The potential of overseas markets for lithium battery companies is akin to the "siren's song," luring valiant youths to venture into the hot lands in search of "gold."
At the beginning of this year, CATL's Chairman Zeng Yuqun personally issued a "going global mobilization letter," internally referred to as the "Number One Document."
Since the third quarter of 2023, CATL's market share has surpassed that of LG Energy Solution, the global leader in power battery shipments, and this advantage has been maintained to date.
The latest data disclosed by the South Korean research institution SNE Research shows that CATL's market share in the power battery installation volume for the global market excluding China from January to July 2024 is 26.9%, surpassing LG Energy Solution's share of 26.2%.
However, Zeng Yuqun believes in the "Number One Document" that there is still "enormous room for growth" in overseas shares. Within the company, it is said that "whoever goes overseas is the hero of CATL."
Going global is no longer an option but a necessity; not going global means being out of the game. This is a consensus in the lithium battery industry. Following CATL, lithium battery companies are also expressing their intentions to go global.
Fengchao Energy's Chairman and CEO Yang Hongxin believes that Chinese power batteries now have a technological, production capacity, supply chain, and talent advantage, and going global is an inevitable trend. Farasis Energy也表示, overseas customers are one of the important sources of the company's operating income in 2024, and the company will formulate a clear layout for the overseas market.
The most significant attraction of lithium battery going global is the overseas gross margin, which is significantly higher than that domestically.
Looking at the semi-annual report, CATL's overseas business gross margin in the first half of the year was 29.65%, 4.47 percentage points higher than its domestic business. Second-tier battery manufacturers such as EVE Energy and Guoxuan High-Tech also performed well in their overseas businesses, achieving gross margins of 21.73% and 21.12%, respectively, which are 7.05 percentage points and 4.94 percentage points higher than domestically.On the one hand, the overseas expansion of Chinese power battery manufacturers has spurred the internationalization of the four major main material and equipment suppliers associated with them. According to data from InfoLink Consulting, by the end of 2023, there were already six battery cell factories operated by Chinese lithium battery manufacturers overseas, with planned overseas production capacity exceeding 579GWh (calculated solely based on cell capacity), and an additional planned capacity of 198.5GWh for the entire year of 2023. According to statistics from GGII (Gao Gong Industry Research Institute), in 2023, more than 20 lithium battery companies went abroad to build factories, with the majority being precursor and cathode material enterprises.
On the evening of September 23rd, two more companies in the lithium battery industry chain announced their plans to establish factories overseas, involving capacity investment plans for cathode materials and separators.
En捷 Corporation plans to invest in a lithium battery separator project in Malaysia with an annual production of 1 billion square meters, with an estimated investment amount of about 2 billion yuan. Wanrun New Energy plans to invest approximately $168 million (equivalent to 1.185 billion yuan) in the United States to build a 50,000-ton lithium iron phosphate capacity.
En捷 Corporation stated that the company's lithium battery separator products are mainly sold domestically and also exported to customers in Japan, South Korea, Europe, and the United States, with overseas sales revenue accounting for 20.04% in the first half of 2024. The United States is the first stop for Wanrun New Energy's overseas expansion, with most of its previous revenue coming from domestic sources, and overseas income in the first half of the year was only 16,800 yuan.
Xiandao Intelligence is one of the first domestic equipment manufacturers to go abroad. The person in charge of Xiandao Intelligence told the 21st Century Economic Report that as the Chinese new energy industry develops rapidly and its competitiveness gradually strengthens, along with the surge in demand in overseas markets, domestic equipment manufacturers have recognized the opportunities in overseas markets.
On the other hand, from "product going abroad" to "capacity going abroad," the Chinese lithium battery industry chain faces its own similar or different challenges in different destinations. Although the overseas opportunities are tempting, the companies are facing a "tough battle." Yang Hongxin believes that to avoid excessive competition overseas or falling into pitfalls, the entire battery industry chain needs high-level collaboration and sharing.
The scale of investment by Chinese battery companies going abroad is huge. According to the data from the "China Lithium Battery Industry Chain Enterprises Going Abroad Strategic Research Report (2024)," as of June 2024, the total overseas investment amount announced by Chinese lithium battery industry chain enterprises has reached 564.8 billion yuan, with Europe being the main destination for Chinese lithium battery industry chain enterprises, accounting for 37%, followed by the Southeast Asian region, while due to geopolitical influences, the investment share in the US market is only 10%.
The 21st Century Economic Report found that in the European region, Germany and Hungary are the "hot spots" for power battery companies going abroad. In the Southeast Asian market, countries such as Thailand, Malaysia, and Indonesia are gradually becoming emerging destinations for Chinese companies going abroad.
Among them, Indonesia has the world's largest reserves of nickel ore resources, which is an essential key material for producing electric vehicle batteries. The first overseas battery factory of Ruipu Lanjun, controlled by Qingshan Group, will be located in Indonesia. Longpan Technology also planned last year to jointly invest with LG New Energy to build a cathode material factory in Indonesia; Bettery plans to build an annual production of 160,000 tons of anode material project in Indonesia, with current annual production capacity already reaching half. CATL had already laid out related recycling capacity here in 2022.
In Europe, companies that went abroad earlier may enjoy the first batch of dividends from going abroad.A research report from Dongxing Securities points out that domestic battery manufacturers began planning and deploying production capacity in Europe as early as 2018, with the first batch of production capacity from Contemporary Amperex Technology Co., Limited (CATL) and Guoxuan High-Tech already operational. Europe's guidance and incentives for new energy vehicles are significant, with a steady increase in penetration rate, and domestic manufacturers continue to increase their investments, accelerating the construction of production capacity. It is expected that domestic manufacturers' production capacity in the European region will begin to be released intensively from 2025.
However, enterprises going global cannot avoid conflicts related to culture and trade. Industry insiders have told reporters from the 21st Century Economic Report that a series of requirements will increase the cost for Chinese enterprises to enter the European market, posing severe challenges to product exports and investment in factory construction. On the other hand, going global also faces challenges related to cultural differences and the recognition of NGOs in local issues.
In the North American market, to reduce the risks brought by geopolitical issues and to avoid the impact of trade protectionism, establishing independent factories and technology licensing are important ways for Chinese enterprises to go global. In 2023, CATL and Ford Motor Company announced a cooperation. Ford will build a battery factory in Michigan, USA, and own it, while CATL will provide establishment and operation services, and license battery patent technology. This model is called the "LRS lightweight asset output model."
"Chinese leading companies are expected to seize the window period of insufficient domestic battery production capacity in the United States to achieve production capacity landing, and maintain their current competitive advantage over Japanese and Korean manufacturers in the US market in terms of cost and technology, and continue to share the dividends of the North American market explosion," the research report from Dongxing Securities points out.
Li Hang, an analyst at Guohai Securities, believes that only enterprises with long-term operation capabilities, local factory establishment capabilities, historical cooperation experience, and cost advantages can support overseas layout. Future overseas competition will once again widen the gap between first and second-tier manufacturers.