Author: Su Qin
NIO and CATL have chosen to join hands again!
On the evening of January 17th, CATL announced the signing of a five-year comprehensive strategic cooperation agreement with NIO. CATL stated that “the signing of this comprehensive strategic cooperation agreement is another deepening and upgrade of the two parties based on the strategic cooperation relationship, involving technology cooperation in new brands, new projects, new markets, linkage between supply and demand, overseas business expansion, and commercial model cooperation based on long-life batteries.”
The signing ceremony was held in Ningde, and both Zeng Yuqun and Li Bin attended. The cooperation level is not low, and from the official pictures released, the smiles on both men’s faces are quite brilliant, indicating their satisfaction with the cooperation.
Such cooperation and smiles are really thought-provoking at this current point. As we all know, CATL and NIO have cooperated for many years with achievements on both sides. NIO has even become CATL’s largest battery installation brand, and CATL has continued to provide NIO with high-quality batteries. However, in recent years, there have been rumors of discord between the two parties in the industry. However, from the successful signing of this cooperation agreement, it is clear that the relationship between the two parties has not become more distant as rumored, but rather has become even closer.
This “unexpected” situation is actually not difficult to understand. CATL and NIO are both leaders in the industry, with CATL being the global champion in power battery installations for six consecutive years, and NIO being a rising star in the domestic new energy market. Only through cooperation can we achieve a win-win situation.
It’s all because of “price increases” that problems have arisen. From the first mass-produced car ES8 launched in 2017 to the latest ET5 that has now been delivered, the best CATL batteries in the world are installed in these NIO cars. The firm cooperation between NIO and CATL can be seen.
The turning point occurred in the second half of 2021. At that time, due to the price increase of upstream raw materials, as the next link in the price transmission chain, power battery prices also saw an increase. For an electric vehicle, the cost of power batteries is already high, and now with this price increase, it is hard to bear. Especially for “Internet car companies” like NIO that highly value gross profit margin, the impact is even greater.
Therefore, in the November 2021 financial report meeting, Li Bin announced that “NIO’s long-term vehicle gross profit margin target is 25%. In order to achieve this strategic goal, we need to strengthen cost reduction and efficiency improvement in our operations, which is a substantive choice for NIO. One of the important points is to strengthen the research and development of battery technology to further control the battery.”
From this, it can be seen that NIO’s reason for making batteries is not just because of the price increase in CATL’s batteries, but also from its own long-term strategic considerations.
Also in November 2021, NIO Capital participated in the C-round financing of Wuling New Energy. According to data, Wuling New Energy is a solid-state lithium battery developer. Its main products include hybrid solid-liquid electrolyte batteries and all-solid-state lithium batteries, which are used in the fields of drones, power tools, large-scale energy storage, electric vehicles, aerospace, and national security.
In June 2022, Li Bin further revealed NIO’s battery strategy, stating that “in the long run, NIO will adopt a ‘self-made + external procurement’ strategy in the battery field, which will help to increase product competitiveness and profitability. This is also our focus in investment and research and development.”
Tianyancha shows that on October 21, 2022, NIO Battery Technology (Anhui) Co., Ltd. was officially established with a registered capital of RMB 2 billion. It is a wholly-owned subsidiary of NIO Holdings, and its director and general manager is Zeng Shuxiang, with Li Bin serving as chairman of the board of directors.
Public information shows that NIO Battery Technology’s business scope covers the import and export of goods, technology import and export, battery manufacturing, research and development of electronic special materials, sales of graphite and carbon products, manufacturing of vehicle parts and accessories, sales of new energy vehicle accessories, sales of intelligent transmission and distribution and control equipment, retail of electronic components, wholesale of electronic components, and so on.
From this point on, NIO has formally entered the battery field. Regarding the landing of this strategy, Li Bin once said to the media, “It is normal for car manufacturers to make batteries.”
NIO’s independent research and development of batteries has made the relationship between NIO and CATL more complicated. This can be seen from the application of CATL’s new battery technology.
As the world’s leading power battery manufacturer, CATL plays an extremely important role in leading power battery technology. Tesla and NIO, as two of the brands with the largest installation of CATL batteries, are also the pioneers of CATL’s new battery technology.
In November 2020, the 100kWh battery pack jointly developed by CATL and NIO was launched, which set several industry records at that time: the largest production battery pack with the most power, the first production vehicle with a “smoke without fire” battery pack…
In September 2021, the second piece of work jointly developed by CATL and NIO was launched – the ternary iron lithium battery pack, which innovatively mixed the two kinds of battery cells of ternary lithium and lithium iron phosphate, obtaining both the low cost advantage of lithium iron phosphate batteries and solving the low temperature problem of lithium iron phosphate batteries.In recent years, with the support of CATL, NIO has left a good impression on everyone with its vehicle safety and deep battery technology. However, this situation began to change last year.
In June 2022, CATL released the Kirin battery, which caused a sensation in the industry. Its system integration degree reached a new global high, with a volume utilization rate exceeding 72%, and an energy density of up to 255Wh/kg, easily achieving a 1000 km range for the entire vehicle.
On December 30, 2022, the Kirin battery was named the best invention of the year 2022 by TIME magazine.
In the lead application of the Kirin battery, it was not NIO as expected, but a newcomer – JiKe Automotive. On August 27, 2022, CATL announced that JiKe is the world’s first mass-production brand for the Kirin battery, and the JiKe 009 is the first model equipped with the Kirin battery.
On the same day, CATL announced that the Kirin battery will be used in the AITO WENJIE series of new car models. The two parties have signed a five-year long-term strategic cooperation agreement, and the AITO WENJIE models will be fully equipped with CATL power batteries.
In terms of battery technology, CATL is still strong as usual. NIO, on the other hand, has become lonely after exploring the battery path alone and even ridiculed. The solid-state battery (later changed to semi-solid-state) announced two years ago has been silent for a long time. It was originally planned to be launched in the fourth quarter of last year and is now scheduled to be delayed until the first half of this year.
Is the semi-solid-state battery really worth the wait? Not necessarily. Strictly speaking, the semi-solid-state battery is just a word game played for naming purposes. In essence, it is still a liquid battery. Its performance is no better than that of the currently advanced liquid battery, and some core performance is even worse.
On December 16, 2022, the Voyah Chasing Light was listed, and the low configuration was equipped with a Founeng semi-solid-state battery, which was also the world’s first installation of a semi-solid-state battery in a car. However, the energy density of the Founeng semi-solid-state battery package is disappointing, only 170Wh/kg. By comparison, the top configuration of the Voyah Chasing Light is equipped with CATL’s liquid battery, with an energy density of up to 212Wh/kg.
The rise in the price of the power battery industry chain is perhaps the biggest challenge in the industry in the past two years. Most industry players, including CATL and NIO, are victims of this change.Of course, as Li Bin mentioned, exploring the power battery is a necessary path for NIO, a young car company, to seek development, even though it may encounter some setbacks.
Collaboration is the Key to Win-Win
From the five-year comprehensive strategic cooperation agreement signed by NIO and CATL, it can be seen that NIO has already made a choice in the development path of power batteries. At the current stage, cooperation with CATL is still the best solution for NIO before it achieves a breakthrough in self-developed batteries.
Why can’t NIO do without CATL?
First, NIO must stabilize the existing partnership with CATL. As “Electric Motion” pointed out, there are mainly four reasons for this:
Firstly, who else besides CATL can meet the demand for high-end battery production capacity? On January 1, 2023, NIO announced a delivery volume of 122,486 vehicles for the full year 2022. Almost all of the batteries used in these vehicles are from CATL.
As a high-end brand, NIO naturally needs high-end battery production capacity. Although second and third-tier power batteries have been very active in recent years, they each have their own difficulties and cannot solve NIO’s current practical problems.
Secondly, it takes time to switch batteries. If NIO wants to switch from a single battery supplier mode to a multi-supplier mode, this process takes time. Moreover, NIO also needs to consider its users’ emotions and acceptance.
On the eve of March 15, 2022, because XPeng Motors switched batteries, 148 car owners launched a complaint. It was reported that their batteries were quietly replaced from CATL’s first-tier battery to a third-tier battery from another brand. If even XPeng has encountered such challenges, NIO, which values users more, will inevitably face even greater challenges.
Thirdly, who can replace CATL’s high-quality battery? As of December 31, 2022, NIO has delivered a total of 289,556 new vehicles, most of which are equipped with CATL batteries, and the proportion of battery self-ignition is extremely low. “NIO hasn’t caught fire for a long time,” NIO users often joke. The high quality of CATL batteries has long been deeply ingrained in people’s hearts.
Fourthly, CATL can enhance NIO’s high-tech image. As the world’s leading power battery giant, CATL batteries are not only of excellent quality, but also technologically advanced. NIO, as a high-end brand, adopts CATL batteries, which complement each other. If NIO can be the first to try new batteries again, it will help promote NIO’s high-tech image, which is naturally better.## New Business Expansion
Next up is the expansion of new business.
Although NIO surpassed the milestone of 100,000 vehicles sold last year and continued to lead China’s high-end pure electric vehicle market, its development model dictates that NIO cannot stop and must continue to build momentum.
Therefore, based on its existing business foundation, NIO will undergo fission, including establishing some new sub-brands (such as the rumored Alps and firefly), as well as expanding into important foreign markets such as Europe.
Whether it is a NIO sub-brand or a new European market, NIO cannot completely ignore CATL. This is especially true for its entry into the European market, where the only domestic battery brand that can work with NIO is CATL.
In 2022, CATL has opened the door to entry into the European battery market:
In April, CATL’s first overseas factory in Thuringia, Germany (with a capacity of 8GWh) officially obtained a battery core production license; in May, CATL was awarded the world’s first European Economic Commission R100.03 power battery system certificate by the German Ministry of Transport. Starting from September 1, 2023, power battery systems exported to member countries of the European Economic Commission must pass this certification; in August, CATL announced the construction of its second European factory—a battery factory in Debrecen in eastern Hungary (with a capacity of 100GWh); in December, the Thuringia factory of CATL achieved battery core production on time.
“The areas of technical cooperation involving new brands, new projects, new markets, supply and demand linkage, overseas business expansion, and business model cooperation based on long-lasting batteries.” From the details of the cooperation agreement between CATL and NIO, we can see that the new cooperation between the two parties involves the aforementioned new business.
According to unconfirmed reports from the media, NIO has opened up its battery procurement strategy for sub-brands, which means adopting a model of supplying multiple battery brands. Based on this cooperation, it is easy to see that CATL is the first battery brand to be finalized. Other battery brands, such as SVOLT and CREC, are also in contact with NIO. As for the results, it remains to be seen.
If it is difficult for NIO’s main brand to switch from CATL batteries to other brands of batteries, this is not a problem for these new sub-brands. On the one hand, the positioning of the new sub-brands is lower, and on the other hand, the new sub-brands do not have a user base.Regarding the future development of NIO’s new battery multi-supply model, there have been many examples to learn from, such as WM Motor’s combustion incidents, XPeng’s consumer rights protection issues, and Aiways re-embracing CATL, etc. However, Aiways’ case is the most valuable reference for NIO at present.
In 2020, GAC Aion New Energy insisted on supporting CATL and replaced Contemporary Amperex Technology (CATL) for NIO. CATL once accounted for over 90% of GAC Aion New Energy’s highest share. However, after using or comparing with other batteries such as CATL, GAC Aion New Energy chose to return to the embrace of Contemporary Amperex Technology (CATL). In late April 2021, CATL and GAC increased their investment in GAC Aion New Energy from CNY 1 billion to CNY 2 billion, a 100% increase, and CATL’s shareholding ratio reached 51%, with GAC Group holding the remaining 49%.
In April 2022, Contemporary Amperex Technology (CATL) batteries’ share of sales for GAC Aion New Energy’s best-selling model, the AION Y, reached 88%. According to sources close to CATL, Contemporary Amperex Technology (CATL) is focusing on expanding production and will mainly supply power batteries for GAC Aion New Energy’s V electric vehicles in the future.
At the World Electric Power Battery Conference in July 2022, GAC Aion New Energy revealed that Contemporary Amperex Technology (CATL) batteries’ share has exceeded 50%.
Overall, regardless of maintaining existing businesses or expanding new ones in the future, Contemporary Amperex Technology (CATL) will be an essential choice for NIO in terms of power batteries. Of course, if NIO’s self-developed batteries have made significant breakthroughs, that would be a different story. But self-developed batteries are not that simple to achieve.
Recently, He XPeng, the CEO of XPeng, stated in an interview with the media, “We are not considering investing in the battery field now. It is difficult to succeed in every field, and it is good to succeed in any field. However, it depends on how much money you invest. Investing CNY 100 versus investing CNY 1 million are two different risks. In the battery field, we choose to cooperate at present.”
Even though NIO has chosen to cooperate with CATL for a win-win situation, NIO’s battery path is still under exploration. We look forward to NIO’s results and wish NIO the best!
This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.