China News Weekly reporter/Li Mingzi
Published in the 1135th issue of "China News Weekly" magazine on April 8, 2024
The "price war" of new energy vehicles has escalated again, but the used car market has been caught off guard.
Just after the Spring Festival, BYD launched the first shot in the new car price war. Two of its hybrid models were launched, with the lowest price jumping to 79,800 yuan. On April 1, the starting price of Wenjie's new M7 entry-level model was reduced by 20,000 yuan to 229,800 yuan.
New energy car companies "turned the table", and the first to be knocked to the ground were second-hand car dealers. The price of new cars is even lower than that of used cars on sale, causing a price inversion. Second-hand car dealers "lose money as soon as they take over the car." For some old cars with a long mileage or that have been involved in collisions, the market price will be cut in half. Under the new market situation, second-hand car dealers no longer dare to accept new energy vehicles, and have even begun to advise new energy vehicle owners to "continue driving if there is no big problem."
Why do new energy vehicles, which are so popular, suddenly fail in the second-hand car market? Zhang Hong, secretary-general of the New Energy Branch of the China Automobile Dealers Association, once said in the media that "the problem of battery residual value evaluation" is one of the main reasons. Due to the current lack of objective and impartial battery testing methods, buyers and sellers often disagree over battery issues, and the valuation of batteries usually accounts for half of the vehicle value, which also makes pricing used electric vehicles difficult.
On March 13, the State Council issued the "Action Plan for Promoting Large-Scale Equipment Updates and Trade-in of Consumer Goods" to promote the trade-in of automobiles. According to a Caitong Securities research report, there will be approximately 110 million passenger car models in China in the core redemption peak period (i.e. 4 to 9 years) in 2023. Experts predict that 40% of the increase in consumption in the passenger car market this year will come from trade-ins.
However, the new car price war combined with power battery recycling and pricing problems may lead to "obstruction" in the replacement of new energy second-hand cars. Consumers cannot sell their old cars, which affects their willingness and budget to replace them with new cars. There is a complex and ultra-long chain between the recycling and replacement of new energy vehicles. The more pressing issue currently affecting the operation of this chain is how to deal with used power batteries?
Is the battery retirement wave really coming?
On the day after a business trip to Guangzhou to investigate the location of the branch factory, Zhao Xiaoyong flew back to the Tianjin factory overnight to prepare to receive a government inspection delegation from a certain city in Shandong the next day. Since this year, new and old players in the recycling market have begun to actively expand their business.
Saidemei New Energy Technology Co., Ltd. founded by Zhao Xiaoyong is on the second batch of white list companies for power battery recycling announced by the Ministry of Industry and Information Technology. The nationally certified "regular army" is very popular in local investment promotion, especially in major consumer cities of new energy vehicles.
"The recycling and reuse of lithium batteries is a need for environmental protection and is also the last track for the new energy industry." Having worked in the field of new energy for more than 20 years, Zhao Xiaoyong has taken a fancy to the potential of "battery recycling". As the last mile of the green closed loop of the new energy industry chain, power batteries not only have a large number of "echelon utilization" scenario needs, but the recycling of rare and precious metal resources in batteries will also bring huge benefits.
Under normal circumstances, when the life of a power lithium battery declines below 80%, the electrochemical performance of the battery will decline significantly, making it difficult to meet the normal power needs of the car, and the battery will enter a retirement state.
Starting from the “Ten Cities Thousand Vehicles” project in 2009, China has been promoting new energy vehicles for 15 years. Taking the promotion of demonstration applications in Beijing, Shanghai and other places in 2013 as a watershed, new energy vehicles began to enter the era of private consumption. For new energy vehicles promoted in the early stage, the power batteries will be scrapped after generally three years of operation for commercial vehicles and five years for passenger vehicles.
"The batch retirement of the first batch of new energy vehicles in China laid the foundation for the large-scale development of power battery recycling after 2014." Zhao Xiaoyong recalled that at the beginning of his business in 2016, battery recycling began to be mentioned in policies, but only as a promotion Some provisions of the new energy vehicle policy document appear. For car companies, having a formal recycling process means it is easier to obtain subsidies, but at that time the industry did not pay enough attention to used batteries.
In 2018, domestic sales of new energy passenger vehicles exceeded one million, the volume of used power batteries grew rapidly, the introduction of policies for power battery recycling was significantly accelerated, various measures were intensively released, and pilot projects increased accordingly.
The recycling of used power batteries and key metal resources is also seen as a way out of "expensive electricity". Power batteries account for more than 40% of the total vehicle cost. Car manufacturers once joked that they were working for battery manufacturers. Due to high raw material prices, battery manufacturers also complained that they were "just struggling on the edge of meager profits." In 2022, the benchmark price of battery-grade lithium carbonate will rise to a peak of 604,000 yuan/ton. The price of lithium battery recycling will also rise, and companies from all walks of life will rush into the recycling track.
Data from the China Business Industry Research Institute shows that in 2018, there were only nearly 2,000 registered companies related to battery recycling, and by 2022, it has exceeded 42,000, an increase of more than 20 times. In addition to third-party recycling companies and battery manufacturers, downstream car companies, upstream battery material companies and lithium mining companies have also joined.
"In order to prepare for the large-scale battery scrap cycle, companies must prepare for building factories 2 to 3 years in advance." Liu Gangfeng, technical director of Beijing Bocui Recycling Technology Co., Ltd. told China News Weekly. Huaan Securities predicts that the volume of retired batteries will reach 437GWh in 2030, and the recycling market value will reach 169.5 billion yuan. Some brokerage firms and consulting agencies are more optimistic in their predictions, believing that the industry's breakthrough of 100 billion yuan is expected to be achieved in advance by 2025.
Coming earlier is the peak period for car trade-ins. In the past ten years, domestic new energy vehicles have developed rapidly, with sales jumping from 75,000 vehicles in 2014 to 9.495 million vehicles in 2023. According to data from the Ministry of Public Security, as of the end of 2023, the number of new energy vehicles in China reached 20.41 million, with 7.43 million new registrations throughout the year.
Lang Xuehong, deputy secretary-general of the China Automobile Dealers Association, said that the current general replacement cycle for traditional fuel vehicles is 6 to 8 years, and the replacement cycle for new energy vehicles is 3 to 5 years. It is predicted that 40% of the increase in passenger car market consumption this year will come from trade-in. . Based on the 26 million passenger car sales last year, approximately 10 million passenger cars will be traded in this year.
The release of a new round of "old for new" action plan comes at the right time. The "Action Plan for Promoting Large-Scale Equipment Updates and Trade-In of Consumer Goods" (hereinafter referred to as the "Action Plan") requires the trade-in of old cars for new ones, increasing policy support, unblocking circulation congestion points, and promoting tiered and updated consumption of cars.
The details of the car trade-in policy have not yet been released, but at least 20 car brands have launched promotional activities in advance. Chongqing, Shanghai and other places have also recently introduced car "trade-in" policies. Regarding the replacement of new energy vehicles, the Shanghai Municipal Commerce Department proposed that for those who purchase pure electric vehicles after scrapping or transferring them, the government will provide a one-time subsidy of 10,000 yuan, which will be valid until the end of 2024.
The "Action Plan" clearly requires that by 2027, the recycling volume of scrapped cars will approximately double compared with 2023, and the transaction volume of second-hand cars will increase by 45% compared with 2023. According to Cui Dongshu, secretary-general of the Passenger Car Association, the net increase in the number of scrapped cars in 2023 will be 7.56 million. The trend of accelerated scrapping will be significant in the future, and the renewal and upgrading of scrapped cars will become an important driving force for industry growth. The industry predicts that new energy vehicles will become the largest contributor to the development of the passenger car market in the coming period.
"Large-scale trade-in of old vehicles, home appliances, and various equipment will drive explosive growth in the battery recycling market," Sun Donggang, general manager of the business management center of Beijing Metal Recycling Co., Ltd., told China News Weekly. Since 2018, there have been predictions in the industry that "there will be a wave of power battery retirements" almost every year. Now that we are really standing on the eve of the industry's outbreak, he has another concern, "Will the chaos that has always existed in the power battery recycling market Will it get worse?"
The regular army cannot run a small workshop
"For power battery recycling companies, obtaining supply is the first step, and it is also a difficult step." Xia Yonggao, chairman of Ningbo Weifu Technology Co., Ltd., said frankly, "In many cases, formal recycling companies simply cannot capture small workshops."
Gao Weiqiao, deputy general manager of Zhejiang Huayou Recycling Technology Co., Ltd., one of the first domestic battery recycling whitelist companies, once shared an experience with the media. One time he went to a battery factory to recycle batteries, and more non-whitelist companies were invited to participate in the auction. Double the price, the quotations of these small workshops are usually about 15% higher than those of whitelist companies, and the premium has exceeded the company's regular profit margin.
"Most small battery recycling workshops are still used all over the world with a crowbar and a machete." Sun Donggang introduced that these self-employed people disassemble batteries on the spot in their own yards without issuing invoices. They basically have no investment in environmental protection, production equipment, etc., and almost zero Cost operation, bargaining power is naturally relatively high. On the other hand, domestic companies most often use centralized auctions to deal with used power batteries. In the past year or two, larger companies have begun to strictly review the qualifications of recycling companies, but many small auctions still follow the "highest bidder gets it" , "Whoever pays more will get the battery."
The China Society of Automotive Engineers predicts that by 2030, the amount of domestic power battery retirements will reach 3.5 million tons. However, a "Survey and Research Report" released by the Development Research Center of the State Council shows that as of 2023, China's standardized recycling rate of new energy vehicle power batteries will be less than 25%. One whitelist company stated that "more than 70% of used batteries have fallen into the hands of second-hand traders and small workshops."
Recycling volumes are less than expected, meaning companies are struggling to make profits. In order to avoid being controlled by traders, Zhao Xiaoyong has been building his own recycling channels since he started his business. He has maintained relative stability by cooperating with five major channel entities, including new energy vehicle companies, battery manufacturers, scrapped vehicle dismantling plants, operating companies and energy storage companies. Increased receipts. "By this year, the recycling volume is expected to reach 10,000 tons. This is only the bottom line for the factory to achieve economies of scale." Zhao Xiaoyong said.
In order to standardize the development of the industry, in 2018, the Ministry of Industry and Information Technology released the first list of companies that meet the "Industry Standards for Comprehensive Utilization of New Energy Vehicle Waste Power Batteries" (referred to as the "white list"). Up to now, five batches of corporate whitelists have been released, totaling 156 companies, which are regarded as the "regular army" of battery recycling.
"If a company wants to be shortlisted, it must meet more than 50 review conditions. The procedures are cumbersome and require a lot of investment." A whitelist company said bluntly that the factory has strict requirements in terms of project location, equipment technology, environmental protection, product quality, etc. It is necessary to obtain multiple certificates such as pollution discharge license and cleaner production license as well as project approval documents. However, in actual competition, the "white list" does not have mandatory exclusivity, and informal enterprises still take advantage of loopholes. Standardized enterprises are subject to cost constraints and are at a disadvantage in the process of competing for supply.
Getting the goods was not smooth, and the quality of the batteries was "full of uncertainty." "It depends on luck just like betting on stones." Xia Yonggao explained helplessly that it is difficult for third-party companies to obtain valid data from car companies or battery companies. Information such as service life is of little reference significance and cannot be used in the "bidding harvest" link. To accurately evaluate the battery life, you can only know the value of the battery after purchasing it and taking it back to the factory for disassembly and testing.
The dispute over supply has not yet been resolved, and the difficulty of battery disassembly and processing continues to increase. The recycling industry ridicules itself that "it is more difficult to dismantle a battery than to make one." At the forum of the China Electric Vehicles Conference of 100 2024, Bao Wei, general manager of Zhejiang Huayou Recycling Technology, publicly stated that the battery-integrated chassis is very unfriendly to battery recycling and dismantling. “Everyone has made the battery extremely strong,” which is very important for recycling companies. , it becomes increasingly difficult to disassemble the battery pack.
"The health of the battery is like a black box. How to use it when you get a battery?" Wang Zhenpo, deputy director and secretary-general of the New Energy Battery Recycling Professional Committee, concluded at an industry meeting that information asymmetry between the upstream and downstream of the lithium battery industry chain leads to A series of problems have arisen. Comprehensive recycling companies cannot grasp information such as where the car is, where the battery is, etc., and transaction prices are not transparent.
Guohai Securities' report on the lithium battery recycling industry pointed out that the maintenance and traceability of power battery "ID cards" has not been smooth and the recycling policy has not been perfected. At the same time, the qualification requirements of formal battery recycling companies are relatively high, resulting in the number of small workshops in the industry far outnumbering the regular army.
"Most scrapped batteries flow to small workshops and the secondary utilization market in a regulatory blind spot. It is basically difficult for formal recycling companies to receive scrapped batteries, and a large amount of high-quality recycling capacity is idle." During the National Two Sessions in 2023, members of the National Committee of the Chinese People's Political Consultative Conference, Zeng Yuqun, chairman of CATL New Energy Technology Co., Ltd., told the media.
In order to survive, some whitelist companies choose to "turn enemies into friends" with small workshops. The person in charge of a power battery recycling company in Zhejiang told China News Weekly that some whitelisted companies have tied up with scalpers with channel advantages to bid, or used whitelist qualifications to trade decommissioned batteries and resold the batteries without recycling them. Utilization work has caused batteries to flow into informal recycling channels, which has inadvertently pushed up the cost of recycling batteries by formal enterprises.
Not long ago, the Ministry of Industry and Information Technology sent a notice to all provinces (autonomous regions and municipalities), clarifying the suspension of accepting applications for comprehensive utilization of new energy vehicle power battery companies and standardizing conditions. "It's also a good thing to stop." Zhao Xiaoyong calculated an account. In 2023, China's comprehensive utilization of new energy vehicle waste power batteries will be 225,000 tons. If evenly distributed to all 156 whitelist companies, each company will recycle less than 1,500 tons. tons, one can imagine the intensity of industry competition. Not only are the regular army and small retail investors competing for the market, whitelist companies are also fighting among themselves. “This track is too crowded.”
Producers’ Dilemma in Recycling
From what point do retired power batteries begin to lose? Zhao Xiaoyong is also looking for answers.
"The contract periods of different channels vary greatly, and the recycling volume involved in the orders varies greatly. It is difficult to calculate the specific number of a certain channel's proportion of recycling." Zhao Xiaoyong said that among the five major recycling channels he built, from scrapped machines EMU recycling and dismantling companies obtain the highest proportion of power batteries.
As the upstream of battery recycling companies, "vehicle scrapping and dismantling plants provide about 60% of retired power batteries." Sun Donggang said that when after-sales new energy vehicles enter the market again, they will be divided into two directions: the second-hand market and scrapping. The end of the circulation of second-hand cars is also scrapping. Regular dismantling plants with certificates that handle scrapping business are the two directions before the car reaches the end of its life. The only way to go.
Sun Donggang introduced that scrapping and dismantling enterprises are managed by both the Ministry of Commerce and the Ministry of Public Security. To put it simply, the scrapping and dismantling plant first uploads vehicle-related information to the Ministry of Commerce. After obtaining the recycling certificate, it then goes to the Vehicle Management Office to compare the uniqueness of the vehicle, then destroys it in accordance with the dismantling process and standards, and uploads the dismantled Go to the website of the Ministry of Public Security with videos, photos and other documents, and obtain the official cancellation certificate and cancellation decision. Only then will the car cancellation be completed.
Sun Donggang stood in front of the office window and pointed to the light poles that can be seen everywhere in the parking lot. There are three or four monitors fixed on the top of each light pole. They are all remote monitoring by the public security system. All scrapping and dismantling processes will be fully recorded. . The scrapping of traditional fuel vehicles is strictly defined, and the five major assemblies, namely engine assembly, steering gear assembly, transmission assembly, front and rear axles, and frame, are indispensable. However, the scrapping standards for new energy vehicles have not yet been clearly implemented. That is to say, new energy vehicles that have been scrapped before do not necessarily have batteries.
"Just taking my family as an example, for every 1,000 scrapped new energy vehicles recycled, we can only receive about 10 batteries." Sun Donggang said that the property rights of the batteries of new energy vehicles belong to consumers, and subject to market regulation, the batteries are often replaced before the vehicles are scrapped. Will be dismantled in advance and sold separately. The OEM, which is primarily responsible for battery recycling, has no property rights and has difficulty controlling the flow of batteries.
A senior practitioner who has worked in a car dismantling and scrapping enterprise for ten years told China News Weekly that in the early years, the sources of scrapping of new energy vehicles were relatively single, mainly the corporate entities that operate the vehicles. When the car has been driven for a certain period of time, it is replaced as a whole, and the amount of scrap is large at a time. "But there have been situations where not even a single battery has been received." With the sudden increase in the purchase of private cars, the sources of scrapping have gradually become diversified. Companies recycle personal vehicles through outlets, and may also receive scrapped cars from various channels such as car companies, repair stations, and scalpers. "It's even harder to control the battery flow direction, but there's nothing we can do about it."
In mid-December last year, the Ministry of Industry and Information Technology issued the "Administrative Measures for the Comprehensive Utilization of New Energy Vehicle Power Batteries (Draft for Comments)" (hereinafter referred to as the "Administrative Measures"), which clarified in the scrap transfer requirements that scrapped new energy vehicle power batteries that are missing should be If the vehicle is deemed to be missing, the scrapped motor vehicle recycling and dismantling enterprise shall not issue a "Scrapped Motor Vehicle Recycling Certificate". In addition, scrapped motor vehicle recycling and dismantling companies are also required to upload warehousing information to the national platform.
"The loss of retired power batteries occurs more in the circulation link, and automobile manufacturers are the key players." The aforementioned senior practitioners in the automobile recycling and dismantling industry said that automobile companies shoulder two tasks, not only to have more data on battery traceability, but also to Consumers can be reached directly through sales outlets. If the old batteries that have been repaired or replaced are returned to regular 4S stores in large quantities, they can often be packaged and sent to the battery factory that signed the "back-to-back contract". However, if they are accumulated sporadically in the hands of repair stations, small workshops, and second-hand car dealers, they will be changed hands after several times. It's difficult to track where the battery went.
The "Administrative Measures" put forward corresponding responsibilities for different entities in the recycling process, requiring automobile manufacturers to bear the main responsibility for the recycling of installed power batteries, battery manufacturers to bear the responsibility for the recycling of power batteries sold directly to the market, and tiered utilization enterprises to bear the tiered utilization of production. Product Recycling Responsibility.
Among them, the principle of "who produces and who recycles" was clarified for the first time. At the sales stage, the "Administrative Measures" require automobile manufacturers to record the traceability information of new energy vehicles and their owners, clarify the requirements and procedures for the maintenance, decommissioning, and recycling of power batteries, and promptly notify when the power batteries meet the decommissioning conditions specified by the company. Requirements and procedures for recycling and disposal of new energy vehicles by owners. In addition, car companies are also required to set up or commission collection-type recycling service outlets that match sales volume in the administrative areas at or above the prefecture level where they sell.
The "Management Measures" encourage enterprises to jointly build and share recycling channels. Leading companies have begun to join forces to lay out the recycling market. In 2013, CATL acquired Bump Cycle and entered the power battery recycling track. In 2018, CATL and SAIC reached a strategic cooperation to jointly promote the recycling and reuse of power batteries for new energy vehicles.
Vehicle companies have also entered the market through equity participation or controlling third-party recycling companies, and have strategic cooperation or direct layout with upstream and downstream companies in the industry chain. Mercedes-Benz established a special joint venture as early as 2015 to make relevant preparations for secondary use of batteries. Domestically, since 2018, China Tower has joined forces with Chongqing Changan, BYD, Guoxuan Hi-Tech and other companies to form a battery recycling alliance to use recycled batteries for base station energy storage backup.
"Promoting the implementation of the extended producer responsibility system actually means allowing car companies to transition from original production management to comprehensive use management. The key is to which link the responsibility is extended." The aforementioned senior practitioner in the car recycling and dismantling industry said that for some cars For enterprises and battery manufacturers, recycling batteries is actually a public good and requires additional labor and technical costs.
He gave an example, what should consumers do when they do not go to a designated repair point to replace the battery? Do they need to continue to track the whereabouts of the battery? Who will bear the management costs? "The reality is that no one asks where the replaced batteries went. No one wants to stretch their hands too far."
"Going to sea" is forced
Liu Gangfeng clearly feels that the industry is getting more and more involved. From 2022 onwards, more and more companies will carry out battery recycling consulting business overseas.
According to the latest data released by the China Association of Automobile Manufacturers in January this year, China's automobile export volume will reach 4.91 million units in 2023, becoming the world's largest automobile exporter. However, non-trade barriers to exports have repeatedly increased. After nearly three years of legislative process, the "EU Batteries and Waste Battery Regulations" (referred to as the "New Battery Law") will officially take effect in August 2023. According to the new regulations, starting from 2027, power batteries exported to Europe must hold a "battery passport" that meets the requirements, recording the battery's manufacturer, material composition, carbon footprint, supply chain and other information.
The "New Battery Law" has been implemented, and the pressure it has brought to China's battery industry is obvious. Sun Fengchun, an academician of the Chinese Academy of Engineering, said at the 2023 World Power Battery Conference that as Europe and the United States drive the green and low-carbon transformation of the battery industry with stricter requirements and strive to dominate global competition rules, Chinese battery companies are facing European carbon barriers, industrial chain localization and carbon peaks Wait for multiple challenges.
"The first challenge faced by Chinese battery products exported to Europe is regulatory issues." Liu Gangfeng reminded that starting from July 1 this year, only batteries that have declared a carbon footprint can be put into the European market. This means that battery export companies must collect and Calculate and disclose carbon emission data in each link from upstream minerals and materials to battery production, recycling and reuse.
However, Chinese battery companies’ accumulation of full life cycle carbon footprint is relatively weak. Zheng Ying, a specially invited researcher from the China Society of Automotive Engineers, said in a previous interview with the media that there are still imperfections in the construction of carbon footprint standards and databases in China and even the world. For most companies, “This is a departure from tradition. The production technology is far away and the work is relatively unfamiliar."
A user-friendly "battery passport" that meets the requirements needs to record about 90 mandatory data attributes as well as voluntary suggestions. In addition to the carbon footprint, information such as battery and manufacturer information, compliance and certifications, supply chain due diligence, battery materials and ingredients, recycling and resource efficiency, and performance and durability are included.
The establishment of a "battery passport" involves a large amount of information disclosure by many companies upstream and downstream of the entire industry chain, which not only involves technical difficulties, but also involves many risks. "Requiring suppliers to provide relevant data and information will inevitably increase costs and further increase the threshold for companies to go overseas. In the future, power battery recycling may face two models, domestic and overseas." Liu Gangfeng said.
Up to now, Chinese battery companies including CATL, Envision Power, China New Aviation, Everview Lithium Energy, Hive Energy, Funeng Technology, Guoxuan Hi-Tech, Xinwangda and other Chinese battery companies have deployed zero-carbon transformation strategies and explored battery carbon footprints , digital battery passports, recycled materials and traceability solutions.
Huatai Securities released a research report stating that the implementation of the "New Battery Law" is expected to force the improvement of the domestic recycling system. In the long run, it will drive the green transformation of the domestic industrial chain and promote the sustainable development of the industry. Stricter recycling requirements may benefit companies that have cooperated with overseas manufacturers to lay out recycling.
In Guben, Brandenburg, in northeastern Germany, Botri Cycle's new lithium battery recycling demonstration plant is under construction. As a gathering place for Germany's new energy industry, Brandenburg also hosts Tesla's first Gigafactory in Europe and BASF's battery materials factory. "Not only are there differences in laws and regulations, but when building a factory in Europe, the requirements for equipment quality standards, organizational production forms, etc. are different from those in China," Liu Gangfeng said.
Lang Xuehong, deputy secretary-general of the China Automobile Dealers Association, once called for the time window for overseas deployment to be 2030, or at most 2035. If they cannot seize this time window, it will be difficult for Chinese car companies to achieve the 1:1 sales target in overseas and domestic markets.
According to the new game rules of "who produces, who recycles", electric vehicle batteries destined for Europe will have to be accounted for in accordance with EU battery carbon footprint rules from February 2025 at the earliest, and must be audited by an EU-recognized certification body. Otherwise it cannot be sold in the European market. There is not much time left for battery companies to prepare.
"China News Weekly" Issue 13, 2024
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