Lead-acid battery market is becoming more and more monopoly

“At present, we are facing a situation where supply exceeds supply. Many large business owners even bring their wife to the company and go directly to our board chairman. If we don’t have a battery, we have to live for two days.” An institutional investment in Hong Kong at the end of August At the meeting, the head of a domestic lead-acid company said in response to questions from industry analysts.

This is a true reflection of the tight supply and demand situation in China's current lead-acid battery market.

One of the most obvious facts about the lack of "electricity" electric bicycles is that many electric bicycles on the market are not equipped with batteries.

Gao Xinkun, the vice president of Chaowei, explained that customers have reported that if the battery is under stress, if you send out 100 vehicles and go out, you can equip about 30 groups of batteries, giving them a good account of the distributors. The allocation rate continues to grow.

Tian Tianren, Chairman of Tianneng Power's Board of Directors, also mentioned a similar situation. At present, many electric vehicles are sold as "empty cars." Consumers need to go to the market to allocate batteries, or they have to wait two months before they can get batteries.

In the face of severe reality, the owners of electric vehicle companies have even offered to ensure that only 50% of the vehicles are equipped with batteries. Others think of ways to raise funds. The fact is that for every 10,000 electric bicycles produced, there are often 2,000 cars in the warehouse waiting for batteries.

But in the end, the electric bicycle industry is facing a lot of battery gaps. Gao Xinkun and Zhang Tianren think that they cannot count. Because it is not ruled out that in order to get more battery, customers deliberately introduce the situation even worse. However, Gao Xinkun believes that customers generally reflect lack of goods, and frequently come to the company to request goods, which itself is unusual.

Leading to this situation in the lead-acid battery market is a series of heavy government rectifications this year. Since May of this year, nine ministries and commissions including the Ministry of Environmental Protection and the National Development and Reform Commission have initiated joint special major rectifications, affecting almost all manufacturers. According to a person who participated in the performance analysis conference of Chaowei and Tianneng, the environmental protection rectification will shut down 30% of the country's production capacity, involving a larger proportion of companies. According to the data released by the Ministry of Environmental Protection on July 30, a total of 1,930 lead-acid battery manufacturers nationwide were included in the inspection list, of which 30% were shut down and 53% were out of service. Only 13% maintain normal production, and another 4% is still under construction.

In addition, the Ministry of Industry and Information Technology is about to introduce regulations for the entry of lead-acid batteries and reform the entire industry. In the next three years, two-thirds of the industry's backward production capacity will be eliminated, and lead-acid battery manufacturers will also be reduced from 2,000. To no more than 300 homes.

Zhang Tianren believes that the regulations for the management of lead-acid batteries being drafted by the Ministry of Industry and Information Technology will further promote industry consolidation. Taking Zhejiang Province as an example, there were 328 companies manufacturing batteries in the province, with 273 registered. However, by the end of August this year, there were 16 companies that had suspended production and reorganization, 31 had to be relocated, and 226 were completely banned. The intensity of reorganization was unprecedented.

In the industry, there is a duopoly. "After this rectification, the Chinese lead-acid battery market will actually have a duopoly." An industry analyst in Hong Kong told the "First Financial Daily" reporter.

In addition, according to the company research report issued by Guoyuan Securities (Hong Kong) in July, as early as 2009, Chaowei and Tianneng had already occupied the top two ranks of lead-acid batteries for electric bicycles in China, respectively, and their market share was roughly the same. It has exceeded 35%, while the market share of the third place is only 8.4%. The industry has a clear pattern of duopoly competition.

After this industry-wide reorganization, the situation of this duopoly competition may be further aggravated. Because the industry's resumption of production or expansion has been strictly limited. In particular, the right to examine and approve the project has already been taken back by the Provincial Environmental Protection Office. All projects that could be approved by a small county-level environmental protection department in the past are now owned by the Provincial Department of Environmental Protection. This means that any expansion project will face greater time and transaction costs.

“Approving a project requires first reporting to the County Environmental Protection Bureau and then submitting it to the Municipal Environmental Protection Bureau. The latter will send a supervision team to the site to verify. If there is no problem, the Municipal Environmental Protection Bureau will use the County Environmental Protection Bureau to report further and send it to the provincial office. The provincial office sent another person to the scene to verify that if there were no problems, the company could be approved to resume production. This process has become very complicated.” said the owner of a lead-acid battery company in Zhejiang.

Under such circumstances, large companies like Chaowei and Tianneng have taken advantage of the situation: On the one hand, a large number of small and medium-sized peers have been shut down or suspended production. On the other hand, the expansion of large-capacity projects has been affected by administrative procedures and duration. In the near future, the entire industry will still face tight supply that exceeds supply, which further enhances the bargaining power of large companies.

Some small and medium-sized lead-acid battery manufacturers that cannot afford to suspend production and rectify have closed down. Some still-surviving companies are contacting companies like Chaowei or Tianneng to seek mergers or cooperation plans. Although these surviving companies got their licenses through environmental protection acceptance, they still face enormous pressure. Due to the lack of brands, they are most likely to be eliminated in the coming round of industrial rectification.

The duopoly competition has brought obvious benefits to the two vendors. Since July, the two leading manufacturers have already raised prices twice. Each time the average increase deducts some of the cost increase factors between 8% and 10%, both price increases have greatly increased the company’s Gross margin.

Tianneng Power’s interim results disclosed in August showed that the company's half-year sales increased by 46.7% to 2.438 billion yuan, while net profit increased by 95% to 2.01 billion yuan. If you count the 50 million yuan fee for processing environmental protection, Tianneng The profitability is even more impressive.

Chaowei also showed strong profitability, with half-year revenue increasing by 34.3% to 1.939 billion yuan, and net profit increased by 19% to 1.42 billion yuan in six months. On the surface, net profit growth is not as good as that of Tianneng, but Chaowei’s gross profit margin growth is even faster, rising from 26% in the same period last year to 30.2% this year, which is about 8 percentage points higher than Tianneng's 22.49%.

This also explains why the news of this year's suspension of rectification has not only failed to cause the stocks of the two companies to plummet, but has also caused it to rise in the Hong Kong stock market. From the beginning of this year to the press release, even in the context of global capital market turmoil, Chaowei Power shares still rose by nearly 50%, Tianneng rose by about 8%, and the Hang Seng Index dropped by 24% over the same period.

It is clear that investors have already seen the excess returns that the duopoly competition brings to the two companies.

Zhang Tianren revealed that the two price increases have not yet fully met market expectations. In fact, if one or two prices are raised again, or even a price increase of 20%, the battery is not enough to sell, and there is still room for improvement. Just to avoid affecting the strategic development of the industry, they sent notices to dealers hoping they would control the price increase in the secondary market.

Zhang Tianren’s words reveal that Tianneng has mastered a considerable portion of the market price. Interestingly, like Chaowei, Tianneng's site is also in the town of Changxing County, Zhejiang Province. According to Hong Kong fund managers who are familiar with the situation, the two companies are not only very close to each other, but also the relationship between the chairman and the chairman of the two companies is very common. They often communicate on topics such as price and industry development. This seems to be more convincing that China's lead-acid battery industry has entered a double-oligopoly competitive landscape.

One of Chaowei’s supervisors also revealed that some customers had to increase their prices in order to prevent even increasing the amount of tens of millions of yuan in advance into the company’s account. Their idea is that if the price increases in the future, at least this part of the “payment” has already been made. Will not be affected. Despite its pricing advantages, both companies have stated that they will not consider raising prices significantly, so as not to affect the strategic growth of the industry.

Is the lead-acid battery industry sunset?

However, many analysts are still worried that the previous two price hikes, coupled with an increase in the “air-to-air ratio,” may make lithium-ion batteries, which are alternatives to lead-acid batteries, a hot commodity. From the relentless exposure of the blood lead incident and the resolute attitude of the country's rectification, it is still uncertain whether the industry still has high growth prospects.

From the point of view of the lead-acid battery company, it is clear that the industry is not on the edge of the sunset, because the demand for lithium-ion batteries will not be effective for lead-acid batteries for a considerable period of time, regardless of product demand, economic cost, and technological upgrading. Impact.

From the perspective of demand, China’s electric bicycle industry has a total market holding of more than 100 million vehicles, and its replacement market demand has exceeded the demand of the primary market in the second half of 2009. With the further expansion of the electric bicycle market, The demand for electric bicycle power battery replacement market will grow rapidly. In fact, electric bicycle power products have already possessed the attributes of consumer goods for Chinese consumers.

The main concern of the outside world for lead-acid batteries is environmental pollution. In the lead-acid battery industry, except for a few large enterprises, the environmental protection awareness, environmental protection equipment and technology of most SMEs are still poor. Although after this round of "green storm" rectification, but China's lead-acid battery industry out of pollution and bad reputation is still a long time.

Many industry analysts are concerned that it is not the sunset of the lead-acid battery industry, but that the current large companies that have survived are expanding their construction to make up for the government's banned production capacity. This may cause overcapacity in the coming year and drive down the price of the battery, leading to a drop in the company's gross margin. In addition, the rapid expansion of production may also increase the risk of environmental protection, which in turn limits the development of the company and even the entire industry.