium iron phosphate battery and ternary lithium battery, the former uses lithium iron phosphate as the positive electrode, and the latter uses lithium nickel cobalt manganese oxide or lithium nickel cobalt aluminate as the positive electrode. In contrast, lithium iron phosphate batteries have a wide range of thermally stable temperature, long battery cycle life, higher safety, and lower cost, due to the large power of the energy storage system, there are higher requirements for the cost and cycle life of the battery, and the National Energy Administration issued in June 22 "Twenty-five key requirements for preventing power production accidents (2022 edition) (draft for comments)" clearly pointed out that medium and large electrochemical energy storage power stations shall not choose ternary lithium batteries, Sodium-sulfur batteries, should not choose the cascade use of power batteries, policy attention to the safety of energy storage batteries makes the performance advantages of lithium iron phosphate at this stage more prominent, so lithium iron phosphate batteries have become the mainstream in the field of energy storage.
2.2.2 The global energy storage market is rising rapidly, and market competition is intensifying
The production capacity of leading enterprises has been rapidly released, and market competition has intensified. In the past two years, there have been a number of energy storage projects in the domestic and foreign markets for public bidding or operation, including energy storage power stations, wind farm frequency modulation, solar power generation storage, user side, communication base stations, etc., attracting a large number of battery companies to enter the market and intensifying market competition. According to SNE Research data, CATL ranked first in the world in 2022 among the leading companies in global energy storage battery sales, with energy storage battery sales of 53,000MWh in 2022, a year-on-year increase of 212%, a market share of 43.4%, an increase of 5.1 pcts year-on-year, of which Gotion Hi-Tech ranked eighth in the world and sixth in China, with energy storage battery sales of 5,500MWh, a year-on-year increase of 1,000%, and a market share of 4.5%, an increase of 3.4 pcts year-on-year Pcts。 According to GGII, in H1 2023, the shipments of energy storage batteries of the leading enterprise CATL have exceeded 10GWh, and the shipments of energy storage batteries of Gotion Hi-Tech have exceeded the level of the whole year of 2022. With the gradual release of the production capacity of mainstream battery companies, market competition will be further intensified.
2.2.3 The demand for energy storage is surging, and the market space is huge
The transformation of the energy structure and the energy crisis in Europe have led to a surge in demand for energy storage, and the shipment of energy storage batteries has reached a new high. In recent 14 years, with the transformation of the energy structure and the energy crisis in Europe, the global energy storage market has risen rapidly, driven by factors such as policy support and the increasing layout of clean energy power generation. According to GGII, in 2023, China's energy storage battery shipments reached 206GWh, up 72% year-on-year, and global energy storage battery shipments reached 225GWh, up 41% year-on-year. We forecast that China's energy storage market will ship 346.1GWh by 2025, with a CAGR of 63.9% from 2021 to 2025, and the global energy storage market will ship 408GWh, with a CAGR of 61.5% from 2021 to 2025.
3. Core competitiveness: vertical layout of the industrial chain, improvement of manufacturing efficiency and efficiency
3.1 Mineral resources: increase upstream lithium resources to ensure the effective implementation of production capacity
Obtained the mining rights of Yichun, Jiangxi Province, and strengthened the security of the raw material supply chain. Since settling in Yichun, Jiangxi Province in 2021, the company has successively obtained the mining rights of Baishuidong Mine, Shuinan Section Mine in Yifeng County and Huayou Mine in Fengxin County, of which the Baishuidong Mine has a designed production scale of 1.5 million tons/year, the Shuinan Section Mine has a designed production scale of 1.8 million tons/year, and Huayou Mine is currently in the stage of mineral resource exploration and promotion, with a designed production scale of 50,000 tons/year. By deploying the supply chain upstream, the company can effectively reduce costs and cope with market price fluctuations, ensure the supply of raw materials and ensure the effective implementation of continuously growing production capacity, and better grasp the carbon footprint and reduce carbon emissions from the upstream of the industrial chain, helping the implementation of the national "dual carbon" strategy.
Lithium carbonate is gradually increasing, and the long-term competitive advantage is obvious. The company has invested in lithium carbonate processing plants in Yifeng and Fengxin in Jiangxi Province, among which the company has an annual output of 20,000 tons of lithium carbonate in Guoxuan Kefeng in Yichun Economic Development Zone, and 50,000 tons of lithium carbonate projects invested in Yifeng and Fengxin. In 2022, the company will produce about 8,000 tons of lithium carbonate, plan to output about 30,000 tons in 2023, and achieve a full production capacity of 120,000 tons of lithium carbonate in 2025. In 2023, the company will sign a cooperation agreement with the National Energy and Mining Company of Jujuy Province of Argentina to establish a joint venture company to carry out the research and development and production of lithium carbonate and other related products, and plan to build a battery-grade lithium carbonate production line with an annual output of 10,000 tons in the early stage, and plan to build a 50,000-ton battery-grade lithium carbonate production line in the second phase according to market demand in the later stage. According to Gaogong Lithium Battery's calculations, 120,000 tons of lithium carbonate can meet the battery production capacity of 208GWh, and the subsequent 60,000 tons of lithium carbonate production capacity in Argentina is expected to support a total of 312GWh battery production capacity.
3.2 Material end: The midstream material end has a comprehensive layout and significant cost advantages
It covers the core links of battery materials such as positive/negative electrode materials, separators, and electrolytes, with significant cost advantages. In order to ensure the stable supply of materials, reduce costs and increase efficiency, and continue to maintain the company's cost and technical advantages in the power battery industry, the company has improved the comprehensive layout of the material end (cathode materials, anode materials, separators, electrolytes). In the field of cathode materials, Lujiang currently plans to produce 200,000 tons of iron-lithium cathode materials, which have been put into production, and there are also 30,000 tons of high-nickel ternary cathode materials with an annual output of 100,000 tons, which were originally planned to be completed and put into operation by the end of 2023, and Michigan, the United States, is preparing to build cathode materials with an annual output of 150,000 tons; In the field of anode materials, Feidong, Hefei, Anhui Province plans a 300,000-ton anode material project, with an annual output of 100,000 tons in the first phase, and Wuhai, Inner Mongolia plans a 400,000-ton anode material project with an annual output of 100,000 tons in the first phase, and 50,000 tons have been put into production 10,000 tons of anode material project; In the field of separator, the company and Xingyuan Materials jointly invested in Hefei Xingyuan to produce wet separators, with an annual design capacity of 500 million square meters and a production capacity of 80 million square meters in the first phase; In the field of electrolyte, the company acquired the BASF electrolyte laboratory and related patents in the United States, made technical reserves for high-voltage and high-energy-density batteries, and planned an electrolyte project with an annual output of 100,000 tons in Hefei.
3.3 Battery cell &PACK end: JTM and semi-solid state technology support, global production capacity
3.3.1 Innovate JTM technology, forward-looking layout of semi-solid-state batteries, LMFP system Qichen batteries
Innovative JTM technology that breaks through the upper limit of energy density of LFP battery systems. On January 8, 2021, the company launched JTM technology at the 10th Science and Technology Conference, JTM (Jelly Roll to Module) integration technology: J is the core, M is the module, and JTM is directly placed in the module with the core, and the production is completed at one time. JTM technology can make the efficiency of the monomer-to-module assembly exceed 90%, using the lithium iron phosphate material system, the energy density of the module is close to 200Wh/kg, and the system energy density is up to 180Wh/kg, to the ternary level of high nickel. The parts of the battery and module are greatly reduced, and the production cycle and battery cost are greatly reduced compared with the traditional lithium battery. JTM has the characteristics of low cost, high grouping efficiency, and easy standardization. The company's JTM products have been industrialized, and will take the lead in the application of battery swap mode to expand its business.
Forward-looking layout of semi-solid-state batteries, product loading and delivery of mass production is imminent. Solid-state batteries are an important direction for the development of battery technology in the future, and the core of the battery's exploration of "solid-state" is to move towards the extreme of high energy density, so as to achieve a transformative improvement in the mileage of the equipped models. In 2017, the company began to research solid-state batteries and solid-state electrolytes, and in 2022, it achieved breakthrough results in semi-solid-state batteries. According to the company's announcement, the semi-solid battery developed this time is developed through material and process innovation, the surface of the cathode material particles is coated with a solid electrolyte, the anode is made of silicon anode, and a new high-safety functional separator and high-safety liquid electrolyte are used to develop and develop, with a single energy density of 360Wh/kg and a system energy density of 260Wh/kg, and the vehicle is equipped with a semi-solid-state battery, with a battery pack power of 160kWh, a range of up to 1000km, and an acceleration time of only 3.9s per 100km. At present, the battery has passed the acupuncture test and the 180°C 30min hot box test higher than the national standard, and has refreshed the extreme heat-resistant temperature of ultra-high nickel ternary large cells. In the future, the company will also accelerate the transition from liquid batteries to semi-solid state through technological innovation to implement silicon-based anode iteration, lithium metal anode and pre-lithium technology, and finally achieve all-solid.
The self-developed LMFP system L600 Qichen battery has opened a precedent in the industry that it can last 1,000 kilometers without NCM. On May 19, 2023, the company released its self-developed new LMFP system L600 Qichen battery cells and battery pack at the 12th Science and Technology Conference. Qichen L600 LMFP battery achieves a single energy density of 240Wh/kg and a system energy density of 190Wh/kg, surpassing the energy density of ternary batteries on the current market. The vehicle has a range of 1,000 kilometers and supports 18min full-time fast charging, the battery pack adopts double-sided liquid cooling technology with sandwich structure and minimalist design, which reduces the number of structural parts by 45% and the length of the wiring harness is only 26% of the previous one. At present, the product is based on the new national standard of acupuncture, and all tests such as hot box, overcharge, overdischarge, thermal runaway, extrusion and short circuit have passed.
3.3.2 Global layout of production capacity
Actively respond to strategic customers and have a global layout of production capacity. The company actively expands the industrial layout, and initially forms five major material bases, including Hefei, Anhui, Yichun, Jiangxi, Wuhai, Inner Mongolia, Jujuy, Argentina and Michigan, and gradually sets up 16 major battery production bases such as Hefei New Station, Hefei Economic Development, Hefei Lujiang, Jiangsu Nanjing, Jiangxi Yichun, Jiangsu Nantong, Shandong Qingdao, Hebei Tangshan, Guangxi Liuzhou, Anhui Tongcheng, Anhui Lu'an, Germany Göttingen, Vietnam, Slovakia, and Illinois, USA. As of 2023, the company's battery cell production capacity is about 115GWh, and we expect the production capacity to reach 178GWh by the end of 2024.
3.4 Recycling: Respond to the policy and lay out the field of battery recycling
Power battery recycling is the key to solving environmental pollution and resource recycling, and the national policy as a whole attaches importance to and supports battery recycling. The upstream industry of the lithium battery recycling industry is mainly scrapped power batteries (new energy scrapped cars, scrapped electric motorcycles, scrapped electric bicycles, etc.), power battery production waste, and the downstream of the power battery recycling industry chain is the field of cascade utilization (low-speed electric vehicles, communication base stations, energy storage batteries, smart street lights, etc.) and plug-in recovery materials (tin, manganese, cobalt, lithium, etc.). In recent years, many national departments have successively issued relevant guidance policies on the recovery of lithium batteries, which can promote and guide the development and upgrading of lithium battery material technology and its recycling industry.
In response to national policies, we actively lay out the field of battery recycling. In March 2021, the company announced the establishment of wholly-owned subsidiaries Hefei Guoxuan Recycling Technology Co., Ltd. (Guoxuan Xunke) and Hefei Guoxuan New Material Technology Co., Ltd. (Guoxuan New Materials), which will carry out the research and development, production and sales of anode materials, and will plan 50,000 tons of waste lithium iron phosphate batteries and 10,000 tons of pole piece recycling projects in Hefei Circular Economy Demonstration Zone; This investment will improve the company's strategic layout of upstream raw materials and battery recycling for lithium batteries, and further strengthen production cost control. At present, in terms of regeneration and recycling technology, the company's self-developed full-component recycling technology can carry out efficient, safe and harmless treatment of waste power batteries, increasing the recycling rate of old batteries from 72% to 93%; In addition, in March 2023, the company reached a strategic cooperation with Edison Energy of Japan, and the two parties will implement the market strategy according to market demand, with a planned sales target of 1GWh in the first year and an increase to 2GWh per year from the second year, to jointly develop the Japanese energy storage and recycling market, promote the popularization of renewable energy in Japan, and promote Gotion batteries to enter the Japanese market.
4. Business-driven: The overseas market space is broad, and the overseas layout is accelerating
4.1 Overseas policy: With the introduction of European and American policies, the strategy of going overseas has become necessary
Europe: Strict carbon emission restrictions, the "New Battery Law" forced industrial chain enterprises to invest in Europe. In November 2019, the European Commission proposed the European Green Deal, and the EU plans to achieve carbon neutrality by 2050, and in order to promote the realization of the European Green Deal, in January 2020, the climate clause 2019/631 came into effect, and the EU set stricter average carbon emission standards for car companies: during the period 2020-2024, the average carbon emissions of newly registered passenger cars shall not exceed 95 g/km per year, and 2025-2030 Period: Based on the average carbon emissions in 2021, the carbon emissions of passenger vehicles should be reduced by 15% in 2025 and 37.5% in 2030, and on August 17, 2023, the EU Battery and Waste Battery Regulation (hereinafter referred to as the "New Battery Law") came into effect, which applies to all categories of batteries put on the EU market, and has provisions in terms of carbon footprint rules, carbon footprint accounting, supply chain management, and audit by the EU designated certification body, etc., only with carbon footprint declaration and labeling, and digital battery passports for electric vehicle batteries and rechargeable industrial batteries to enter the EU market. The essence of the promulgation of the "New Battery Law" is to use the relatively high proportion of renewable energy in Europe, and the advantages of relatively clean energy structure have forced all industrial chain enterprises to invest in Europe, so as to enhance the resilience of the local industrial chain in Europe.
United States: The introduction of the IRA Act restricts the development of China's industrial chain, and it has become necessary for enterprises to go overseas. On March 31, 2023, the U.S. Department of the Treasury and the Internal Revenue Service jointly issued specific guidance on the proportion of critical minerals and battery materials under the Inflation Reduction Act ("IRA"). From the perspective of the budget expenditure direction of the bill, the budget for energy security and climate change projects is 369 billion US dollars, accounting for more than 80%, and the investment direction mainly involves wind power, photovoltaics, energy storage, new energy vehicles and other industrial chains. Judging from the tax credit conditions of the IRA Act, there is an obvious problem of foreign industrial chain restrictions, which aims to guide the US/North America of lithium battery manufacturing, while inhibiting the development of the industrial chain of specific countries or enterprises (such as China). The IRA Act would provide a $7,500 federal tax credit for electric vehicles assembled in North America, but there are strict standards for sources of critical minerals, components, and more in car batteries. Starting in 2023, EVs must have more than 50% of their battery components and materials manufactured or assembled in North America to be eligible for the $3,750 per vehicle tax credit. This is 100% after 2029, with a direct ban on EVs containing battery components and critical minerals from overseas sensitive entities (FEOCs) from obtaining tax credits, with restrictions on battery components/critical minerals starting in 2024/2025 respectively. From the perspective of the battery link, the IRA bill is good for the battery industry chain companies that have begun or plan to build factories in North America, and the cooperation form of technology licensing through the battery link is currently feasible. In terms of materials, in order to meet the subsidy requirements, Chinese companies need to be prepared for the localization of components and critical minerals.
4.2 Overseas demand: The demand in Europe and the United States is growing rapidly, and the international layout is unstoppable
From the perspective of the international market, the electrification of Europe and the United States is rapidly awakening, and the demand is growing rapidly. In 2023, the sales of new energy vehicles in Europe will reach 2.948 million units, a year-on-year increase of 13.38%; In 2023, the sales of new energy vehicles in the United States will reach 1.39 million units, a year-on-year increase of 50.20%. Combined with the relevant data of ACEA, EV Sales and Marklines, considering the high subsidy policies for new energy vehicles in Europe and the United States, the platform-based model layout of traditional car companies led by Volkswagen and Mercedes-Benz, and the establishment of Tesla's factories in Europe and the United States, as well as the negative impact of geopolitical conflicts and the Fed's continuous interest rate hikes, we predict that the sales of new energy vehicles in Europe will reach 4.07 million units by 2025, with a CAGR of 15.70% from 2021 to 2025. In 2025, the sales of new energy vehicles in the United States will reach 2.66 million units, with a CAGR of 42.15% from 2021 to 2025. With the policy stimulus, market concept, car companies and supply chain linkage and other factors, Europe and the United States electrification will enter a stage of rapid growth, which will promote the continuous demand for power battery products of car companies, power battery companies around the construction of European and American localization industry chain is bound to be overwhelming.
4.3 Overseas layout: the globalization strategy is accelerating, and Europe, the United States and Asia are jointly developing
The company anchors the European and American markets, takes into account the Asia-Pacific market, and deeply binds global customers. In Europe, the company has cooperated with Volkswagen, Bosch Group of Germany, and InoBat, a battery company in Slovakia, to jointly develop the European market, and in the Americas, it has signed strategic cooperation agreements with Rivian, a new EV manufacturer in the United States, and the National Energy Mining Company of Jujuy Province (JEMSE) in Argentina, and has obtained approval from the governments of Illinois and Michigan to build material and battery plants in the United States, and in Asia, it has signed strategic cooperation agreements with India's TATA, Vietnam's VinFast, and Thailand's Nuovo Plus, Japan's Edison Energy signed a cooperation agreement to actively explore the Asia-Pacific new energy market.
4.3.1 Volkswagen's electrification process is accelerating, and the company is expected to share the dividends and become a major supplier
The Volkswagen Group's electrification process is accelerating, and the production and sales of electric vehicles are expected to grow rapidly after the transformation. In 2021, Volkswagen Group sold 8,881,900 vehicles and 452,800 pure electric vehicles, with a penetration rate of 5.1%; In 2022, Volkswagen Group's vehicle sales will reach 8,262,800 units, and the sales volume of pure electric vehicles will be 572,100 units, an increase of 26.35% year-on-year, and the penetration rate will reach 6.92%, of which the sales of pure electric vehicles in Europe, the United States, and China will be 35.2, 4.42, and 155,700 respectively, a year-on-year increase of 13.40%, 18.82%, and 68.14%. In order to accelerate the transition to electrification and respond to the carbon emission reduction policies of various countries and regions, the Volkswagen Group has continued to increase its electrification strategy in the past two years, and plans to sell more than 70% of pure electric vehicles in Europe and more than 50% in North America and China by 2030. In terms of power batteries, the Group aims to develop battery technology into its core competitiveness, with plans to build six gigafactories in Europe with a total capacity of 240GWh, and will use "standard cells" embedded with intelligent technology to reduce battery costs by 30% for large-scale market models and 50% for entry-market models. The "standard cells" will be rolled out in 2023 and will cover 80% of Volkswagen's electric models by 2030.
Volkswagen accelerates its electrification capacity and deploys four MEB plants in China. The MEB platform is the first modular platform for electric vehicles developed for large-scale production, integrating the cutting-edge production technology of the Volkswagen Group, adopting an innovative flat-panel battery module layout, which makes the vehicle more comfortable in terms of space, and can achieve a long range of more than 550 kilometers. The Volkswagen Group plans to produce electric vehicles in Europe, China, and the U.S., and will continue to build electric vehicle plants in various regions of the world. At present, SAIC Volkswagen has built an MBE plant in Shanghai with an annual output of 300,000 electric vehicles, and is expected to build a MEB plant with an annual output of 100,000 electric vehicles in Changsha, which will gradually start production in 2024, FAW-Volkswagen has built a MEB plant with an annual output of 600,000 units in Foshan, which is expected to have a production capacity of 770,000 units by 2024, and Volkswagen Anhui is building a MEB plant with an annual output of 350,000 electric vehicles in Anhui.
Gotion has been designated for mass production of Volkswagen standard battery cells and overseas markets, and is the only designated supplier of Volkswagen's SSP platform. Since the official introduction of Volkswagen's stake in 2021, the company has launched in-depth cooperation with Volkswagen Group. In 2021, the two parties reached a strategic cooperation framework agreement to jointly promote the industrial production of batteries at Volkswagen Group's Salzgitter plant, and the company provided corresponding technical support, and at the beginning of 2022, the company obtained the official mass production designation of Volkswagen China's standard battery cells ternary and lithium iron phosphate, which adopts a unified design standard to greatly reduce the cost of battery cells, and the standard battery cell products will be equipped with the SSP platform for the next-generation fusion platform of the existing MEB and PPE platforms, which is expected to cover 80% of Volkswagen's products in the future In May 2023, the company's iron-lithium products were designated by Volkswagen in overseas markets, marking a milestone in the company's development of world-renowned automobile brand customers, which is conducive to enhancing the company's comprehensive competitiveness in the field of new energy power batteries.
In order to meet the needs of Volkswagen's battery supply, the company built a 50GWh standard battery cell production base at the new station in Hefei. In 2021, the company signed an agreement with Hefei Xinzhan High-tech Industrial Development Zone to build a 50GWh power battery production base in Xinzhan High-tech Industrial Development Zone, which will focus on the production and manufacturing of Volkswagen's standard battery cells. The first phase of the new station project has a production capacity of 20GWh, including 10GWh ternary batteries and 10GWh lithium iron phosphate batteries, and in the third quarter of 2023, the first production line will be completed, and it was originally planned to achieve small batch C sample shipments in Q4, which will have the production capacity of standard battery cell products. Sensitivity calculation: As the electrification process of the Volkswagen Group continues to accelerate, Volkswagen China's new energy vehicle sales target in China is 1.5 million units by 2025, we assume that the actual sales volume of the Volkswagen Group in 2025 is 1.3 million to 1.7 million units, Gotion Hi-Tech will supply 20%-40% of Volkswagen's new energy vehicle batteries in China, and by 2025 the battery capacity of a single vehicle will be 61KWh, then it is expected that Gotion will supply batteries for the Volkswagen Group in 2025 15.86-41.48GWh, with huge potential for battery orders.
4.3.2 Cooperation with Rivian and the United States to build factories is expected to open up the North American market
By partnering with Rivian, a new U.S. EV manufacturer, Gotion is expected to open up the North American market. In December 2021, the company signed a strategic supply and localization agreement with Rivian, a new American EV manufacturer, to become its lithium iron phosphate battery supplier, according to which Rivian will purchase more than 200GWh of batteries from 2023 to 2028. Rivian is an electric vehicle manufacturer in the United States, founded in 2009 and listed on NASDAQ in November 2021, focusing on the development of high-performance electric pickup trucks and SUVs. Rivian currently has three products, including the R1T electric pickup truck, the R1S electric SUV, and the EDV, an electric logistics vehicle that solves delivery problems for Amazon, all of which are based on the all-electric drive platform of the skateboard chassis, and the R2 prototype will be shown in early 2024. Rivian produced 24,300 vehicles and delivered 20,300 vehicles in 2022, and expects to produce 54,000 vehicles in 2023. With the release of Rivian's new and expanded production capacity will lead to an increase in vehicle production and sales, Gotion is expected to open up the North American market by supplying it with large-scale lithium iron phosphate batteries.
The layout of Michigan and Illinois has taken shape, and Gotion USA is far ahead of other battery manufacturers in terms of its speed of going overseas. According to the strategic supply and localization agreement signed between the company and Rivian, the two parties have entered into friendly negotiations to establish a joint venture to build a battery production base and a joint venture covering upstream materials and downstream battery recycling industries. On October 12, 2023, the company issued an announcement on the proposed construction of the Illinois lithium battery project, and the Illinois government will provide tax subsidies for the project based on the previously passed REV subsidy law that specifically subsidizes new energy and electric vehicle enterprises. According to the official website of the Illinois state government, Gotion will spend 2 billion US dollars (about 14.7 billion yuan) to build a new electric vehicle battery gigafactory in Manteno, Kankaki County, the state, which is expected to produce 10GWh of lithium-ion battery packs and 40GWh of lithium-ion battery cells, and is scheduled to be put into operation in 2024. In October 2023, the company issued an announcement on the construction of the Michigan battery materials project, and will invest in the construction of a cathode and anode materials project in Michigan, USA, with a planned total investment of 2.364 billion US dollars (about 16.8 billion yuan), and the Michigan battery materials plant can produce 150,000 tons of battery cathode materials and 50,000 tons of anode materials per year after completion, which is expected to be completed in 2030. The company relies on the strategic cooperation of Rivian, an American customer, and the endorsement of Volkswagen, and the strategic process of going overseas in the United States is ahead of other domestic battery manufacturers.
4.3.3 Cooperate with India, Vietnam, Thailand, Germany, etc., and blossom in multiple locations around the world
Cooperate with manufacturers in Germany, Slovakia, India, Vietnam and Thailand to develop European and Asia-Pacific markets. In addition to the U.S. market, it has also established in-depth cooperation with enterprises in Germany, Slovakia, Vietnam, Thailand, India and other places to actively expand the European and Asia-Pacific markets. TATA, India: In May 2019, the company announced a 40% investment in India with a 40 million INR 40 million investment in the design, development, validation and manufacturing of battery modules and packs, as well as battery management systems for a wide range of passenger cars and commercial vehicles in the region. VinFast Vietnam: In August 2020, the company announced a partnership with VinFast, a Vietnamese automotive brand, to develop and produce LFP batteries. In November, the battery factory cooperated by the company officially started construction in Ha Tinh Economic Development Zone, Vietnam, with China Xuan holding 51% of the shares, which is the first lithium iron phosphate battery manufacturing plant in Vietnam, with a planned annual production capacity of 5GWh in the first phase of the project, and is expected to be put into operation by the end of 2023. Bosch, Germany: In July 2021, the company acquired 100% of the assets and equity of the Bosch Group's plant in Göttingen, and will build the first new energy production and operation base in Europe, with a total pack capacity of 20GWh planned for the Göttingen plant, which is expected to be completed in four phases and is expected to achieve an annual output value of 2 billion euros. In September 2023, the first battery production line of the Göttingen plant in Germany was officially put into operation, and the first battery product of the base officially rolled off the production line, and the plant has already received a large number of European orders.
Thailand Nuovo Plus: In December 2022, Singapore's subsidiary Gotion Singapore entered into a strategic partnership with Nuovo Plus, a subsidiary of Thailand's PTT Group, to establish a 49% joint venture in eastern Thailand, focusing on the design, development, manufacturing, sales and export of battery modules and pack products, with the first phase of the production line expected to be put into operation in the fourth quarter of 2023. InoBat, Slovakia: In February 2023, the company signed a Memorandum of Understanding (MoU) with European battery manufacturer InoBat to build a 40GWh battery cell and pack plant based on their respective strengths in lithium iron phosphate and ternary batteries, and in September, Gotion acquired a 25% stake in InoBat, with the two parties focusing on the development and manufacture of batteries localized in Europe to unlock potential demand in Europe, the Middle East and Africa.
(This article is for informational purposes only and does not represent any investment advice from us.) To use the information, please refer to the original report. ）
Selected report source: [Future Think Tank]. Future Think Tank - Official Website