Power batteries reduce price 30%

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Issue Time: Nov 3,2017

Summary

With the phase out of political subsidies, OEMs require power battery companies to reduce battery prices largely. From the beginning of this year, mainstream power battery companies decreased their battery prices between 20% and 30% compared with last year. The related segments like battery material, manufacturing equipment of battery, battery parts and BMS are affected by the strong cost management of the power battery companies. On one hand, these companies suffered net profit declines and their overall profitability is also weakened. On the other hand, price competition spurred chaos to some extent, and meanwhile the prolonged account payment lead the capital chain to face industrial risks.

Power battery companies cut costs quickly

On Oct. 26, Hefei Guoxuan High-tech Energy Power released financial report for the third quarter, posting a year-on-year revenue growth of 9.7% to RMB 0.3755 billion, and net profit attributable to shareholders of listed company reached RMB 640 million, down 13.27% compared with the same period with last year. According to Hefei Guoxuan High-tech Energy Power, the nationwide price reduction of NEV batteries in 2017 caused sharp net profit decrease of their battery products, and thus affected their whole profitability.

On Oct.20, China Aviation Lithium Battery Co., Ltd.'s parent company, Sichuan Chengfei Integration Technology Co., Ltd disclosed at a roadshow promotion that the price reduction of battery products would be over 20% or even more this year. Shenzhen BAK Battery Co., Ltd also released at a meeting that their product prices had decreased 30% compared with last year. Other two battery companies also said that they had cut their costs. It is learned that the battery companies reduce their cost via the following approaches: first, they manage to negotiate with suppliers to lower the materials and equipment prices and prolong the account payment; second, they promote the cost management in product design and manufacture; third, release of production capacity and scale effect enable them to cut costs; fourth, they lower their net profit to meet the reducing trends of battery price.

Material, equipment and BMS suppliers were affected deeply

Facing the compelling bargain from the power battery companies, battery separator and electrolytes have suffered gross profit reduction. The battery separator was once deemed as the most high-tech key material for lithium battery with high gross profit, but with the development of technologies, heavy investment of capital and release of production capacity, the gross profit for battery separator decreased over 10% year on year.