The recent sharp rise in the price of upstream raw materials has put collective pressure on the profits of the power battery industry. At the same time, with the TWH (billion KWH) era approaching, the global competition in the power battery industry is becoming increasingly fierce.
Contemporary Amperex Technology Co.Limited(300750) deputy general manager Jiang Li said in an interview with China Securities Journal Taurus recently that under the background of jointly promoting the “double carbon” goal in the world, the development of the new energy industry will not change due to these short-term fluctuations, and the prospect is still broad. The company has responded through many measures such as upstream layout and resource recovery. In addition, the company is accelerating the expansion of production to meet the future market demand, and strengthening the company’s leading position in the industry through the dual business drive of power battery and energy storage.
short-term cost pressure for long-term competitive advantage
China Securities Journal: the new energy industry has experienced a year of rapid development and many changes have taken place. The company’s 2021 annual report and the first quarterly report of 2022 have been disclosed. Behind these figures, please talk about the changes of the company itself
Jiang Li: there have been many changes over the past year. First, the company’s market competitiveness has become stronger. According to SNE research, the company ranked first in global power battery shipments in 2021 for five consecutive years. From January to March this year, the global market share of power battery shipments reached 35%, and the market share continued to grow. In terms of energy storage business, the company achieved the best performance in the world for the first time in 2021, and its revenue increased by more than 6 times year-on-year. The company actively develops customers and signs strategic cooperation agreements with national energy group, China Energy Engineering Corporation Limited(601868) , China Huadian, Three Gorges group, Sungrow Power Supply Co.Ltd(300274) , Atlas, Eaton and other enterprises; Actively participate in the exploration of local energy storage business models and help China’s first GWH level shared energy storage project group land in Shandong. In addition, the company’s products are also exported to 35 countries and regions around the world, covering a variety of application scenarios such as new energy power generation, peak shaving and frequency modulation independent power stations, green mines and so on.
Secondly, the company’s leading edge in technology is increasing. By the end of 2021, the company had more than 10000 R & D personnel, owned and applied for more than 10000 foreign patents, and its scale and growth rate were leading in the industry. In 2021, the company invested 7.7 billion yuan in R & D, a year-on-year increase of 115%. It has successively launched 12000 long-life batteries, sodium ion batteries, Kirin batteries, etc. at the same time, it has reserved technologies in multiple technical routes such as solid-state batteries, cobalt free batteries and negative metal batteries. Among the mass-produced models, the company’s battery has always maintained a leading position in performance.
Third, the company’s globalization strategy is further deepened. As the world’s leading innovative technology enterprise, the company has focused on expanding the international market and in-depth cooperation with overseas mainstream automobile enterprises since its establishment. In recent years, the scale of overseas order delivery has increased rapidly. In 2021, overseas business revenue accounted for more than 20%, which has become an important part of the company’s revenue; The first overseas factory is located in Thuringia, Germany. The module has been put into operation and has obtained the production license of electric cell.
In addition, the recent changes from the industrial chain, especially the upstream price, have had a certain impact on the company. Since 2021, major battery raw materials have increased significantly. In particular, lithium carbonate, although not scarce, has accelerated its price rise since the end of last year, with a year-on-year increase of more than 10 times, due to the fact that the upstream expansion rate can not keep up with the downstream demand growth and the superposition of artificial speculation and other factors. This put great pressure on the company’s product costs, resulting in a decline in the company’s net profit in the first quarter, which also affected the overall profitability of the battery industry.
China Securities Journal: just mentioned that the main reason for the decline in net profit in the first quarter was the rise in the price of upstream raw materials. What measures do Contemporary Amperex Technology Co.Limited(300750) have to deal with it
Jiang Li: facing the impact of this round of sharp price rise of upstream raw materials, Contemporary Amperex Technology Co.Limited(300750) as a leading power battery enterprise, has always paid attention to the long-term cooperative relationship with customers and hopes to maintain the stable and healthy development of the industry. From last year to the first quarter of this year, it mainly bears the cost pressure of raw material price rise through itself. However, this round of price increases has a wide range and a large range, which has had an impact on the healthy development of the industry. The company has to negotiate with customers in a friendly way, adjust the battery price dynamically, and jointly face the pressure of the supply chain. Customers also express their understanding and support. Recently, the price negotiation of major customers has been basically completed, but it was not reflected in the first quarter due to the time required for negotiation and price transmission.
With the gradual implementation of communication and negotiation with customers, the company’s future profits will be reasonably repaired. The price fluctuation of upstream raw materials is a phased impact. With the expansion of resources and supply chain, the supply and demand situation will gradually improve and the price will return to the normal level. In addition, Contemporary Amperex Technology Co.Limited(300750) has also strengthened the investment and layout of the upstream supply chain in the past two years, which will help to further ensure the supply of raw materials and stabilize the purchase price. In the long run, in the context of the global joint promotion of the “double carbon” goal, the development of the new energy industry will not change due to these short-term fluctuations, and the prospect is still broad.
capacity improvement to meet the arrival of TWH era
China Securities Journal: according to the data, in 2021, Contemporary Amperex Technology Co.Limited(300750) capacity utilization rate reached 95%. Recently, the company’s fixed increase of 45 billion yuan has been approved. What impact will this fixed increase have on the development of the company
Jiang Li: through overseas fixed points and binding with dimensions, Contemporary Amperex Technology Co.Limited(300750) has obtained a large number of long-term orders. At present, the TWH era is accelerating, and the company needs to rapidly improve its delivery capacity to meet the needs of customers. All the capital raised by the company this time will be used for production capacity construction and R & D investment. This is an arrangement made by the company according to business needs and capital planning under the background of rapid development of the industry, which will further improve the company’s production capacity and R & D capacity, better realize customer delivery, and increase product R & D and innovation, so as to help enhance the company’s market competitiveness and consolidate its market leading position. At present, the international competition of power battery and energy storage battery is also very fierce. LG was listed at the beginning of this year, and the one-time financing amount reached 68 billion yuan. Next, the pace of its global layout will also be accelerated. Therefore, this financing is very important for the company to participate in international competition. This approval also reflects the support of the government and regulators to the company. At present, many investment institutions are also very interested in the fixed increase of the company, and the subsequent companies will choose a reasonable time to start and complete the issuance.
China Securities Journal: we are concerned that the epidemic prevention and control in Ningde City has won the stars. Has the sudden outbreak in April affected the company’s business development? What is the current production situation
Jiang Li: the provincial, municipal, district and county governments responded quickly and dealt with the epidemic decisively, and implemented various prevention and control measures “quickly, accurately, strictly and carefully”.
At present, Ningde region has been fully unsealed on April 30. On the one hand, the company actively takes measures to connect with local governments and local suppliers, and takes all feasible measures to do a good job in the production and logistics guarantee of the enterprise, and all links cooperate effectively, so as to ensure the stable operation of relevant industrial chains and supply chains to the greatest extent; On the other hand, under the guidance of the epidemic prevention department of the territorial Government, production and operation activities are organized and closed-loop management is strictly implemented. At the same time, the company maintains communication with clients at any time to minimize the impact. At present, although the production plan declined slightly in April, the company has resumed stable production, and the epidemic has little impact on the company’s production.
power and energy storage dual drive to strengthen market position
China Securities Journal: Contemporary Amperex Technology Co.Limited(300750) won the first place in power battery and energy storage for the first time in 2021. What is the development trend and space of power and energy storage battery industry in the future
Jiang Li: in recent years, the global ecological environment and climate warming have become increasingly prominent. Governments of all countries are accelerating the transformation of energy structure to clean energy, and have successively announced the goal of “carbon emission reduction”. Global carbon emissions mainly come from electricity, transportation and other fields. According to the statistics of carbon monitor, the carbon emissions of power industry and transportation industry accounted for 38.9% and 20.3% of global carbon emissions respectively in 2021. The power battery and energy storage battery based on electrochemical technology are the power source of new energy vehicles and an important guarantee for clean energy consumption. Their important value is gradually highlighted under the background of “carbon emission reduction”, and the market space is broad.
In terms of new energy vehicles, according to the data of China Automobile Industry Association, the sales volume of Shanxi Guoxin Energy Corporation Limited(600617) vehicles in the middle of 2021 was 3.521 million, a year-on-year increase of 1.6 times; The electrification rate was 13.4%, an increase of 8 percentage points year-on-year. With the continuous improvement of the market penetration of new energy vehicles, the installed capacity of global power batteries is also growing rapidly. According to SNE research data, the installed capacity of global power batteries in 2021 was 296.8gwh, with a year-on-year increase of 102.18%. The research institute predicts that the global power battery installed capacity is expected to be about 3twh in 2030.
In terms of the energy storage battery market, according to the statistics of the International Renewable Energy Agency, 257gw of renewable energy such as wind power and photovoltaic will be newly installed in 2021, and the demand for chemical energy storage with electricity will grow rapidly. The research institute predicts that the global installed capacity of energy storage batteries will reach 1twh in 2030.
China Securities Journal: facing the broad market, what advantages does Contemporary Amperex Technology Co.Limited(300750) have to continuously obtain market share and ensure market position
Jiang Li: under the influence of supply chain and epidemic situation, the company still maintained the continuous improvement of market share, which reflects the recognition of the company by customers and the market. This trust is mainly based on the core competitiveness of Contemporary Amperex Technology Co.Limited(300750) in the following aspects:
Forward looking strategic layout is the core. The company adheres to three strategic directions and four innovations. The three strategic directions include: Taking “electrochemical energy storage + renewable energy power generation” as the core, realizing the substitution of fixed fossil energy and getting rid of the dependence on thermal power generation; With “power battery + new energy vehicle” as the core, realize the replacement of mobile fossil energy and get rid of the dependence on oil in the field of transportation; With “electrification + intellectualization” as the core, promote the integrated innovation of market applications and provide sustainable, universal and reliable energy sources for all walks of life. According to the guidance of the three strategic development directions, the company has built four innovation systems: material system, system structure, extreme manufacturing and business model. First, go deep into the micro mechanism of materials and develop the material system innovation of high-performance materials; The second is to realize the system structure innovation of reducing system energy consumption, improving efficiency and reducing cost through system optimization through CTP and CTC; Third, we are committed to creating flexible, efficient, low-cost, high-quality and self upgrading extreme manufacturing innovation; Fourth, open up the business model innovation of the whole industrial chain from raw materials, battery manufacturing, operation services and material recycling.
Under the guidance of three directions and four innovations, the company has achieved fruitful results and outstanding competitive advantages. In terms of technology accumulation, the company has created a comprehensive R & D system, the R & D achievements continue to be in the leading position in the industry, and the number of patents has increased rapidly. By licensing ATL technology, it has obtained a technology license fee of US $150 million per year, and signed a CTP technology license and cooperation intention agreement with Hyundai Mobis. Next, the continuous launch of m3p, sodium ion battery and Kirin battery will further lead the technological development of the industry.
In terms of supply chain layout, the company strengthened its resource advantages through whole industry chain cooperation, and conducted in-depth layout in resources, materials, recycling and other aspects, which stably ensured the stability and cost control of the supply chain. It also achieved full coverage of key nodes through vertical layout and cooperative development of the industrial chain. The landing of Jiangxi lithium carbonate base and the promotion of overseas key resource projects such as Indonesia nickel will reserve granaries for the development of the company on the resource side.
In terms of manufacturing capacity, the company is committed to building an extreme manufacturing production system, continuously improving production efficiency and operation quality, providing a strong guarantee for high-quality delivery and ensuring product safety and quality. In 2021, the company was rated as the only “lighthouse factory” in the global battery industry by Davos forum. Through production line transformation and green logistics, Sichuan Yibin base achieved carbon neutralization in 2021, becoming the world’s first battery zero carbon factory.
In terms of customer ecology, the company maintains long-term and in-depth cooperative relations with almost all mainstream auto enterprises in the world, and customer advantages support global expansion; At the same time, in terms of energy storage, the company has continued cooperation with the two major power grids, “five major and four small” power generation enterprises and international well-known customers; In terms of medium-sized batteries, the company has established a joint venture with ATL. The two sides complement each other’s advantages and comprehensively promote the electrification of electric second wheel, home storage, UAV and other application scenarios.
In terms of business model innovation, the company promotes integrated innovation in multiple market application scenarios, covering smart mines, power exchange services, optical storage and charging inspection, smart ports, electric ships and other fields. The company launched evogo combined power exchange solution this year and took the lead in landing in Xiamen. This not only enables the battery to realize the closed loop of the value chain in the whole life cycle, but also can truly realize the recycling of battery raw materials by building urban mines. At present, the company has reached cooperation with a number of automobile enterprises.
