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“After analyzing 5 years of financial data, we found that the most profitable people are neither battery manufacturers, nor mining, nor car manufacturers.” Custom fabrication service dental unit parts
At the end of July, the 2022 World Power Battery Conference jointly sponsored by the Sichuan Provincial Government and the Ministry of Industry and Information Technology was held in Yibin, Sichuan. This is the highest specification and largest power battery conference held in China. The world’s mainstream new energy vehicle industry chain companies are basically participating. this meeting.
The biggest hot spot throughout the entire conference is the controversy over which link in the new energy vehicle industry chain is the most profitable.
At the opening ceremony, Zeng Qinghong, chairman of GAC Group, said: “The battery accounts for 60% of the cost of my vehicle, so am I not working for the Ningde era?”
Zeng Yuqun, chairman of CATL, responded: “The upstream capital hype has derailed the price of (battery raw materials) from a reasonable track.” In the subsequent sub-forums, in response to the price fluctuations in the new energy vehicle industry chain in the past two years, almost all the participants expressed their opinions. Opinions were expressed, many of which were tit-for-tat. Custom fabrication service dental unit parts
After communicating with a number of industry experts at the conference, the author found that companies in all links of the industry chain are saying that they do not make money, and all parties have their own one-sided views.
Therefore, this article will try to use data as the basis to explain which link in the new energy vehicle industry chain has the strongest profitability and why?
Data samples will be selected as follows:
- Divide the new energy vehicle industry chain into six links: vehicle manufacturing, power batteries, positive and negative electrodes, diaphragms and electrolytes, mining and recycling, and manufacturing equipment. Custom fabrication service dental unit parts
- Select no less than 3, generally more than 5 A-share listed companies in each link, and the selection criteria comprehensively refer to market value, revenue, and market share. (See appendix at the end of the text for the list)
- The main data samples are the revenue, net profit, net profit margin and gross profit margin of the past 5 years.
vehicle manufacturing
It is not surprising that the OEM industry has seen lower profit margins over the past five years. The gross profit margins of SAIC and GAC relying on joint venture brands have declined significantly since 2019, mainly due to the overall decline in the product power of joint venture brands in the Chinese market and the slow launch of new energy products. Custom fabrication service dental unit parts
Among self-owned brands, the gross profit margin of Great Wall and Changan remained basically stable. The situation of BYD is rather special. Although the sales and market share of new energy models have been growing rapidly since 2020, the cost reduction effect brought by the growth in scale has been offset by the soaring price of raw materials. The quarterly profit margin level has not increased but decreased.
Although OEMs are complaining that the price increase of upstream suppliers such as power batteries has put a lot of pressure on them, but from the perspective of gross profit margin and net profit margin, the impact is not yet obvious. The main reason is that these large auto groups are currently Revenue and profits are still mainly from fuel vehicles, which are limited by changes in power battery prices. However, the impact of rising battery costs on new energy vehicle manufacturers is more obvious, such as BYD, which has completely switched to new energy vehicles, and new car manufacturers.
However, since the release of financial reports, the new car manufacturers Nio, Xiaopeng and ideal profit margins, which mainly produce new energy vehicles, have been improving their gross and net profit margins significantly year by year. However, in the first quarter of 2022, this improvement stopped, and the profit margins of the three companies may have fallen significantly, or only barely increased. When explaining the situation, the management of the three companies mentioned that the price increase of power batteries and various key materials has a huge impact on the profitability.
Tesla is the only exception, with profit margins rising all the way. The gross profit margin levels from 2017 to the first quarter of 2022 are 18.90%, 18.83%, 16.56%, 21.02%, 25.28%, and 29.11%, respectively. With the start of mass delivery of Model 3, Tesla’s gross profit margin level began to significantly exceed its peers, and in 2021 and the first quarter of 2022, it was not affected by soaring raw material prices, and the gross profit margin level reached a record high.
There are many reasons for this, three of which are recognized as more important:
- The number of parts and components of electric vehicles is small. After large-scale manufacturing, the cost reduction effect brought by scale is more significant than that of fuel vehicles.
- The promotion and application of integrated die-casting technology further reduces the number of parts and improves production efficiency.
- The optimization of the vehicle wiring harness system reduces the dependence of the vehicle manufacturing process on manual labor, and the improvement of the degree of automation brings about the improvement of production efficiency. The large scale brings stronger bargaining power with upstream suppliers, and the improvement in efficiency effectively offsets the impact of rising raw material prices. Custom fabrication service dental unit parts
With Tesla as a comparison, it is enough to prove that the OEMs whose profitability has declined, although there are reasons for the increase in the price of raw materials, it is still due to the lack of scale and technology. At present, some domestic OEMs have realized this and are following the advanced manufacturing trends led by Tesla, such as integrated die-casting technology.
Tesla previously used a 6,000-ton pressure casting machine, and a 9,000-ton pressure integrated die-casting machine has been built and put into production in China. New energy vehicles with new platforms and new technologies are also being launched in turn, striving to achieve an annual sales volume of 100,000 units to one million units. Custom fabrication service dental unit parts
Note: GAC Group’s net profit margin is higher than gross profit margin since 2019 because income tax expenses, asset impairment losses and credit impairment losses are all negative
battery manufacturing
Battery companies have always been considered the strongest link in the new energy vehicle industry chain, but profit margins do not support this judgment. From 2017 to 2022, the gross and net profit margins of major power battery companies have continued to decline. Except for the abnormal fluctuations in the data of Funeng, the gross profit margin and net profit margin of all other battery companies are highly consistent.
Of course, the decline in gross profit margin and net profit margin does not mean that the profitability of battery companies is not good. The rapid expansion of scale and the decline in profit margins occur simultaneously. Power battery companies are exchanging profits for scale, which is a high-growth market. It is more important to seize market share than to earn high profits at this time. Custom fabrication service dental unit parts
Power batteries have come under greater pressure in this round of raw material price hikes. The customer side is a strong car company, and the supplier side has extremely limited bargaining power due to the serious shortage of supply. Among them, the gross profit margin of the industry leader CATL dropped from 36.29% in 2017 to 14.48% in the first quarter of 2022, and the net profit margin dropped from 20.97% in 2017 to 4.06% in the first quarter of 2022.
Positive and negative
Positive and negative electrodes are important upstream industries for power batteries. The industry has made a lot of gains in this power battery market boom, but this gain is based on the previous low starting point. Zooming into a 5-year cycle, it will be found that the profit margin level of representative positive and negative companies in the first quarter of 2022 is basically the same as that in 2017. In 5 years, with 2020 as the lowest point, the profit margins of positive and negative companies show a V-shaped curve.
The return of profit margins to the level of 2017 does not mean that the positive and negative companies in the past five years have been standing still. Their scale has long been different from that of the year. After this round of market weakness from 2018 to 2020, those who can persevere are high-quality companies in the industry. Nowadays, many Chinese companies have global influence, especially the negative electrode production capacity. China occupies 90% of the global market share, and several leading companies have monopolized the global market. Custom fabrication service dental unit parts
Diaphragm, Electrolyte
Diaphragm and electrolyte are a relatively neglected link in the upstream industry chain of power batteries. If it weren’t for the fact that in the second half of 2020, lithium hexafluorophosphate took the lead in raising the price of lithium battery raw materials, most outsiders have never heard of this industry. This is especially true of the diaphragm. Due to its small size, it accounts for a small proportion of the entire industry market of power batteries, and the diaphragm is usually easily ignored.
But the profit margin data shows that diaphragms and electrolytes are typical of muffled money making, especially diaphragms. As the two leading companies of diaphragms, Enjie is the overlord of wet-process diaphragms, accounting for more than 45% of the market share. The leading Xingyuan material of dry-process diaphragm also has the advantage of almost monopoly, occupying nearly half of the national market. The profit margin data of these two companies is very eye-catching, with a gross profit margin of more than 40% and a net profit margin of 20% to 30%, which are very stable and have hardly been affected by the sharp fluctuations in raw material prices in recent years. Custom fabrication service dental unit parts
Electrolyte is the starting point of this round of soaring raw material prices, and it is currently one of the biggest beneficiaries of rising prices. The profit margin data of companies such as Tianci, Dofluoroduo, Tianji, and Xinzhoubang have all risen rapidly since 2020. However, similar to positive and negative electrode companies, electrolyte companies were also seriously damaged by the market weakness that began in 2018. In the past two years, prices have skyrocketed and profits have soared. For most electrolyte companies, they are recovering.
Mining mining and recycling
Mining companies are the most eye-catching stars in the power battery industry chain in the past two years. The price of lithium carbonate has skyrocketed tenfold, and the net profit of related listed companies has increased by dozens or even hundreds of times year-on-year. One part is controversial.
In terms of profit performance, lithium mining companies have indeed gained a lot. In the first quarter of 2022, Tianqi Lithium’s gross profit margin exceeded 85%. The staff of Ganfeng Lithium said, “I saw Tianqi’s financial report, and I felt that there are brothers who can share the gunfire in the future.” Custom fabrication service dental unit parts
There have been more and more disputes over the price of lithium carbonate recently. Some people say that capital speculation has raised the price, and there is hope that the state department will come forward to guide the price to return to rationality. In short, they all hope that there will be a strong external force to limit the high price of lithium carbonate. There are many voices against this in the industry. The most representative view is that the price of lithium carbonate is completely caused by the mismatch between supply and demand. Instead of trying to expand supply, relying on price control will only be counterproductive.
First of all, we need to answer a question. Is there any capital speculation at the current price of nearly 500,000 lithium carbonate? At present, the global lithium carbonate spot market mainly relies on several major mines in Australia. From July 2021, after Australia began to use the auction form to determine the price, lithium carbonate started to take off. Custom fabrication service dental unit parts
In fact, the number of BMX auctions (that is, the Australian lithium ore auction electronic platform) is not large, but the biggest role of the auction is to anchor the long-term price. The long-term supply agreements signed by several major mining groups in Western Australia and most customers are all The transaction price is determined based on the BMX auction price. If the two auction prices in June and July 2022 are used, the CIF price of spodumene concentrate from Western Australia arriving in China will be converted into the price of lithium carbonate per ton. More than 400,000 yuan, which is almost the same as the current domestic price of lithium carbonate, and there is almost no room for capital speculation to raise the market price of lithium carbonate.
How can the price of lithium carbonate return to rationality? In the article “Lithium resources are becoming white oil” published by “Financial Eleven”, he once discussed: “The price of lithium carbonate returns, and we must rely on salt lakes to extract lithium. Salt lakes are lithium The main forms of resources exist, but the natural resource endowments of different salt lakes are completely different, and the lithium extraction process is also completely different. One lake and one process are not reproducible, which directly results in the slow progress of production capacity construction and slow production speed for lithium extraction from salt lakes. Fortunately, the continued high price of lithium carbonate has accelerated the construction of lithium extraction from salt lakes in South America and China. According to feedback from several lithium mining companies, it is expected that early next year, lithium extraction from salt lakes in South America is expected to be on track. Custom fabrication service dental unit parts
The high profits of lithium mining companies are actually based on high risks. In the profit rate chart, the two deep grooves in the net profit rate of Salt Lake and Tianqi Lithium are shocking. Mineral mining has always had such characteristics. The mine runs smoothly and the profits are very rich. However, every mine is a large project with a large amount, high risk and a long return period. As long as one of the projects fails, there will be huge losses. . Salt Lake and Tianqi were once on the verge of life and death. Although they survived, a large number of lithium mining companies collapsed before dawn.
Except for lithium mining companies, the profit situation of other battery-related mineral raw material mining companies has not changed significantly. Nickel and cobalt were once considered to be metal elements that are prone to shortages in power batteries, but now, because of sufficient preparations in advance, although the supply of these metal elements is not optimistic, it has not caused a serious mismatch between supply and demand like lithium carbonate. lead to price hikes.
equipment manufacturing
The equipment manufacturing of power batteries is a small and beautiful track, with high technical content, high industry threshold, and difficulty for competitors to enter, so the advantages of leading companies are relatively stable. From the point of view of profit performance, the profits of equipment manufacturing enterprises are generally high, especially the gross profit margin, with an average value of close to 40%. The difference between the net profit margin and the gross profit margin is large, mainly because the manufacturing equipment is accelerating from the defect rate of one part per million (PPM) to the defect rate of one part per billion (PPB), and the R&D investment of equipment manufacturers is huge. Custom fabrication service dental unit parts
Who makes the most money
Now to answer the question of which part makes the most money.
Add up the total net profit of the sample companies in each industrial chain link from 2017 to the first quarter of 2022, and divide it by the total revenue to obtain the five-year average net profit rate of this industrial chain link, and then calculate a single The five-year average gross profit margin of all sample companies in the industrial chain is as follows:
In terms of gross profit margin, equipment manufacturing ranks the highest, diaphragms and electrolytes are slightly behind, and mining mining also exceeds 30%. These three links belong to high gross profit levels. Among them, equipment manufacturing benefits from high technology thresholds, and companies with technology have naturally high product premiums. The high gross profit of mining companies is expected, and with the increase of lithium extraction capacity in the salt lake, the average gross profit of lithium mining companies is expected to continue to increase.
However, compared with the gross profit margin of more than 30%, the five-year average net profit margin of mining and recycling enterprises is only 1.23%, which is the lowest among all industrial chain links. The huge losses of Tianqi Lithium and Salt Lake in 2019 are the main reasons, and this huge loss reflects the high risk characteristics of mining development companies. Custom fabrication service dental unit parts
Diaphragm and electrolyte are the biggest findings after the statistics, the average gross profit rate ranks second, and the average net profit rate ranks first. Most people think that batteries or mining are the most profitable, but the data tells us that diaphragms and electrolytes are the most profitable.
The high profits of diaphragms and electrolytes are unexpected and reasonable. The diaphragm market is highly concentrated. Enjie and Xingyuan are unshakable overlords in their respective fields, with strong bargaining power, and their profit levels will naturally not be poor.
Electrolyte belongs to the chemical industry, and scale is the only way to reduce costs and increase efficiency in this industry. The strong demand in the global market has prompted Chinese electrolyte companies to aggressively expand production capacity from the second half of 2021, and electrolyte companies with cost advantages will continue to expand their profit margins.
As for the vehicle manufacturing and batteries that are the most noisy at the World Power Battery Conference in 2022, the average gross profit margin is the first from the bottom, the second from the bottom, and the average net profit margin is the second to last and the third. Custom fabrication service dental unit parts
