In 2017, a price cut of more than 20% for power batteries had become almost inevitable. However, the pressing question remained: how could this reduction be achieved while still maintaining profitability? This was a critical concern for power battery companies around the globe.
With the inclusion of new energy development in the national 13th Five-Year Plan, the electric vehicle industry saw rapid growth. New energy vehicle production was projected to surpass 800,000 units in 2017. Looking ahead, the global new energy vehicle market was expected to sustain its fast-paced growth trajectory over the next decade.
Driven by the rising demand for cost-effective power batteries, the industry witnessed a surge in both vehicle sales and the subsequent growth of the power battery sector. This, in turn, fueled the demand for upstream materials, creating opportunities for the entire midstream industry chain.
China's power battery companies now hold a prominent position in the global market, with their market share growing rapidly. From 2011 to 2015, China’s market share increased by 15 percentage points. By 2020, the market scale was anticipated to reach 500 billion yuan.
High-performance power battery technology is crucial for the expansion of the new energy vehicle market. Current challenges include achieving longer lifespans, lower costs, greater load capacity, better performance in harsh environments, and support for fast charging. Cost reduction remains a key focus, with expectations that battery prices would drop below 1 yuan/Wh by 2020.
Lowering the cost of power batteries is essential for making new energy vehicles more affordable. Currently, half the cost of these vehicles stems from power batteries. Therefore, reducing battery costs is vital for breaking the price barrier and making them accessible to the general public.
The rise in raw material prices, particularly cobalt, nickel, copper, and lithium carbonate, has increased production costs for power battery companies. While this trend benefits upstream suppliers, it poses challenges for battery manufacturers seeking to reduce costs. Ensuring a balanced supply-demand relationship in the raw material market is crucial to prevent excessive price hikes.
Despite these challenges, advancements in battery technology are driving industry growth. The current battery route for new energy vehicles appears to be set, with technological innovation becoming the primary battleground for power battery companies. Over the past five years, the specific energy of lithium-ion batteries has doubled, and costs are expected to fall to 1 yuan/Wh by 2020.
To achieve the necessary price reductions, battery companies must focus on scaling up production and standardizing processes. Industry leaders suggest that achieving economies of scale will significantly reduce costs by spreading R&D and manufacturing expenses across larger volumes. Standardizing PACK modules can also reduce design and after-sales costs, as well as maximize the value of used batteries.
Currently, the finished product rate in the power battery industry is below 80%. Improving this rate is essential for cost reduction. This requires battery companies to adapt their product lines and undergo comprehensive upgrades, focusing on technological advancements and improving material quality, equipment precision, and process consistency.
Policy changes have also influenced the industry, requiring companies to adjust their production lines to meet updated standards. While these changes create uncertainty, they ultimately contribute to the stability and cost reduction of the power battery sector. Companies like BYD, SAIC, and CATL are responding by expanding independently or forming strategic partnerships to enhance product fit and performance.
Looking forward, addressing issues like energy density, lifespan, safety, and affordability will remain central to the industry’s success. Collaboration along the supply chain, along with continued technological innovation, will be key to overcoming these challenges and ensuring the sustainable growth of the power battery market.
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