In-Depth Analysis of Ningde Times' "Darkest Hour": A Game of Profit, Power, and Survival Rules
Hello everyone, I'm your financial journalist. Recently, there's been a significant development in the new energy sector: Li Auto announced that it will primarily use its own batteries in the future and no longer rely on Ningde Times.
This news was like a bombshell, causing Ningde Times' stock price to plummet to a new low for the year, with its market value evaporating by over 700 billion yuan. Many people are confused: Isn't Ningde Times the "King of Batteries"? How could it suddenly suffer such a blow?
In reality, this is not just a matter of rivalry between two companies; it represents a severe shakeup in the power structure of the entire automotive industry. Today, we'll break down this situation in simple terms and explain the logic behind it from five perspectives.
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1. The Trigger: Why Did Li Auto Suddenly "Turn Against" Ningde Times?
First, we need to understand that Li Auto and Ningde Times have been a close partnership for over a decade. Since Li Auto's establishment in 2015, Ningde Times has been its core battery supplier, and the two have collaborated closely, even developing the renowned "5C Kirin Battery."
So why does Li Auto now want to move away from Ningde Times? On the surface, it seems like Li Auto wants to gain more control, but there are three main reasons:
1. Trust Crisis and Production Capacity Issues: Last year, the sales of Li Auto's i8 were lower than expected, leading to inaccurate forecasts for the battery demand for the i6 model. When the i6 became a huge success, Li Auto urgently needed more batteries. However, Ningde Times, possibly prioritizing other major customers or maximizing its own profits, did not respond promptly, causing delivery delays. This was seen by Li Auto as a failure at a critical moment.
2. Ambiguity in Intellectual Property: The 5C Battery, jointly developed by the two companies, was later used in other cars by brands like Geely. Li Auto believes its exclusive technology was shared, raising concerns about the ownership of the intellectual property.
3. Shift from Default Supplier to Alternative Option: Li Auto's new MEGA model now uses its own batteries, with the i9 model using a mix of batteries before transitioning entirely to its own, and the i6 model no longer having a Ningde version. Li Auto calmly redefined its relationship with Ningde Times, stating that it is no longer the "only option" but just one of several.
In simple terms: It's like a restaurant that has long relied on one supplier for all its supplies. Suddenly, that supplier not only raises prices but also refuses to deliver when needed and even sells the restaurant's secret recipe to a competitor. The restaurant owner, fed up, decides to build its own kitchen or find a more reliable supplier.
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2. The Core Conflict: Who Is Making the Big Money? Who Is Working for Whom?
The underlying issue is a severe imbalance in profit distribution:
- Ningde Times Is Profiting Huge: In the first half of this year, Ningde Times' net profit reached 43.3 billion yuan.
- Automakers Are Struggling: During the same period, the total profit of 20 major domestic listed automakers was only about half of Ningde Times' profit. Li Auto even turned from a profit to a loss, losing 4 billion yuan.
Batteries account for 30%-40% of the cost of a vehicle. If the battery supplier has a high margin, automakers, as the brands facing consumers, have very little profit margin.
In simple terms: Imagine you own a milk tea shop (an automaker), and the tea and milk (batteries) cost 40% of your expenses. If the tea supplier (Ningde Times) not only monopolizes the supply but also takes more than half of your profits, you'll want to consider alternatives, such as growing your own tea or finding a cheaper supplier.
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3. The Battle for Power: Do Consumers Recognize the Battery or the Car?
Beyond money, there's the issue of brand influence:
Over the past few years, Ningde Times has invested heavily in building its brand, with ads emphasizing that "when choosing an electric car, look at the battery—choose Ningde Times." It even launched a battery lookup feature, allowing consumers to see directly if a car uses Ningde batteries.
This has created a situation where consumers first ask if a car uses Ningde batteries before considering the car itself.
- Automakers' Anxiety: If consumers only care about the battery brand, automakers lose control over pricing and product design. They become mere "assemblers" and distributors for battery manufacturers.
- Product Homogenization: To achieve economies of scale, Ningde Times tends to provide standardized battery solutions. This means different cars may have similar battery experiences, making it difficult for automakers to differentiate their products.
In simple terms: It's similar to the smartphone industry. If consumers only care about the "Qualcomm chip" and not the brand (Apple or Huawei), smartphone manufacturers lose the ability to charge higher prices. Li Auto wants consumers to buy its cars for the Li Auto brand, not just because of the batteries.
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4. The Real Challenges of Developing Own Batteries:
Automakers like Li Auto and Xiaomi have announced plans to develop their own batteries, but is this really a viable path? The answer is no—it's a difficult one:
1. High Technical Barriers: Ningde Times has invested over 90 billion yuan in research and development over the past decade, with more than 20,000 researchers. In contrast, Xinwangda and CATL, the manufacturers Li Auto is using, have much less research funding. Battery manufacturing requires high quality and consistency, which cannot be achieved with money alone; it takes years of technical expertise.
2. Quality Risks: Automakers like GAC and Geely have tried supporting smaller battery manufacturers but faced quality issues, eventually returning to Ningde Times. If Li Auto develops its own batteries and uses second-tier manufacturers for the cells, any problems will be blamed on Li Auto, not the battery manufacturers.
3. Lack of Scale: McKinsey estimates that automakers need to produce 500,000 cars or 15 GWh of batteries annually to achieve cost advantages. Only比亚迪 and Tesla have successfully done this. Li Auto and Xiaomi have good sales, but they are still smaller than比亚迪, so the cost-saving benefits of developing their own batteries may not be as significant.
In simple terms: Developing your own batteries is like building your own high-tech factory. You may understand the design, but you need others to produce the components. If the quality is poor, it can damage your reputation. Moreover, small production volumes result in high costs, and only large sales volumes can bring down the costs. Li Auto is betting its brand reputation on this.
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5. The Future of Ningde Times: Will It Fall?
Finally, let's look at the outcome. Will Ningde Times collapse because of this? Not in the short term:
1. Solid Foundation: In the first half of the year, Ningde Times still held a 46.7% market share in domestic passenger vehicles, with a 95% capacity utilization rate. For mid-to-low-end models, automakers will continue to use multiple suppliers to reduce costs, but for high-end models, consumers and automakers still trust Ningde Times' quality and reliability.
2. Strategic Transformation: Ningde Times is not just a battery supplier; it's also expanding into energy storage, battery swapping networks, upstream minerals, and downstream recycling. It is transitioning from a "battery supplier" to an "energy infrastructure operator."
3. Market Reaction: Institutions like UBS and JPMorgan still have a "buy" rating for Ningde Times. Despite the stock price drop, the market sees its long-term competitiveness.
In simple terms: Ningde Times is like a large energy empire. Although it has lost an important customer like Li Auto, it still has many others and is entering new markets. Its current challenges are more about changing its image—it wants to shift from a dominant supplier to a partner or infrastructure provider, but its past dominance has led to some loss of trust from customers.
In summary:
Li Auto's move away from Ningde Times is a result of pressure on profits and brand concerns among automakers. However, this does not mean Ningde Times will be replaced. Instead, it indicates that the power dynamics in the battery industry are shifting from a monopoly to a competitive landscape with multiple players.
For consumers, this is good news. Increased competition will drive innovation, potentially leading to more affordable and differentiated electric vehicles.
This battle is just beginning.