As share increases, profits decrease, the three major lithium battery players can't withstand the price war anymore | Jianzhi Research
As one of the top three companies in the industry, Zhongchuang Innovation also faces the harsh reality of declining profits and slowing revenue
On March 26, Zhongchuang Innovation Aviation, a power battery manufacturer, announced its performance report for 2023. The company achieved operating income of 27 billion yuan in 2023, a year-on-year increase of 32.5%; net profit was 294 million yuan, a year-on-year decrease of 57.4%, marking the first decline in nearly four years.
Zhongchuang Innovation Aviation's gross profit margin was 13%, an increase of 2.68 percentage points year-on-year; net cash flow from operating activities was 2.9 billion yuan, a 37.5% increase year-on-year.
In the context of the 2023 full-year power battery price war, even Zhongchuang Innovation Aviation, one of the top three companies in the industry, faced declining profits and slowing revenue growth.
1. With low prices to maintain quantity, Zhongchuang Innovation Aviation's market share increased but profitability significantly declined
In 2023, the intensity of the price war in the domestic power battery industry continued to escalate, with price reductions of over 55% for lithium iron phosphate battery cells (power type) and ternary lithium battery cells (power type) throughout the year. Most second and third-tier power battery manufacturers faced both a decline in market share and profitability.
Under the strategy of low prices to maintain quantity, although Zhongchuang Innovation Aviation's overall market share increased, profits still declined.
Specifically, in the domestic power battery market, Zhongchuang Innovation Aviation's power battery installed capacity reached 32.9GWh in 2023, a 71% year-on-year increase, with market share increasing by 1.96 percentage points to 8.49%.
In the global power battery market, Zhongchuang Innovation Aviation's power battery installed capacity reached 33.4GWh in 2023, an 80.9% year-on-year increase, second only to EVE Energy, with market share increasing by 1.1 percentage points to 4.7%.
However, the increase in Zhongchuang Innovation Aviation's market share in the power battery market was accompanied by a significant decline in profitability. In 2023, the company's net profit fell to 294 million yuan, a 57.4% year-on-year decrease, marking the first negative growth in nearly four years.
As the industry leader, CATL's power battery business continues to lead. At the same time, CATL's energy storage batteries, material recycling, and mining businesses are also growing rapidly, accounting for over 30% of operating income.
In comparison, Zhongchuang Innovation Aviation's business is relatively single. In 2023, the operating income of Zhongchuang Innovation Aviation's power battery products reached 22.25 billion yuan, a 21.4% year-on-year increase, accounting for 82.4% of total operating income. The energy storage system product business is still in its early stages, with operating income of 4.76 billion yuan, accounting for 17.7%, contributing relatively limited profits to the overall businessIn the competition of power battery prices, Zhongchuang Xinhang's unit price has dropped, exceeding the growth rate of sales volume. This is reflected in the mismatched situation where the installed capacity of power batteries grew by 80.9%, while revenue only increased by 21.4%.
Zhongchuang Xinhang, whose main business is power batteries, is facing more significant negative impacts. In contrast, energy storage batteries mostly have long-term orders, with smaller price reductions.
2. Slow Progress in Zhongchuang Xinhang's Overseas Market Expansion
With the intense competition in the domestic power battery market, CATL has started to shift towards higher gross margin overseas markets. In comparison, Zhongchuang Xinhang lags behind in expanding overseas markets.
In 2023, CATL's overseas installed capacity reached 92.6GWh, ranking second to LG New Energy, accounting for 36% of the total installed capacity, with a year-on-year growth rate of 100%, far exceeding the domestic growth rate of 17.6%. Overseas business revenue reached 131 billion yuan, a year-on-year increase of 70.29%, significantly surpassing the domestic business growth rate of 7.25%, and the revenue proportion also increased to 32.67%.
In contrast, Zhongchuang Xinhang's overseas business development is relatively slow. In 2023, the overseas installed capacity was only 0.5GWh, not among the top ten in overseas installed capacity, accounting for only 1.5% of the total installed capacity. The revenue from overseas business was only 653 million yuan, accounting for 2.4%, with a year-on-year growth rate of 68.9%, mainly driven by energy storage business, with little association with the core power battery business.
3. Shift of Influence to End Users, but R&D Investment Maintains Steady Growth
In the price war of the power battery market, Zhongchuang Xinhang's bargaining power and industry position are facing challenges. In 2023, the company's accounts receivable and notes increased to 6.83 billion yuan, a year-on-year increase of 28.3%, while accounts payable and notes decreased to 19.96 billion yuan, a year-on-year decrease of 7.8%.
The growth rate of contract liabilities also began to slow down, increasing by only 26.5% to 620 million yuan, indicating a decrease in end customers' willingness to make prepayments.
Amidst the backdrop of the power battery price war, Zhongchuang Xinhang continues to increase R&D investment to enhance competitiveness. In 2023, Zhongchuang Xinhang's R&D expenditure reached 990 million yuan, a 50% year-on-year increase.
These continued R&D investments paid off in 2023, as Zhongchuang Xinhang successfully promoted high-specific-energy 5C ultra-fast charging square battery products, achieved the industrialization of 400Wh/kg solid-liquid hybrid batteries, and continued further research and development around 5V high-voltage nickel-manganese lithium batteries, 450Wh/kg solid-liquid hybrid batteries, and all-solid-state batteries.
Although Zhongchuang Xinhang's domestic market share slightly increased, slow expansion in overseas markets, coupled with the continuous decline in product unit prices, ultimately puts pressure on profitability. For Zhongchuang Xinhang, expanding overseas markets like CATL or seeking new growth points may be an effective strategy