In a surprising turn of events coinciding with the sweet "520" holiday in China, news broke of a successful partnership between Xiaomi Automobile and Contemporary Amperex Technology Co., Limited (CATL). This partnership represents a bold move in the rapidly evolving electric vehicle (EV) market.

Recent reports indicate that a new entity, Beijing Times Power Battery Co., Ltd., has been officially establishedThis company is jointly owned by main players in the industry, including Xiaomi Automobile Technology Co., CATL, Beijing Blue Ocean Core Energy Technology Co., Ltd., and Beijing Jingneng Technology Co., LtdThe new enterprise boasts a registered capital of 1 billion yuan and will focus predominantly on battery technology and production.

In a market characterized by battery oversupply, these leading enterprises have chosen to collaborate rather than compete, demonstrating a pragmatic approach to current market dynamics

Advertisements

This strategy sheds light on various alternatives for nurturing the growth of the new energy vehicle sector, opening up avenues for innovation and improvement.

01 Market Optimism Surrounds New Partnership

The inception of Beijing Times Power Battery Cocan be traced back to early spring this yearOn March 9, Baic Blue Valley New Energy Technology Co., Ltdannounced its plan to align with Baic Industrial Investment and Boya Energy to create a platform dubbed Baic Ocean Core.

This platform company aims to collaborate with CATL, Jingneng Technology, and Xiaomi to establish a joint venture

Advertisements

Following the establishment of the joint venture, plans include investing in a smart manufacturing factory for battery cells in Beijing.

According to the announcement, the registered capital of the joint venture is set at 1 billion yuan, with CATL contributing 510 million yuan (51% stake), followed by Baic Ocean Core with 390 million yuan (39% stake). Both Jingneng Technology and Xiaomi are contributing 50 million yuan each, representing a 5% stake.

When seeking comments from representatives of Xiaomi and CATL regarding the collaboration, there was no immediate response prior to publication.

The partnership between these major corporations is expected to focus on the research and development of battery cells, a crucial component in electric vehicle battery technology

Advertisements

Typically, the assembly of energy batteries follows a clear structure: cell, module, and battery packThis hierarchical construction begins with the basic cell unit, integrating multiple cells to form a module, which is then installed into the casing composed of beams, resulting in a complete battery pack.

Meanwhile, both Xiaomi and CATL have achieved significant milestones in battery pack technology, including the assembly of an advanced 800V battery packLiu De, founder of Xiaomi, proudly noted that this battery has undergone rigorous safety testing, exceeding 1,050 distinct evaluations and surpassing national standards by a factor of 20.

Furthermore, the collaborative efforts extend beyond R&D; they are also reflected in product supply

• Rapid Expansion of Greece's PV Industry
• Waller Hints at Rate Cut: Gold Market in Focus
• Did Tesla’s Price Cuts Hurt Revenue and Boost BYD?
• AI's Rise Fuels Expanding Market Opportunities
• U.S. Mortgage Rates Surpass 7%

Xiaomi's SU7 Pro model features CATL's innovative battery, capable of covering a distance of 830 kilometers with a capacity of 94.3kWhIt allows for a charging boost of 350 kilometers within just 15 minutesOn the other hand, the SU7 Max model boasts CATL's flagship Kirin battery, reaching a capacity of up to 101kWh, supporting 800V super fast charging technology, enabling an impressive recharge of 510 kilometers in just 15 minutes.

Cui Dongshu, Secretary General of the Passenger Car Association, remarked in an interview that collaboration between leading battery manufacturers and automotive companies has become an effective strategy for ensuring market stability and reducing costsThis collaborative framework could prove advantageous for Xiaomi in an increasingly competitive new energy vehicle landscape.

The establishment of Beijing Times Power Battery signifies a new chapter in the deepening collaboration between Xiaomi and CATL within the power battery sector, a partnership that has earned recognition in the marketplace

In fact, stock prices for both Xiaomi (01810.HK) and CATL (300750.SZ) have experienced notable increases as a result.

According to data from Wind, as of May 22, Xiaomi's stock closed at HKD 19.44, marking a 0.73% rise, with a total market capitalization of HKD 485.1 billionConcurrently, CATL's stock reached RMB 204.89, representing a 1.65% increase, with a total market cap of RMB 901.3 billion.

Further, on May 21, JP Morgan announced an upward revision of Xiaomi's target price by 14%, raising it from HKD 21 to HKD 24. They expressed optimism that Xiaomi's core business gross margin would remain resilient, anticipating accelerated growth in the electric vehicle sector, thereby revising their earnings per share forecast for 2023 and 2024 upwards by approximately 14% and 2%, respectively.

02 Navigating Overcapacity Challenges

Amidst the noise of the new energy vehicle market, an intense competition surrounding battery production capacity is becoming evident

As Cui Dongshu noted, the current new energy vehicle market is marked by increasing competition, with battery capacity approaching saturation.

Data from SMM indicates that based on the actual battery capacity established by April, China’s lithium battery annual capacity is projected to reach approximately 1,976 GWh by 2024. Given that the output in April was 94.88 GWh, the estimated annual output for 2024 is about 1,138.56 GWh, resulting in an annual capacity utilization rate of merely 57.62%. This stark reality underscores the issue of overcapacity in the battery market.

Furthermore, CATL's performance metrics further validate the crowded market scenario

The company's battery system capacity utilization fell from 83.4% in 2022 to 60.5% in the first half of 2023, with only a slight recovery to 70% by the third quarter, indicating persistent challenges in returning to higher utilization rates.

In response to this industrial landscape, the Ministry of Industry and Information Technology issued a draft on May 8, requesting opinions on the regulatory conditions and announcement management for the lithium battery industryThe aim is to encourage companies to curtail the mere expansion of production capacity, promoting technological innovation, enhancing product quality, and reducing production costs.

Against this backdrop, the creation of Beijing Times Power Battery holds particular significance

Why would companies choose to swim against the current of overcapacity?

In recent years, many automotive companies have ventured into the battery sector to gain leverage over battery costs, which form a significant portion of overall vehicle manufacturing expensesThe chairman of GAC Group, Zeng Qinghong, famously expressed frustration, saying, "Aren't I just working for CATL?" This prompted GAC to establish a battery technology company in October 2022. Meanwhile, NIO made a significant investment of 2 billion last October to establish its own battery company, further solidifying its commitment to dominating the battery arena.

As a new player, Xiaomi understands the critical importance of batteries, especially after observing the path carved by predecessors

Lei Jun, Xiaomi's founder, has emphasized that batteries are foundational to electric vehicles, accounting for 40-50% of manufacturing costs and vital for vehicle range, safety, and maneuverability.

Consequently, Xiaomi has prioritized developing its own battery technology within its core technical advancementsNotably, the battery installed in the SU7 Max leverages Xiaomi's proprietary Cell and Battery Integration (CTB) technology, which not only optimizes space within the vehicle but also ensures safety.

On May 15, Lei Jun announced on social media that Xiaomi has successfully delivered 10,000 vehicles and is pushing vigorously to increase production, aiming to deliver at least 100,000 new cars this year

Achieving this ambitious target hinges on the stability of the supply chain, making the establishment of a joint battery company a robust strategy for sustainable battery supply.

Lin Shi, Secretary General of the China-Europe Association for Intelligent Connected Vehicles, commented that, "Currently, the examples of joint ventures between vehicle manufacturers and battery producers aboundThe core objective of tightly binding automotive companies with battery manufacturers is to ensure stable supply chains and foster better compatibility."

For CATL, establishing a new factory in Beijing marks a significant step in enhancing its production layout while gaining proximity to northern markets

This strategy is crucial for binding automotive manufacturers and securing market share in a fiercely competitive landscape"The competition in the battery sector remains quite intense, and the partnership with Xiaomi is pivotal for CATL's ongoing development," stated Cui Dongshu.

In fact, CATL's clientele in Beijing also includes established partners such as BAICCATL supplies batteries for a variety of vehicle manufacturers and has maintained a collaborative relationship with the likes of Li Auto since 2010, aligning with them across battery cells, modules, and system components.

In its pursuit to forge strong ties with automotive manufacturers, CATL has meticulously chosen its new factory's location