On July 16, Hefei Guoxuan Battery Materials, a subsidiary of Guoxuan High-Tech (also referred to as Gotion High-Tech), signed an agreement with the managerial committee of Hefei Lujiang Hi-tech Industrial Development Zone to build a high-nickel ternary cathode material plant. With an annual production capacity of 30.0kt, the cathode materials plant is scheduled to start test operations in early 2023.
Roskill’s view
In May 2020, German automaker Volkswagen AG confirmed an investment in Guoxuan, becoming Guoxuan’s biggest shareholder with a 26.47% stake. Almost immediately Guoxuan announced its plan to raise roughly RMB7.3Bn (US$1Bn) by issuing a non-public issuance of stocks. The majority of the fund is scheduled to build a high-nickel ternary cathode material plant capable of producing 30.0ktpy, and a lithium-ion battery plant with an annual production capacity of 16GWh.
Guoxuan is the third largest lithium-ion battery manufacturer in China, relying primarily on LFP technology for its batteries. In 2019, Guoxuan was operating around 2GWhpy of NCM battery effective manufacturing capacity, far below its 10GWhpy of LFP battery capacity. Since 2015, however, Guoxuan has strategically build up capacity in the field of NCM batteries. The company noted that vertical integration of their supply chain has been a core strategy of Guoxuan, with a particular emphasis on self-supply of cathode materials. By 2020, Guxuan has covered multiple stages of the NCM lithium-ion battery supply chain, including NCM precursor materials, cathode materials and batteries. The 30ktpy cathode materials plant based in Hefei, together with the 16GWh battery project, represent the next steps for Guoxuan to build market share in the NCM cathode and battery industries.
Milestones of Guoxuan’s NCM battery development
Source: Roskill, public announcements
In H1 2020, Guoxuan’s net profit fell between 89-91% compared with a year earlier to RMB30.5-39.5M (US$4.4-5.6M). This is mainly caused by the Covid-19 pandemic and the resulting decline in downstream demand. While LFP has been gaining increasing attention in the EV market, Roskill expects nickel-based cathode will continue to be the go-to option for more automakers offering driving over 400-500km or performance vehicles as nickel-based cathodes have higher energy density (gravimetric and volumetric energy density). Guoxuan’s investment in NCM cathode materials goes well with the power battery market trend, which could provide opportunities for lower cost, improved quality control and enhanced market competitiveness of their battery products. Despite a significant decline in revenue in H1 2020, Guoxuan’s 30kt NCM cathode materials project is regarded as a positive sign for the market.
Kevin Shang 