Author: Zhang Yi

On February 27, at the Ideal Auto 2022 financial report conference call, Li Xiang stated that “with the gradual improvement of industry maturity and the gradual improvement of upstream and downstream supply, Ideal Auto maintains confidence in the supply of parts for 2023.”

Where does Li Xiang’s confidence come from?

In fact, compared with other new forces, Ideal Auto has always attached particular importance to the cultivation and management of the supply chain and has now “made some progress.” It is through such unremitting efforts that Li Xiang can be reassured and even maintain confidence.

For example, in the core power battery, Ideal Auto has evolved from direct purchase of battery packs to independent research and development of battery packs. At the same time, Ideal Auto has also built a multi-cell supply model, such as Ningde Times + Honeycomb Energy + Xing Wangda, which provides more guarantees.

For example, the newly listed Ideal L7 uses battery cells from Ningde Times and Honeycomb Energy. Although they have different suppliers, Li Xiang said at the press conference, “Performance, quality and warranty policies are consistent with Max and Pro models.”

Regarding this, some netizens criticized, “When the car owners asked the Ideal Sales, ‘You said that the performance and quality are the same, why are the prices different?’ The Ideal Sales said, ‘Ningde Times has a big reputation?'”

There are many related comments, although they are somewhat exaggerated, Ideal Auto has always used Ningde Times as its battery supplier. This sudden announcement that the L7 Air will switch battery suppliers and ensure that the performance, quality, and warranty policies of the high configuration models remain unchanged has caused some discussion, which is reasonable.

However, what is the actual situation of Honeycomb Energy in this “marriage” with Ideal Auto?

“Honeycomb” should not be underestimated

If we use one word to describe the “marriage” between Ideal Auto and Honeycomb Energy, it would probably be “strict.”

It is reported that in order to ensure the smooth and high-quality delivery of Ideal Auto’s independently developed PACK batteries, as early as July last year, the Ideal Auto R&D leadership team had led the team to enter Honeycomb Energy for guidance and review. Honeycomb Energy did not disappoint and handed in a satisfactory and beautiful answer sheet.When designing the PACK battery, efficiency and safety are the top priorities considered by HEC. To achieve this, HEC uses its self-made 117 AH ternary battery cell with an energy density of up to 180Wh/kg, which solidifies the foundational energy of the battery, achieving pure electric driving range that is no less than that of CATL.

To ensure the highest level of user driving safety possible, HEC has pioneered the use of cold plate instead of longitudinal beam in the production process, adopting integration of the battery cell and housing with a high-strength steel armor. At the same time, in the event of thermal runaway occurring in the battery pack at high temperature, HEC can effectively suppress no more than two out of control battery cells, improving the safety of the battery pack by a significant margin.

During the production process, HEC fully leverages automation and intelligence of the manufacturing equipment to empower the PACK production.

HEC has matched its ideal automobile with a fully automated CTP dedicated production line, realizing modular automatic assembly from battery cells to PACK, which is recorded and analyzed in the MES system for traceable quality control of process equipment and product parameters. Subsequently, all kinds of PACK and vehicle-side signals are detected after PACKs are taken down the line, to ensure 100% product quality.

Of course, accurate overall control cannot be achieved without the pursuit of excellence in detail.

For example, Pack production process uses the Atlas tightening system, which monitors torque, angles and quantity in real-time, achieving 100% error prevention; and advanced loop-shaped spot weld laser welding is employed, elevating weld quality from Six Sigma to ten Sigma level with more appealing weld appearance, reducing weld splatter by 90% compared to traditional laser welding.

To strictly guard against possible problems from the design to the production line, HEC has established a stringent and systematic quality management system, such as performing automated CCD online detection, 100% performance testing, and quality gate control of all critical process steps, as well as maintaining strict stoppage rules and pushing for the ten major redlines of quality.## From Design to Production, and from Human to Machine

At every step of the production process, and from every part involved, Focused Energy (蜂巢能源) aims not only to meet high standards and strict requirements, but also to achieve refined management.

During this period, both parties maintained deep communication from the top to the team level regarding the collaborative project. Li Xiang (李想) was confident to say that “performance, quality, and warranty policies are consistent with those of the Max and Pro models”, which in large part reflected the shared effort and the confidence in the intelligent manufacturing level of Focused Energy.

The “marriage” between Li Auto (理想汽车) and Focused Energy has drawn attention, but just like how BMW once chose the little-known Ningde era (宁德时代) in the past, the current influence of enterprises is not important; what is important is how much strength the enterprise has accumulated in the past and how its future will be driven by core values.

Focused Energy may seem unknown to the general public, but it has a great history. Formerly the power battery department of Great Wall Motors founded in 2012, it officially became independent in 2018 and has since embarked on a solitary journey.

In the development process of less than five years today, Focused Energy has accumulated cutting-edge technologies such as cobalt-free batteries, short-blade batteries, dragon-scale armor batteries, and third-generation ultra-high-speed stacking technology, and has deep cooperation with many automobile manufacturers. Focused Energy is now among the top ten power battery companies in China and has a seat in the global market.

Some industry institutions predict that by 2025, the total demand for lithium batteries in the global transportation electrification and energy storage fields will exceed 1.8 TWh. Facing this trend of entering the terawatt-hour (Twh) era, Focused Energy is ambitious.

At Focused Energy’s Battery Day in 2021, it proposed a strategy of expanding production capacity and plans to build multiple bases in China in the next few years to achieve a significant increase in production capacity.

Collaborating with Li Auto is undoubtedly the beautiful first shot. Thousands of miles of clouds and the moon suggest that in the future, Focused Energy will undoubtedly release more and higher-quality production capacity and form a broader and stronger influence.

“Honeycomb Style” Leads the Way

China’s new energy vehicle market has been booming for about ten years. Thanks to this, a large number of new automobile and power battery manufacturers have quickly grown, and the latter is competing with Panasonic, LG, and other old battery manufacturers worldwide.

Strictly speaking, both the automakers in the spotlight and the power battery companies behind the scenes still have a long way to go before they can truly mature in the industry.

Therefore, in today’s power battery industry, which is characterized by an oligopoly, the “marriage” of SVOLT Energy Technology and Ideal Automobiles just provides a new cooperation model for the industry. On the surface, it seems that Ideal Automobiles supports SVOLT Energy Technology, but in fact the biggest gain of this “marriage” is a win-win situation.

On the one hand, for Ideal Automobiles, the significance of this specialized product line cooperation model, in which SVOLT Energy Technology only provides batteries for the Ideal L7 Air, is to help reduce costs while ensuring product quality.

When faced with SVOLT Energy Technology, Ideal Automobiles has relatively stronger bargaining power. At the same time, introducing multiple suppliers optimizes the supply chain system, enhances supply chain risk resistance, facilitates control of procurement costs, and ultimately enhances the cost-effectiveness of the product. Ideal Automobiles’ price threshold has dropped to 319,800 yuan, which is a corresponding reflection of this.

The price reduction also allows Ideal Automobiles to face the crisis and volatility of price wars more flexibly and calmly during the price war outbreak at the beginning of 2023, even in the absence of major promotional activities.

For SVOLT Energy Technology, the biggest significance lies in leveraging the influence of Ideal Automobiles to enhance brand awareness, enabling users to see and make more product choices, and gain more high-quality customers by using Ideal Automobiles as a springboard.

At the same time, through cooperation with Ideal Automobiles, it is also beneficial for SVOLT Energy Technology to leverage Ideal Automobiles’ high standards to improve the precision of SVOLT Energy Technology’s processes and technologies, continuously output more cost-effective battery solutions for automakers over a longer time period, and ultimately form positive feedback on itself, thus promoting its benign development.

In fact, it is an inevitable trend for automakers to choose multiple power battery companies as suppliers, and for power battery companies to seek multiple automakers as customers, because at least two legs can ensure a stable walk.Various industries are like this. Only by forming a networked cooperative structure can the entire industry develop steadily. Once the industry winter comes, each enterprise, as a point dispersed on the network, has sufficient resilience to cope.

However, as mentioned above, an oligopoly has formed in the power battery industry, and the cooperation between the vehicle manufacturers and power battery companies is also in a delicate situation.

On the one hand, most automakers want to find one or two oligarchs to cooperate with, so as to improve their own product competitiveness, ultimately leading to a serious imbalance in the industry dividend.

On the other hand, many leading power battery companies are too deeply bound to only one automaker, such as Contemporary Amperex Technology and GAC Group, CATL and Volkswagen, and EVE Energy and BYD.

Deep binding with automakers can certainly achieve rapid growth, but it also limits their rapid maturity. Once the automaker they are bound to has “a new love” or “turns off the tap”, the power battery company is likely to quickly decline, or even collapse.

Fate is only secure when it is in our own hands.

Being too deeply bound to automakers also limits the cross-industry cooperation of the entire new energy vehicle industry, which not only hinders the stability of the entire industry, but also increases the cost of power batteries and adds to the survival pressure of automakers. If the automakers do not take action, the entire industry will suffer.

Therefore, for power battery companies, relying on automakers to complete the initial capital accumulation and grow rapidly to survive is important, but independent growth towards maturity to release potential to adapt to the market is undoubtedly more important.

Now, not only Ideal Automobiles, but many automakers are actively looking for multiple battery suppliers, and most power battery companies have passed the stage of seeking survival. In an increasingly complex market environment, two-way running between automakers and power battery companies has become increasingly urgent.

The cooperation model between Ideal Automobiles and BJEV is a good example. First, it is open and transparent, and accountable to users; second, it achieves a win-win situation and rewards both parties. The “marriage” of the two is certainly a match.

The Voice of Electric Power

In 2022, the sales of new energy vehicles in the Chinese market reached 6.887 million vehicles, a year-on-year increase of 93.4%, and the market penetration rate reached 25.6%. The market demand for power batteries is still very strong, and the story of power battery companies such as BJEV continuously expanding will continue to be played out in the future.Although the formation of an oligopoly is currently suffocating the industry, the battery technology route, the market demand for endurance, and the energy demand structure on both supply and demand sides have not yet formed, so the market demand centered on “technology-driven” will not change in the short term.

Yang Hongxin, the chairman of Honeycomb Energy, once said, “Build an unbreakable moat with research and development and innovation without leaving any way out.” Indeed, only by building an unbreakable technological barrier can Honeycomb Energy have sufficient strength to cope with the current oligopoly and seek more possibilities.

Anyway, the cooperation between Ideal Car and Honeycomb Energy, despite public opinion, still enabled Honeycomb Energy to achieve a certain degree of breakthrough. This undoubtedly set a good precedent for the brand new 2023, and the starting point of the new “rampage” may be here. We’ll see if it can “accelerate crazily” in the future!

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.