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With the support of policies and markets, China has developed into the world's largest market for the production and sales of new energy vehicles. With the rapid expansion of the new energy vehicle and power battery industry, some new problems and situations in the industry are gradually emerging; On the other hand, subsidy and support policies are accelerating their decline, and international car and battery companies are expanding into the Chinese market, intensifying competition. At the recently held "2018 First International Exchange Conference on New Energy Vehicles and Power Batteries (CIBF Shenzhen)", Wu Zhixin, Deputy General Manager of China Automotive Technology Research Center Co., Ltd. (hereinafter referred to as "China Automotive Research"), gave an exclusive interview to Battery China Network, expressing his views on the current development status, hot issues and trends of China's new energy vehicle and power battery industry.

The manifestation of industrial agglomeration effect

The rapid rise of the new energy vehicle industry has also driven the development and growth of related industries in the power battery, lithium-ion equipment and other industrial chains. Wu Zhixin stated that in the past few years, the domestic power battery industry not only lagged behind Japan and South Korea in technology, but also needed to import battery production equipment from Japan and South Korea. China has laid out its new energy vehicle industry earlier and received strong policy support. The domestic key components industry chain, such as new energy vehicles and power batteries, has gradually formed. Currently, the entire industry chain has made great progress in technological innovation, product quality, and production line intelligence. Some links have already compared with Japan and South Korea, and even surpassed them, and are approaching advantageous enterprises.

According to statistics from the Power Battery Application Branch of the China Chemical and Physical Power Supply Industry Association, the sum of the installed capacity of the top 10 power battery companies in China in 2017 accounted for 71% of the total installed capacity, while the top 20 companies accounted for 87% of the installed capacity. "In 2016, there were over 200 power battery companies in China, but by 2017, they had shrunk to just over 100. This means that the remaining 80-90 companies share less than 20% of the market share, and the agglomeration effect of the power battery industry is evident, with a rapid increase in industrial concentration." Wu Zhixin further added that only through agglomeration can there be benefits and competitiveness, and the entire industry can end the mixed situation of good and bad and enter a healthy development track. He believes that the number of power battery companies may further decrease in 2018.

Overcapacity is a pseudo proposition

The latest data from the China Association of Automobile Manufacturers shows that the sales of new energy vehicles in China from January to May this year were 328000 units, while the sales of cars in China reached 11.7924 million units during the same period. Wu Zhixin stated that currently everyone is talking about overcapacity, but overcapacity is a false proposition. It is important to distinguish between phased overcapacity and structural overcapacity in the power battery industry. "At present, the proportion of new energy vehicles is less than 3%. If the proportion reaches 10%, then the current power battery production capacity is completely insufficient. This kind of overcapacity should be an inevitable result of the market economy in the short term. However, at the same time, we also need to be cautious of structural overcapacity. As the energy density of power batteries gradually increases, we advocate launching more high-end production capacity projects, and low-end production capacity will definitely be eliminated," Wu Zhixin added, The product deployment of whole vehicle enterprises takes some time, and battery enterprises must deploy production capacity in advance. Otherwise, when large-scale demand approaches, they will not be able to keep up with the pace of whole vehicle enterprises. At the same time, he also pointed out that due to the development of new energy vehicles, the cost of power batteries has significantly decreased compared to before, which provides opportunities for the promotion and application of power batteries in other industries.

Industry standard system urgently needs to be established

There are many types, specifications, and sizes of power batteries in the current market, which greatly inconvenience the widespread application of batteries in automobiles, energy storage, and other fields. Therefore, it is urgent to establish a standard system for power batteries. Wu Zhixin believes that in the fields of automobiles and power batteries, some leading backbone enterprises may influence the market through their own product standards, gradually being accepted by customers and industry chain related enterprises, and gradually forming some industry common standards; In addition, the government, associations, and enterprises will promote the formulation of industry standards and policies through communication and coordination to ensure the healthy development of the industry. He also believes that as the power battery industry gradually matures, the specifications of power batteries in the market will eventually become similar to flashlight batteries, forming batteries with only a few specifications such as number one, number two, number five, and number seven.

In addition, the formulation of battery standards is also beneficial for the full lifecycle use of batteries. With the retirement trend of power batteries assembled in early new energy vehicles, the cascading utilization of power batteries is also receiving increasing attention. Wu Zhixin pointed out that at present, the cascading utilization of batteries still faces difficulties such as inconsistent battery specifications and sizes, and high cost of evaluating the value of retired batteries. Wu Zhixin stated that on the one hand, batteries need to have corresponding standards and technical specifications at the beginning of design and production, so that they can be directly applied in energy storage and other fields after being retired from automobiles, reducing disassembly, welding, and assembly processes and lowering costs; On the other hand, retired batteries also need to handle the issue of responsibility transfer, which requires the government to formulate corresponding policies and regulations, such as how to transfer the responsibility of battery recycling when batteries unloaded from new energy vehicles are used in the energy storage field. In addition, he emphasized that if the cost of evaluating the performance of retired batteries is too high, there will be no economic value and no longer a market.

The country cannot always protect backward enterprises

The withdrawal of subsidies for new energy vehicles in China has entered the countdown to the last two years. Starting from April this year, Korean battery companies including Samsung, LG, and SKI in South Korea have launched a new round of high-profile investments in China. Wu Zhixin stated that power battery companies in Japan and South Korea started early and have a relatively high level of production line automation. They have advantages in technology accumulation, production management, quality control, and brand effect. He said that the Chinese market will eventually be opened up, and there is no need to panic too much about foreign investment entering the Chinese market. During the policy cultivation period, China has already cultivated international battery giants such as CATL and BYD. He further explained that China is the world's largest market for power batteries and new energy vehicle applications. After a few years of development, China has formed the most complete industrial chain. Domestic battery companies have a better understanding of vehicle companies, and technical personnel from battery companies and vehicle companies have been working together for a long time. The upstream and downstream industries are more familiar, which are not possessed by foreign-funded enterprises. These advantages should be leveraged; On the other hand, foreign investment will inevitably accelerate the competition in the domestic power battery industry, accelerate the research and development of power battery technology, eliminate low-end backward production capacity, and promote the concentration of the power battery industry. Wu Zhixin added, "The country and local governments cannot always protect backward enterprises. It is always to encourage the strong. If we do not open up now, advanced foreign enterprises will not be able to enter, and domestic battery companies may face less pressure in the short term. They will not put much effort into technological innovation, and the foreign market will eventually open up. At that time, there may be a risk of survival."

When it comes to technological innovation, Wu Zhixin stated that domestic enterprises should be vigilant and pay attention to the research and development of fundamental and forward-looking technologies. "If you don't master the most basic technologies, you will always have an unstable foothold," Wu Zhixin further added. "Basic technology research and development, forward-looking technology research and development, and our so-called technology research and development are different. In China, so-called technology research and development is product development, and development and research and development are different."

The integration degree between new energy vehicles and power battery enterprises will be higher in the future

How far new energy vehicles can go ultimately depends on how far the power battery can go. Wu Zhixin stated that power batteries are the core link of the new energy vehicle industry chain, and the electrification, networking, intelligence, and sharing of automobiles cannot do without batteries. In the future, the cooperation between the two will become increasingly close, and the integration will also be deeper. According to Wu Zhixin, even before the emergence of new energy vehicles, the cooperation between foreign car companies and component companies was already very close. International car giants such as Toyota, BMW, and Mercedes Benz brought their supply systems into the Chinese market, and these car companies basically incorporated their suppliers into their own industrial systems. However, this relationship between domestic cars and components is very fragile. Not only that, foreign car companies will also cultivate their component companies, helping them improve product quality and technological innovation. Wu Zhixin said, "New energy vehicle companies must closely cooperate with power battery and key component companies, treating them like their own humerus. If it doesn't work, your car will definitely not work. Car companies must pay attention to it and assist it."

Wu Zhixin also stated that the emergence of new energy vehicles has led to an unprecedented increase in the integration of power batteries and the automotive industry. From a lack of understanding in the past to the current situation, the degree of integration is becoming higher and the division of labor in the industry is becoming more reasonable. However, there is still a lot of room for improvement in this area in China. He hopes that the two can truly integrate into a supply chain system in the future, like a mother ship fleet, where everyone works together, so that the power battery and new energy vehicle industries will truly form strong competitiveness.

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