Amid the surge of the new energy wave, China has emerged as a critical juncture for the entire industrial chain. At the industry’s core, power batteries in China account for over 60% of the global market share, birthing several globally influential enterprises.
Recently, public new energy battery companies have disclosed their performance metrics. Notably, Guoxuan Hi-Tech’s 2022 annual report and first-quarter report reveal impressive growth. The company’s revenue for 2022 exceeded 23.052 billion yuan ($3.22 billion), marking a 122.59% year-on-year increase. Operating profit reached 199 million yuan ($27.86 million), a staggering 408.87% increase from the previous year, with a net profit of 366 million yuan ($51.24 million), reflecting a 376.03% year-on-year increase. The company’s first-quarter revenue was 7.177 billion yuan ($1.00 billion), an 83.26% year-on-year uptick.
Using Guoxuan Hi-Tech’s robust growth as a lens, it becomes apparent that China’s new energy battery companies exhibit potent growth potential. This encompasses not just Chinese firms’ leading positions in technological innovation, production capacity layout, supply chain, and market share, but also their strategic moves to leverage capital, integrate resources, and establish a closed-loop supply chain.
The substantial and assured market demand is affording the new energy battery industry a sufficiently high growth trajectory. However, as with any nascent industry, it has weathered a tumultuous decade, characterised by chaos and confusion – a journey exemplified by the turbulent past of Guoxuan Hi-Tech.
Established in 2006, Guoxuan Hi-Tech entered the public market in 2015, marking a decade of progress and becoming the first power battery company listed on the A-share capital market.
Guoxuan High-Tech’s chairman, Li Zhen, recounts an influential visit to the University of Science and Technology of China in early 2005. Inspired by the university’s work on lithium iron phosphate energy storage technology, Li assembled a team to pursue battery research, ultimately developing a high-capacity lithium iron phosphate battery.
Following the commencement of production of Guoxuan Hi-Tech’s lithium iron phosphate battery in 2007, the company experienced a surge in industrial demand. Capitalising on this momentum, Guoxuan Hi-Tech quickly advanced, achieving an energy density of 95Wh/kg in its developed LFP cells. The company completed battery module assembly for 30 buses that year and became one of the principal implementing units in the demonstration operation of “ten cities and a thousand vehicles” in Hefei.
In the subsequent nine years, Guoxuan Hi-Tech ascended to the top spot in domestic power battery sales, reaching its zenith of industry influence during its 2015 listing. Concurrently, the number of power battery companies burgeoned from 40 to over 200, including CATL, founded in 2011, and BYD, which began with batteries and upgraded to blade batteries in 2020.
The 2016 car subsidy policy profoundly impacted Guoxuan Hi-Tech. Given that the company’s lithium iron phosphate battery’s energy density was 115Wh/kg, falling short of the subsidy requirement of 120Wh/kg, the company faced considerable sales hurdles, which adversely affected its performance in 2019-2020. Over these two years, the company reported asset impairment losses of 3.2/130 million yuan and credit impairment losses of 2.2/240 million yuan.
Post-2020, Guoxuan Hi-Tech recalibrated its strategy, attracting Volkswagen China as strategic investors via a private placement. Volkswagen’s stake improved the company’s governance structure, amplified research and development capabilities, and ensured steady demand, catalysing the company’s growth from 2020 onwards. The company has since consistently enhanced product performance and delivery capabilities, fortifying its industry standing. The company’s battery installed capacity reached 12.32GWh in 2022, a year-on-year increase of 89.5%.
However, the scarcity of lithium ore resources and the exceedingly high price of lithium carbonate have exerted significant pressure on Guoxuan Hi-Tech’s supply chain. Recent reports indicate that despite revenue growth, the gross profit margin has diminished.
Regardless, Guoxuan Hi-Tech persists in its endeavours to optimise the upstream and downstream industrial chains through capital platforms. In 2021, the company embarked on new ventures and invested in the construction of the Feidong Industrial Base, the Jiangxi Yichun Lithium Carbonate Project, and others, established a battery recycling network, and expedited the creation of an industrial closed loop.
As industry demand explodes, power battery technology development is accelerating. Learning from the missteps of betting solely on lithium iron phosphate eight years ago, Guoxuan Hi-Tech has adopted a diversified approach to this wave of technological advancement, integrating lithium iron phosphate, ternary, and solid-state technologies.
The past decade has not only signified the nascent phase of new energy industry development but also the first half of the power battery timeline. The completion of the power battery’s evolution is yet to come, and future competition remains fraught with uncertainty.
Despite enduring industry fluctuations, Guoxuan Hi-Tech has consistently held a vanguard position in the Lithium Iron Phosphate (LFP) direction. By the close of 2020, the company’s LFP soft-packed batteries, using silicon-based negative electrode plus pre-lithiation technology, achieved an energy density of 210Wh/kg. This surpassed the ternary NCM523 level and neared the energy density of ternary NCM622, marking an industry-leading achievement with icommercialization set for 2023.
Simultaneously, the company’s 230Wh/kg LFP cells are projected to commence mass production in 2023. The next milestone is 260Wh/kg, already realised in prototype samples within the laboratory.
In May 2022, Guoxuan Hi-Tech unveiled a semi-solid battery boasting an energy density of 360Wh/kg. When tested in a high-end model, the battery yielded a power of 160kWh, a cruising range of 1000 kilometres, a battery pack energy density of 260Wh/kg, and an acceleration time of 3.9 seconds from 100 kilometres – all notable enhancements.
Guoxuan Hi-Tech’s high specific energy semi-solid-state battery, with an energy density of 360Wh/kg, has passed the new national standard safety test and has transitioned into the commercialization phase. The first batch of batteries is slated for mass production by a high-end new energy vehicle company, with the expectation of commencing mass delivery this year. Concurrently, the company’s 400Wh/Kg ternary semi-solid battery has prototype samples in the laboratory.
In response to the escalating adoption of the global new energy vehicle market and the explosive growth of the energy storage market, Guoxuan has rapidly ramped up its global production capacity.
Simultaneously advanced projects include the Nanjing base’s intelligent manufacturing 20GWh power battery project, Yichun base’s 10GWh power battery project, Lujiang base’s annual output of 200,000 tons of high-end cathode material project, Tongcheng base’s first phase of an annual output of 40GWh power battery project, Liuzhou base’s annual output of 10GWh battery project, among others. The Göttingen factory in Germany has begun smooth production, and the construction of overseas bases in Southeast Asia and South Asia is advancing steadily. This progression bolsters the company’s industrialisation level and meets downstream customers’ demands for high-performance battery products.
In 2022, the company’s total production capacity reached around 100GWh. According to the company’s projections, total production capacity will hit 300GWh by the end of 2025, with overseas production capacity accounting for approximately 100GWh. It is predicted that in 2023, the company’s construction and production capacity will achieve 180GWh. As production capacity ramps up over the next three years, the company’s supply capacity is expected to improve significantly, aiding in the expansion of both domestic and international market space. The company’s global market share is anticipated to steadily increase in the long term, driving revenue growth.
The company has refined its lithium battery supply chain, covering core battery material links such as positive/negative electrode materials, separators, and electrolytes through self-built production capacity, equity joint ventures, and patent acquisitions.
In the realm of cathode materials, the company can independently produce high-energy-density LFP and high-nickel ternary cathode materials. The production capacity of LFP cathode materials is 200,000 tons/year, and the high-nickel ternary cathode materials’ production capacity is 40,000 tons/year. The company also holds a 30% stake in a joint venture with China Metallurgical Group and BYD to build a high-nickel ternary precursor with an annual output of 48,000 tons.
Regarding anode materials, the company plans to establish a graphite anode production capacity of 700,000 tons/year in Wuhai, Inner Mongolia, and Feidong, Anhui, and construct a silicon-based anode production capacity of 5,000 tons/year in Lujiang, Anhui.
In the separator segment, the company and Xingyuan Materials jointly established a factory with a production capacity of 100 million square meters, with Guoxuan holding a 27.69% stake.
With regard to electrolytes, the firm took over BASF’s Cleveland Electrolyte Laboratory along with associated patents in June 2017, and constructed its own production capability of 100,000 tons per annum in Feidong, Anhui.
Moreover, Guoxuan has implemented battery recycling processes, which will enable it to establish a sustainable business cycle and streamline the cost structure of the supply chain.
This comprehensive layout of the battery materials supply chain will grant the company an enhanced cost advantage based on a secure supply of raw materials and components. It will also allow the company to modulate the rhythm of its production expansion and pre-emptively engage in all aspects of core materials in tandem with battery research and development. This strategy is designed to enhance the alignment and uniformity of product development and design, thereby improving the performance of the end products.