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The Market Structure of Power Batteries

The market structure of power batteries still holds uncertainties.

Until 2023, CATL, led by NINGDE Times, dominated the market with more than half of the market share. While BYD closely followed with blade batteries, leaving less than 30% for the remaining companies. Over a dozen companies were struggling outside the ‘spotlight’. From any perspective, the top players seemed to have a highly fixed position, making it challenging for mid-sized companies to compete.

However, in the ever-changing landscape of the automotive industry over the past century, rarely has such a dominant super supplier emerged. Moreover, as power batteries account for about 30-40% of the overall vehicle cost, automakers, driven by considerations of safety and cost, will continuously choose new secondary suppliers to balance the leading companies. Powerful automakers and products still have the potential to change the situation.

In fact, similar changes are brewing. Since the beginning of this year, new energy vehicles entering the Ministry of Industry and Information Technology’s new vehicle catalog in China, such as the Ideal L series and Geely Galaxy L6/L7, have mostly disclosed more than one battery supplier. Moreover, overseas reports have indicated that in a new round of 160GWh battery orders from BMW, 90GWh of orders for Europe were granted to a Chinese battery company known for its innovation – Hefei Guoxuan High-Tech Power Energy Co., Ltd.

This year, the Matthew effect in the power battery industry is weakening, with a decline in the installed capacity of the top two companies in the first three quarters compared to the same period last year. The market share of almost all second-tier battery manufacturers has increased, signaling opportunities for these second-tier players.

For Hefei Guoxuan High-Tech Power Energy Co., Ltd., which secured a major contract with BMW, the opportunity is particularly valuable. The choice of a large automaker often has the potential to change the fate of suppliers. Especially for companies like BMW, which have a complete power battery research, development, and validation system, BMW’s 800-page German technical document has played a significant role in the global leadership of power batteries.

This time, the spotlight is on Hefei Guoxuan High-Tech Power Energy Co., Ltd. In the dominant Chinese power battery market, this company, established just six years ago, has consistently entered the top ten.

BMW’s choice signifies an uncertain outcome. And there are many stories to tell about innovation, manufacturing, and the market for Chinese power battery companies.

Change in Competition Paradigm

In 2023, while downstream automotive companies are struggling, upstream battery enterprises are facing a widespread issue of overcapacity.

According to data released by the China Association of Automobile Manufacturers, in the first nine months of this year, approximately 140.5GWh of batteries were in stock, a 60% year-on-year increase.

The interval between battery production and installation in vehicles has also extended from 0.5 – 1 month last year to 1-3 months this year. This has led to a significant occupation of enterprise cash flow, putting immense pressure on the power battery industry .

Even more challenging is the fact that in the first half of this year, the capacity utilization rate of leading companies temporarily dropped to 60%. This phenomenon seems to indicate that the competition paradigm in the industry is quietly changing.

In the lithium battery industry, a critical indicator in the past was known as the “yield rate.” It refers to the proportion of power batteries meeting the qualified standards when they come off the production line.

This ratio at the product level affects the battery’s performance, stability, and consistency. On the market and operational level for companies, it translates into customer reputation and production costs, ultimately determining the competitiveness of the enterprise.

Take, for example, battery manufacturers from Japan and South Korea in the era of consumer electronics and Chinese battery manufacturers in the era of power batteries.

Each has achieved success by meticulously focusing on details. In the early stages of industry development, the high barriers in the battery industry naturally made “high yield rates” of high-quality production capacity scarce.

However, as leading battery manufacturers have pushed single-process yield rates to over 99% and overall yield rates to 90% or more, the scarcity of “high yield rate” production lines, while possessing relatively stronger competitiveness, is no longer as pronounced as in the past.

In addition, downstream customers in the lithium battery industry, such as automakers and energy storage companies, are showing differentiated demands for batteries. This requires battery companies to innovate not only in processes but also in battery materials, product forms, and even advanced factory processes to meet downstream customers’ expectations for cost and specific functional requirements.

The ability to innovate around downstream demands has become a new key factor in industry competition at this stage.

However, the difficulty of innovation is often immense. Process improvement can rely on continuous trial and error, improvement, and iteration—a case of “diligence can compensate for clumsiness.” In contrast, innovation requires the crucial spark of inspiration on top of diligence.

Contemporary Amperex Technology (CATL) was able to rise unexpectedly precisely because, before the wave of electric vehicles arrived, it broke through the more challenging ternary lithium battery route and hit the demand for high energy density.

Even today, among the top ten power companies in China, there are not many capable of simultaneously improving battery materials, product forms, and factories like the industry leaders. Hive Energy, as a rising star, stands out in this regard.


As a power battery company established only in 2018, Hive Energy may have a gap in manufacturing experience compared to peers who have been in the industry for over a decade at the time of its establishment. However, precisely because it lacks historical burdens, Hive can insightfully discern the underlying needs of the industry without interference.

For instance, in 2019, while other battery manufacturers were still pursuing high nickel and high energy density, Hive Energy astutely recognized the importance of cost in the widespread adoption of new energy vehicles. In the same year, they released a cobalt-free battery, eliminating cobalt, the highest-priced and most price-volatile element per ton in power batteries.

Just as the entire industry enters a stage of cost competition this year, Hive Energy’s cobalt-free battery has started to enter the supply chain of large domestic automakers, with an estimated annual shipment of 1.6 million units.

For example, in the previous year, when the sales of new energy vehicles were steadily increasing but safety issues were being questioned, Hive introduced the Dragon Scale Armor battery system.

This system ensures the efficiency of battery grouping while achieving thermoelectric separation, ensuring that in the event of battery thermal runaway, ejected materials won’t have secondary contact with the circuit, preventing serious safety issues.

Numerous similar innovations abound. While many battery manufacturers adhere to established roadmaps, Hive Energy’s approach to product innovation often aligns more closely with the “first principles” mindset.

More importantly, Hive’s innovation extends beyond the product level. The research, development, manufacturing, and validation of batteries constitute a systematic engineering process. Behind the products, advanced and modernized manufacturing facilities are equally paramount.

The Product of Producing Products

Elon Musk, the mind behind SpaceX and Tesla, has a famous perspective: the factory is a machine that manufactures machines.

He considers the factory as one of Tesla’s most critical products, redesigning every step – from the factory building, assembly lines, inventory, to crucial production processes – to align with the production model of electric vehicles.

Following this approach, Tesla has rapidly become the world’s most efficient electric car company, establishing super factories in Nevada, Shanghai, Berlin, and Texas.

Considering Tesla’s success, it’s likely that Hive Energy, investing significantly in the factory aspect, sees merit in Musk’s viewpoint.

Before Hive Energy, most domestic battery factories seemed to be engaged in what appeared to be an “unreasonable” task: winding electrode sheets in a circular manner inside the square-shaped casing of a battery. These battery factories had their reasons:

The winding process is more efficient and mature. The underlying principle is that the highest efficiency in factory mechanical movement is achieved through rotational motion.

The method of producing batteries can be likened to “sweeping a square room in a circular path.” Especially as electric vehicle batteries grow larger, the impact of leaving dead zones at corners becomes more severe, affecting the volume utilization rate. In the bending areas of battery electrode sheets, mechanical stress can lead to powder shedding and burrs. In severe cases, it may cause short circuits, leading to thermal runaway.

Hive Energy opted for a stacking approach in the production process, where electrode sheets are layered and placed inside the casing. This is somewhat akin to organizing files in a drawer, but the realization of this approach proved to be much more challenging than they initially anticipated.

Around 2019, when Hive Energy chose stacking machines, there were almost no mature stacking machine suppliers in China. They were forced to collaborate with foreign companies that provided stacking machines to Korean battery manufacturers. The difficulty of the stacking process was substantial, addressing challenges such as aligning electrode sheets and reducing burrs during the cutting process, which were top-level industry problems.

Although Hive Energy completed the development of the first-generation stacking machine before the JinTan factory went into production, the stacking efficiency was only about 0.6 seconds per sheet. While higher than mainstream stacking devices on the market, it remained lower compared to the 0.2 seconds per sheet efficiency of winding machines.

After the launch of the first-generation stacking machine, Hive Energy swiftly initiated full-stack independent research and development of stacking machines. In 2021, determined to improve stacking efficiency beyond winding, Hive Energy explored solutions in various industries, including papermaking, beverages, and cigarettes. Drawing inspiration from the production line of beverage cans, they introduced a novel parallel stacking machine, boosting stacking efficiency to 0.125 seconds per sheet.

The success of the stacking process laid a foundation for Hive Energy to establish a firm position. However, battery production involves the complex integration of over twenty processes, and the final outcome follows the “barrel effect.”

While emphasizing the stacking process, Hive Energy has also addressed skill points across the manufacturing stages. In the monitoring phase, for instance, Hive Energy has equipped the stacking process with CCD and Hi-pot online detection capabilities. Engineers at Hive Energy stated, “These functions ensure real-time monitoring and rejection of poor alignment during the stacking process, significantly enhancing product defect detection capabilities.”

Market Structure of Power Batteries-1

Hive Energy Battery Production Line

In the logistics phase, due to the heavier weight and longer length of the short-blade cell module, traditional belt logistics struggles to ensure the alignment of the cell modules during transportation. Therefore, Hive has designed a magnetic levitation logistics line within the factory, not only solving the alignment issues but also achieving a transportation efficiency ten times that of traditional logistics lines.

Over the past three years, Hive Energy’s total investment in the research and development phase has exceeded 22 billion yuan, accounting for nearly 14% of its revenue. In the highly competitive Chinese market, it ranks among the top, and this high-intensity investment has ultimately translated into Hive Energy’s competitiveness in the manufacturing phase.

Market Structure of Power Batteries-2

Hive Energy Battery Production Line

However, unlike many battery manufacturers immersed in a self-research approach, Hive Energy understands how to leverage external expertise. In May of last year, Hive initiated the “Pioneer Industry Partner Global Recruitment Campaign,” recruiting emerging companies in the forefront of lithium batteries and industrial Internet. Eight companies were selected.

These include Hichain New Materials, which specializes in developing conductive agents, and Shengxiong Laser, which focuses on laser equipment research and development. Additionally, there is Huamao Energy Union, providing energy services. Collaborating with external companies ensures that Hive Energy’s technological innovation does not become isolated, and partnerships with Hive Energy help these companies expedite the implementation of their technologies.

In the manufacturing phase, Hive Energy has now built a nested manufacturing improvement system with “stacking process + factory enhancement + supply chain investment” at its core. Efficiently operating this system will be crucial for achieving its goal of creating a “product-producing product.

Market Trends Boosting Growth

The current trend in the new energy vehicle market, with a short-term focus on plug-in hybrids (PHEVs) and a long-term emphasis on pure electric vehicles (EVs), is highly advantageous for Hive Energy.

From January to September 2023, domestic sales of PHEV models reached 1.687 million units, an 84.5% year-on-year increase. The market share grew from 24% in the same period last year to 32% this year.

As PHEV models can better address short to medium-term “range anxiety” and quickly establish “fuel and electric at the same price” with internal combustion engine vehicles, plug-in hybrids are expected to be an undeniable category in the market for a long time. This trend will continue to impact the upstream battery industry.

Looking at the shipment volume from battery factories, Hive Energy’s power battery models, supporting vehicles from January to August this year, have a proportion of PHEV models significantly larger than pure electric models. Even though PHEV models have less electric power per vehicle, the ratio of installed electric power between PHEVs and pure electric vehicles has reached 6:4.

This phenomenon has a more profound impact on the power battery industry because plug-in hybrid (PHEV) and pure electric vehicles (EV) have distinct battery requirements. For those familiar with the battery industry, it’s known that power batteries can be broadly categorized into energy-type and power-type batteries. The former emphasizes battery energy density, while the latter focuses on the battery’s peak discharge rate.

Pure electric vehicles rely entirely on battery power, with relatively stable current output. Therefore, they adopt energy-type batteries to enhance overall driving range. On the other hand, PHEVs rely on both the battery and the engine for propulsion. The working conditions for the battery in PHEVs include scenarios that require high power output, such as rapid acceleration and uphill driving. Consequently, PHEVs demand batteries with higher discharge rates.

Taking Hive Energy’s L400 short-blade battery introduced in April of this year as an example, this battery boasts a pulse discharge rate exceeding 15C, placing it in the category of ultra-high discharge rates. In contrast, typical power battery discharge rates usually range from 3 to 10C.

Market Structure of Power Batteries-3

Hive Energy Short-Blade Battery

As for the increase in the battery discharge rate, it’s far from being as simple as it seems. Factors like the microscopic lattice arrangement and the use of conductive agents can impact the battery’s charging and discharging performance. It is precisely because of this that, within the industry, only CATL (Contemporary Amperex Technology Co. Limited) and Hive Energy have relatively comprehensive PHEV (Plug-in Hybrid Electric Vehicle) battery product lines.

With the outbreak of the PHEV market this year and the widespread elevation of secondary suppliers by original equipment manufacturers, Hive Energy has become one of the few options in the market.

Yang Hongxin, Chairman of Hive Energy, stated, “Currently, there is a situation of high demand and short supply for PHEV batteries, and this situation is expected to persist at least until the first half of next year.” As of now, relying on the L400 short-blade battery, Hive Energy has secured cooperation with many models such as the Ideal ONE L7, Geely Galaxy L7/L6, Dongfeng Aeolus Atlas Chasing Light/Dreamer, Haval M6/M8, and many more.

However, in Hive’s product planning, PHEV batteries are just one pivot. As mentioned earlier, the current trend in the new energy market is short-term PHEVs and long-term pure electric vehicles (EVs). In the plans of many original equipment manufacturers, there is also a long-term optimism for pure EVs.

Therefore, the development of high-performance energy-type batteries remains a core focus for Hive. For example, in the popular field of lithium iron phosphate ultra-fast charging this year, Hive Energy revealed to us, “Relevant products are under development, and core technologies such as electrolyte, positive and negative electrode cover plates, overcurrent protection, and cooling have been verified.”

Another example is in the hot 4680 large cylindrical battery arena. Hive Energy has currently proposed nano-web silicon negative electrode technology that supports high energy density. The core achievement is overcoming the high expansion rate issue during the charge and discharge process of silicon negative electrodes. Power batteries equipped with nano-web silicon negative electrodes will achieve an energy density exceeding 300Wh/kg. Internally, Hive Energy has already planned a mass production project of 5GWh by 2025.

With ample technological reserves, Hive has the capability to respond to changes in the industry cycle. When the reshuffling of the current round of power batteries concludes, excess industry capacity is cleared, and holding the three cards of technology, manufacturing, and market, Hive Energy is poised to enter a high-growth cycle.

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