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Power battery New Deal accelerates industry reshuffle, 80% of companies will be eliminated
Jan 05, 2019


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On December 24, the official website of the Ministry of Finance announced that since January 1, 2019, China will cancel the provisional tax rate for the import of lithium-ion battery cells for new energy vehicles and resume the implementation of the MFN tariff rate.

This new policy will accelerate the reshuffle of China's power battery market.

Industry insiders speculate that after the new deal is issued, by 2020, there will be only 20-30 power battery companies, and more than 80% will be eliminated.

The last round of shuffling began in 2016.With the gradual reduction of the subsidy approval rate for new energy vehicles, the power battery industry has entered a cold winter, and the number of supporting enterprises has decreased from 150 to less than 100 in 2017.

But before that, China Dynamic Gas Battery Company enjoyed a three-year policy dividend period.

In 2016, China's Ministry of Industry and Information Technology released a “white list” of power battery companies.Foreign-funded enterprises including Panasonic, LG, Samsung, etc. were not selected.In China, electric vehicles need to enter the battery catalog in order to get state subsidies and local subsidies.

This "policy barrier" has spawned the rise of China's domestic power battery companies represented by the Ningde era.In 2017, the Ningde era surpassed the old giant Panasonic for the first time and won the first global sales crown.

In fact, before the “big reshuffle” came, the power battery leading company was in trouble.

The leading company encountered the first down limit after the listing in Ningde era; BYD's performance price both fell; Wattmar was in deep debt crisis; lion technology exposed cash flow tension; Miaosheng, Zhihang and other companies suffered production stoppages.

The problems in the power battery industry are gradually exposed in the predicament of leading companies.But even worse, the foreign giants are about to be allowed to re-enter the Chinese market.

Zeng Yiqun, the founder of the Ningde era, always maintained a sense of crisis.“If a foreign company comes back in the second half of the year, can we still sleep with our eyes closed?” He asked the staff in an internal mail.

His sense of crisis stems from the impending destruction of China's “policy barriers” – the Chinese government plans to completely abolish subsidies for electric vehicles after 2020.This means that the Japanese and South Korean power battery giants that once withdrew from the Chinese market will make a comeback.

Nowadays, under the background of the Sino-US trade war, the policy has shifted and the “white list” has begun to open to foreign-funded enterprises.

In the new white list, Samsung Huanxin (Xi'an) Power Battery Co., Ltd., Nanjing Lejin Chemical New Energy Battery Co., Ltd. (lg Chemical), Beijing Electronic Control Aisi Technology Co., Ltd. (sk) and other three Korean companies were finally selected. They immediately restarted their business in China.

On November 29 this year, the second phase of the new plant of Samsung Huanxin Power Battery was started in Xi'an. After the project is completed, the annual production capacity will reach 60 million pieces. It is estimated that the newly added sales revenue will reach 12 billion yuan.

Under the New Deal, the cost of power batteries in countries such as Japan and South Korea will be further reduced.

In contrast, the cost of China's power battery companies remains high.An analysis report by UBS shows that the cost of Ningde era is higher than that of Panasonic by more than 35%, and the cost of lg chemistry and Samsung sdi is also lower than that of Ningde.

Although China's power battery companies will face international competition sooner or later, the regulatory authorities will issue a new deal to make them unprepared.

At present, Ningde era and BYD have combined to occupy more than 60% of the Chinese market, and domestic growth space is not large.Going overseas is an inevitable choice for finding new growth points.

In the first three years, policy protection has allowed local companies to rise.But now, they need to join the international competition in a more independent way.This year, changes in government policies have been in line with this new situation.

The cost of power batteries accounts for almost half of the cost of electric vehicles.The provisional tax rate for the import of lithium-ion battery cells for new energy vehicles has been lifted, and the regulatory authorities have worked hard – in the long run, this will force the price of new energy vehicles to fall.

After many years of support, the regulatory authorities suddenly decided not to “capture”. How will China Power Battery Company compete in the face of the returning foreign giants?