What does CATL think of the self-developed battery acceleration by car companies?

2024-01-03

A week before the end of 2023, CATL released a meaningful video on its official Weibo account titled "Which New Energy Vehicles Are Using CATL Batteries". In the main film, CATL lists over 30 well-known brand models, including Ideal, NIO, WENJIE, Tesla, Geely Krypton, BMW, Avita, and more.

At the end of the video, CATL also added a sentence: Choose a tram and identify CATL batteries. After the video was released, CATL continued to post multiple Weibo posts and brought up the topic of "choosing electric cars and identifying CATL batteries", aiming to remind consumers that CATL batteries are an indispensable part of current new energy vehicle models.

As a third-party independent power battery supplier, directly promoting the brand to consumers seems to be the first time in the development process of CATL. After all, as a stable leader in power batteries, CATL is well-known in the automotive industry and holds a solid position.

Why does CATL constantly suggest to consumers while showcasing its muscles? With the rapid development of the new energy vehicle market, car companies are accelerating the pace of battery self-development, and companies as strong as CATL are also beginning to feel the crisis. New energy vehicles travel thousands of miles every day, and the market structure of power batteries is not completely unchanged. Perhaps the Ningde era is also a bit panicked.

Car companies, we don't want to work anymore

The just concluded December was not a good month for the Ningde era. Partners have announced the progress of self-developed power batteries, giving CATL a sense of betrayal.

On December 14th last year, Jike officially released its first self-developed 800V lithium iron phosphate ultra fast charging "brick battery". The newly launched Extreme Krypton 007 will also be equipped with this "brick battery" for the first time.

Jike Automobile and CATL have always been close partners. The flagship Kirin battery of Ningde Times was first equipped with the Jike 009 model, which was later installed on the Jike 001. At the capital level, CATL has also participated in two rounds of financing for Jike Automobile. In addition, CATL and Geely established "CATL Geely", which specializes in producing batteries for Geely cars.

At this time, Jike Automobile announced the mass production of its self-developed "golden brick battery", which can be described as a mixed bag with CATL.

NIO, a customer on Ningde Times, also has plans to develop their own batteries. In early December, it was reported that NIO Automobile was planning to split its battery manufacturing business to achieve independent financing. Not long ago, Li Bin, the founder of NIO Auto, personally measured the range of a 150kWh ultra long battery pack.

It is worth mentioning that this 150kWh battery pack is a semi-solid state battery released by NIO Day in 2021, with an energy density of 360Wh/kg, which is higher than the Ningde Times Kirin battery (255Wh/kg). At the same time, this battery is also independently developed by NIO and will be put into mass production in April 2024.

These two are only representative car companies that develop their own batteries. On December 12th last year, GAC Aion announced the official completion of its Inpai Battery Intelligent Ecological Factory. The factory plans to build a 36GWh power battery and energy storage battery production capacity, which can meet the loading needs of 600000 new energy vehicles. Compared to the self-developed process of other car companies, GAC Aion has entered the substantive production stage.

According to preliminary statistics from GAC, more than 15 car companies have announced plans to develop their own batteries, including not only GAC Aion, NIO, and Jike, but also Changan, Great Wall, Changan, Nezha, Lantu, Wuling, SAIC, BMW, Volkswagen, Ford, Toyota, Honda, and other car companies. And many of these car companies are customers of CATL.

Since 2023, CATL has been facing a situation where its related clients have started their own research journey and are gradually entering the implementation stage. In other words, the dependence of car companies on CATL batteries will gradually decrease.

From the perspective of automotive companies, having received strong support from CATL, choosing CATL's high-quality batteries also means stronger competitiveness. However, it was also constrained by the Ningde era. Once upon a time, the supply of power batteries was in short supply, and in the face of a "battery shortage", the head of a certain car company had to personally queue up for batteries.

Nowadays, power batteries are entering an era of overcapacity, and reducing costs and increasing efficiency has become an important assessment goal for automotive companies. The first step in cost reduction is to find a solution from the power batteries that account for 40% -60% of automotive products. As Zeng Qinghong, Chairman of GAC Group, said, "Car companies are all working for CATL."

According to institutional calculations, taking Tesla's self-developed 4680 battery as an example, it can save about 86% of production costs and reduce costs per kWh by 69%. Therefore, for car companies with a certain scale, self research may be an effective way to reduce costs.

Ningde Times: Please Don't Leave Me

Although there is a sense of crisis in the Ningde era, it is not idle.

Faced with the "two-way" bet of self research and external procurement by car companies, CATL continues to deeply bind its supply relationship with car companies.

During the December period when car companies announced the progress of self-developed batteries, CATL signed a cooperation agreement with Celes Group on December 20th. It is worth mentioning that Ningde Times has signed a deepening cooperation agreement with Selis Group, and Ningde Times Chairman Zeng Yuqun personally attended.

According to the agreement, both parties will deepen cooperation in areas such as overcharging technology, battery safety, and integrated vehicle charging, and work together to expand overseas business. The more core content is that CATL will provide battery products for the AITO WENJIE series of vehicles in the long term, and deeply collaborate in new product research and development, new technologies, and new materials.

In fact, as early as 2022, Ningde Times had already signed a five-year cooperation agreement with Celes Group. Now, we have once again signed a cooperation agreement for the AITO Wenjie series models, and everyone knows the good intentions involved.

Perhaps the situation in front of the Ningde era is not as beautiful as imagined. What CATL needs to do is to face the competition and crack down. If car companies choose to escape from themselves, they should continue to strengthen cooperation and close any cracks that may arise.

In terms of technological layout, Ningde Era has already begun a self revolution. The Kirin battery has always been a heavyweight product of CATL, capable of achieving a range of 1000km. However, due to its high price, the Kirin battery is more suitable for high-end models, so the supporting quantity is not very large.

Seeing the trend of market changes, Ningde Times launched Shenxing Battery in August last year. Thisan overcharged battery made of lithium iron phosphate material and capable of reaching 4C, with a range of 400 kilometers after 10 minutes of charging. In terms of cost, Shenxing Battery is more economical and is also the flagship product of Ningde Times targeting models in the price range of 150000 to 300000 yuan.

With the release of Shenxing Battery, CATL's social circle has also been significantly expanded, with car companies such as Nezha, Chery, Geely, Lantu, BAIC, and GAC extending olive branches to it.

With the acceleration of the pace of self research by car companies, both car companies and CATL are rethinking the issue of bargaining power. On the one hand, car companies master core technologies through self-developed batteries, enhance their competitiveness, and create a moat in their own development process to enhance their bargaining power in supply relationships.

On the other hand, self-developed batteries are not something that can be achieved overnight. In the process of technology transformation and manufacturing, they also need to undergo multiple verifications, and the technical threshold, time, and labor and material costs will inevitably be high. Therefore, it is necessary to continue to cooperate deeply with CATL in order to smoothly navigate through the critical period of development.

From the perspectives of both parties, their cooperation has also begun to enter a concession stage. Car companies have improved their bargaining power through self research, and CATL is also gradually loosening its cooperation intensity and starting to build new supply relationships. Or continue to deeply bind to obtain visible market orders, or research new technologies to resist the impact of self-developed car companies.

Industry insiders have revealed that CATL has drafted a new price agreement with its partner car companies, with some changes in procurement prices. However, there are also conditions for reaching such an agreement. Car companies that accept the price concession agreement from CATL must purchase CATL batteries at a rate of no less than 80% within 3 years, and must make a partial advance payment.

Will the future still be dominated by the "King of Ning"?

This has to be associated with the large-scale implementation of self-developed batteries. Will the car companies that promised "self-developed+outsourced" make the once inseparable "King of Ning" become the "abandoned child" of the times?

In the capital market, the situation of Ningde era is somewhat reflected. In 2021, it was officially the year of high incidence of battery shortage, and the market value of Ningde Times reached 1.6 trillion yuan. After 2023, the market value of Ningde Times has significantly shrunk. After returning to a trillion yuan market value on September 6 last year, its market value has now evaporated by about 315.7 billion yuan. As of January 3rd, the stock price of Ningde Times was 155.58 yuan per share, with a total market value of 684.3 billion yuan.

In the supporting market, CATL's market share is also gradually declining. According to data from the China Automotive Power Battery Industry Alliance, the proportion of Ningde Times installed vehicles in 2021 was as high as 52.1%, but in 2022, the proportion declined to 48.2%. According to data from GAC Automotive Research Institute, the proportion of Ningde Era's installed vehicles continued to decline to 42.91% from January to November 2023.

Even more severe is the capacity utilization rate of CATL. The power battery industry is facing a crisis of overcapacity, with Ningde Times achieving a production capacity utilization rate of 95% and 83.4% in 2021 and 2022, respectively. In the first half of 2023, the capacity utilization rate of CATL has declined to 61%. Industry insiders believe that this situation may continue until 2025.

Of course, despite facing unfavorable situations, the position of the leader of Ningde Era is still difficult to shake in the short term. For CATL, it did not sit idly by, but actively followed or even led the new trend of new energy vehicles.

In terms of business layout, in addition to launching cost-effective Shenxing batteries, CATL is also actively expanding its energy storage and battery swapping businesses. At the same time, CATL is also researching forward-looking technologies such as condensed state batteries, solid-state batteries, and sodium ion batteries. In terms of overseas markets, facing the extremely competitive domestic situation, CATL has also expanded its focus to overseas markets and actively expanded its overseas customers. For example, collaborating with Stellantis to provide lithium iron phosphate batteries for the European market.

In addition, CATL's strategic market is not focused on a single field in the automotive industry. With the arrival of the era of carbon neutrality, in addition to power and energy storage, comprehensive electrification in fields such as construction machinery, heavy-duty trucks, ships, and aviation is also about to begin. The new energy industry has at least 20 times the market space, which will also be a new growth point for CATL's business.

Anyway, the leading position of Ningde era is loosening. However, the response from CATL is also very clear: from the perspective of ensuring supply, car companies may produce some batteries themselves. For its positioning, CATL has always been a leading independent third-party power battery supplier globally, providing the most competitive, cost-effective, and diverse product solutions globally.

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