Lithium battery industry:Access China conference highlights

Keep optimistic in the long term; short term demand may slow down

    Mr. Moke, the founder of RealLi Research, attended our 2017 dbAccess China conference in Beijing in this week. In the conference meeting with investors, Mr Moke delivered his understandings of China EV policy development, positive outlook in the long term and concerns on short term risk. Below are the key summary of the investor meetings.

    Previous EV policy is defective but not unsuccessful

    Chinese government started to support electrical vehicle since 2009 through three phases. Although EV policy has remained to be defective, it is not unsuccessful. Thanks to the strong government supports, China EV industry has now been well established and the upward trajectory is irreversible. Mr. Moke believes the key target of Chinese government is slightly changing from mainly volume focused previously to more quality focused now.

    New subsidy policy may slowdown group buying

    The new subsidy policy of 2017 has added new clauses of accumulating 30,000 km (may need at least c. 2 years) on EVs, for non-individual users. This additional clause may significantly slowdown the group buying (orders usually given by leasing companies and bus companies) for 1) deteriorating the purchasers’ cash flow situation and 2) hurting the profitability of business model of leasing EVs. The A00 class (the smallest size sedan) EV’s sales should drop most.

    Energy density preferred policy may raise the risk of safety

    EV safety issue is challenging in 2017. Mr. Moke believes the new energy density preferred policy may possibly raise the risk of safety for 1) stimulating the development of NMC, which brings higher safety risk and 2) forcing LFP battery producers to unload certain safety production components, which adds weight and deteriorates energy density. In addition, some low quality lithium batteries previously installed in 2015-2016 when supply of lithium battery was tight, are highly possible to expose their safety risk in this year.

    2017 demand may slowdown

    Mr. Moke still has confidence on accomplishing government’s target of accumulating 5mn units on the road by 2020 for seeing the clear industry trajectory and flexible government supports. Mr. Moke believes the real demand of 2017 may slowdown due to potential safety issue and decreased incentive of purchasing. Annual sales of 2017 are unlikely to achieve street consensus of 700k unit in this year.