New energy vehicles are facing "consumption upgrading", and the upstream and downstream industries are becoming more polarized.


New energy vehicles are facing

Authors: Weng Rong Tao, Tong Haihua

Since the first half of this year, the trend of new energy vehicle industry upgrading and product "high-end" development has become more and more obvious. BMW plans to increase its stake in Brilliant BMW to 75% on Oct. 11. BMW said it plans to use China as a base for electric vehicles and export them globally.

In addition to BMW, international high-end brands such as Mercedes-Benz, Audi and Porsche have also stepped up efforts to develop new energy vehicles. In addition, the new forces also bet on the "high-end", during the National Day, the high-end brand ENOVATE electric Cafe car's new batch of engineering trial cars for the first time exposed.

The pressure of "high-end" development of new energy vehicles is conducting to the upstream and middle reaches, which makes the survival of the fittest intensify. Taking the battery sector as an example, according to the third quarter of 2018 earnings results show that leading companies such as Ningde Times, BYD and Cosco Cao Xuan's performance has increased significantly, and the dual squeeze of cost and R&D capabilities makes many small and medium-sized battery companies in trouble.

Car companies bet on "high-end"

According to the data released by the China Automobile Industry Association, the national automobile sales in September 2018 were 2.39 million vehicles, down 11.6% from a year earlier; passenger vehicle sales were 2.06 million vehicles, down 12% from a year earlier; and automobile sales increased by 1.5% from January to September. A number of automobile companies disclosed the first three quarters of earnings forecasts, showing a sharp decline in net profit.

Compared with the traditional automobile market in the cold winter, the new energy vehicles show a hot situation of both production and sales. According to the data released by the China Automobile Industry Association on October 12, the production and sales of new energy vehicles in China completed 7346,000 vehicles and 7215,500 vehicles respectively from January to September, an increase of 73.05% and 81.05% compared with the same period last year.

When sales of traditional fuel vehicles declined, new energy vehicles, driven by both policy and market forces, rose against the trend. Citic Securities suggested in the research paper that the investment logic of the automotive industry has shifted from the detonation SUV to the detonation of new energy, so companies with the potential of detonating new energy vehicles deserve more attention.

With the rapid development of new energy vehicles, the international high-end automobile brands are accelerating the layout. BMW plans to acquire a 25% stake in Brilliant BMW for $29 billion and optimize its production base in Shenyang by an additional 3 billion euros, allowing it to produce 100% pure electric vehicles when needed, and Mercedes-Benz to invest $1 billion to build a battery plant in the U.S., the first mass production of EQ, a Mercedes-Benz electric vehicle brand, according to an announcement released by Brilliant China (1114.HK) on November 11. The luxury SUV EQC is expected to start production in Europe early next year.

With the development of electric travel and the popularity of new energy vehicles, new energy vehicles are ushering in the era of "consumption upgrading". Yan Jinghui, an automotive analyst, told China Business Daily that "as a technology-based industry, new energy vehicles are born with the gene of'high-end'development. At present, there are fewer luxury new energy vehicles on the market, and the demand of the market remains to be met. From the aspects of styling design, endurance mileage and maneuverability, new energy There is still much room for improvement of the source vehicle, and the development of high-end development in the future will be a trend.

Wei Jun, chairman of the Ranger automobile, said: "the electric cars with a price of 50 thousand ~25 yuan must be fully hung up." It has been revealed that Ranger will push a high-end pure electric car with a price of more than 300,000 yuan against the Standard Tesla Model S. In addition, the new force has sold a number of high-end models, the future of the first mass production vehicle K50, subsidized product prices of 6868,000 yuan; Ulara ES8 subsidized product prices of 448,000 yuan.

Cui Dongshu, secretary-general of the National Joint Committee on Passenger Car Market Information, believes that the high-end private consumption is a major trend in China's automobile consumption. In the current domestic passenger car market, luxury car sales performance is better. At present, the automobile market is developing rapidly in the direction of intelligence and electrification. Foreign capital, joint venture and local competition are fierce.

Pressure to the upper and middle reaches

With subsidies declining and domestic and international market competition intensifying, the development of new energy vehicles "high-end" is conducting to the upstream and middle of the industrial chain, resulting in intensified polarization of the industry. In addition, the performance of many automobile companies has declined this year, downstream vehicle companies also bring pressure on the performance of upstream and middle enterprises.

A recent study by Gold Securities showed that cobalt prices in the upstream resources are expected to continue sideways, lithium prices are expected to stop falling and stabilize, nickel and rare earth prices will be slightly volatile. There is no big rebound room for upstream resources as a whole. By the end of October, due to the start of the depot cycle of battery factories, prices have a downward risk again, and the short-term market of the upstream battery factories may be disturbed by subsidy policies.

According to the forecast for the first three quarters of 2018, Ningde Times (300750.SZ) estimated net profit of shareholders of listed companies after deduction of non-listed companies to be 1.954-2.032 billion yuan, an increase of 80.57% - 87.75% year-on-year; Guoxuan Gaoke (002074.SZ) estimated net profit of 641 million-700 million yuan in January-September, compared with the same period last year. It was 640 million yuan, an increase of 0.21% to 9.43% over the same period.

The other side of the sharp rise in performance is that the net interest rate of battery companies is vulnerable to upstream and downstream businesses. According to the semi-annual report of 2018, Ningde Times achieved a total revenue of 9.36 billion yuan, an increase of 48.69 percent over the same period of last year, but net profit was 910 million yuan, a decrease of 49.70 percent over the same period of last year. Net interest rates in the first quarter and the second quarter were 7.3% and 7.6% respectively, corresponding to a net profit of about 100 million yuan on 1GWh battery production. Low gross margin became a factor of market concern.

On the one hand, under the situation of slowing sales in the automotive market, excess power battery capacity, downstream automotive companies in the purchase of batteries keep pressing prices, making the battery company's gross margin is compressed; on the other hand, the high price of raw materials, but also to the battery manufacturing costs brought some pressure. However, the recent decline in raw material prices has contributed to a rise in net interest rates for battery companies.

The extension and penetration of vehicle manufacturing enterprises to the industrial chain also affect the enterprises in the industrial chain. Yan Jinghui believes that high-end brands such as BMW and Mercedes-Benz as power batteries not only have accumulated technology, but also have accumulated users and reputation. Leading batteries companies such as Ningde times have already occupied a certain market share when foreign enterprises enter the competition, and have a first-mover advantage. Through competition, the market can be benign development. The reporter wrote a letter about how to deal with the competition of multinational enterprises in Ningde.

At present, the country's entry threshold to the industrial chain has been raised, the lithium-ion equipment industry has the scale strength, the equipment giants covering the main manufacturing links of power batteries have gradually formed, the concentration of the industry is gradually improving, integration is also accelerating the arrival. "The change of subsidy policy, starting from downstream automobile enterprises, has a direct impact on the capital cycle of the entire industrial chain. Leading enterprises are well received by the market because of their good reputation. Small and medium-sized enterprises will face greater pressure because of lack of funds and technology," Merco told reporters.

SME survival dilemma

The polarization rate of battery industry is increasing, and the industry is developing "cold and hot uneven". According to the "Blue Book on Power Batteries" in 2018, the top 20 power battery enterprises accounted for 87% of the total, and the power battery industry in China showed a trend of increasing concentration.

Dongfeng Securities recently reported that power batteries will maintain a composite growth rate of more than 25% by 2030, but the rapid expansion of domestic battery capacity in the past few years has led to phased and structural overcapacity. Due to the selection of vehicle companies in the dimensions of safety, energy density, cost, multiple performance and cycle times, it is expected that leading enterprises will quickly gain a high share and the industry structure will be clear.

Small and medium-sized enterprises are facing the dilemma of continuous decline in performance. Taking Guizhou Anda Technological Energy Co., Ltd. (hereinafter referred to as "Anda Technologies", 830809.OC) as an example, on October 15, the company disclosed its earnings forecast for the first three quarters of 2018. The company predicted a net profit of 65 million to 71 million yuan from January 1 to September 30, down 52.64% to 48.27% from the same period last year. The company made a profit of 137 million yuan.

Anda Technologies had previously planned an IPO in December 2017, terminated its IPO application on August 24 and withdrew its application to the SFC. According to the prospectus, Anda Technologies disclosed a total of 21 risks such as high customer concentration, the risk of technological route changes, the risk of new energy automobile industry policy changes.

Anda Technologies Limited on June 18, 2014, the new third board, mainly engaged in iron phosphate, lithium iron phosphate research and development, production, sales, the main customers are BYD, Hefei Guoxuan, China Airlines Lithium-ion battery manufacturers. For the reasons for the decline in performance, the company said the third quarter results of major changes in the main reason for increased competition in the industry, power battery cathode materials sales prices fell sharply.

In July this year, Dongguan Kaijin New Energy Technology Co., Ltd. (hereinafter referred to as "Kaijin Energy") was rejected by the NDRC for its first issue. Kaijin Energy is engaged in research and development, production and sales of negative materials for power batteries. The NDRC has raised a number of questions about it, among which it relies heavily on the related party Ningde Age and its achievements. The decline was an important reason. According to the financial report, the selling price of Kaijin's main energy products declined year by year and the gross profit rate fluctuated continuously during the reporting period.

On June 27, Chen Qingtai, chairman of China Electric Vehicle Association, said at the "International Summit Forum on Lithium Industry and Power Batteries 2018" that the number of power battery supporting enterprises has decreased from 150 in 2016 to less than 100 in 2017.

The decline in performance and the shortage of funds are accelerating the industry shuffling, Merck said, "the pressure on the profit side of automobile companies will be transmitted to the upstream enterprises. Industrial chain industry shuffle will intensify, the next few years will be a test of the new energy automobile industry chain on the survival of enterprises in the key period, SMEs in addition to ensuring stable cash flow, but also should pay attention to technology research and development investment and brand building.


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