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MENSHINE Technology: Construct a production base of lithium ion battery

The construction work on Fujian Dynavolt New Energy, a subsidiary of Dynavolt Power Technology, has recently commenced in Zhaoan, Fujian. With a phase-one investment of 500 million yuan, the project will, upon completion, have annual production capacity of 400 million lithium batteries.

According to a person in charge of sales at Dynavolt, automakers keep on launching new-energy vehicles in response to relevant policies issued consecutively by the government that have even encouraged the markets of tier-3 and tier-4 cities. This means a further expanded market for core components including lithium batteries.

Industry observers estimate that the sales of new-energy vehicles in China will exceed 200,000 in 2015 while 1 million will be sold in 2020. In the coming decade, the power battery industry is expected to have a market worth 160 billion yuan.

In this backdrop, traditional lead-acid battery producers have changed course one after another, and begun to foray into the field of lithium power batteries. Since early 2015, listed lead-acid enterprises such as Dynavolt, Camel Group, and Vision Group have ventured into the lithium battery sector.

Notably, traditional lead-acid enterprises transforming into lithium battery producers have inherent advantages over other types of lithium batteries in China. On the one hand, these traditional listed companies are better positioned in cash flows, which means that they are usually more solid in financial terms in the lithium battery business; on the other hand, these enterprises have obvious advantages in brand equities, customer recognition, technological R&D level, sales channel development, and technological accumulation, which will play an important role in the development of their lithium battery business.

In December 2014, Dynavolt increased its shareholding by 15 million yuan (with its own fund) in Pylon Technologies, expanding its holding to 5% of the companys total equity. In June 2015, to perfect its new-energy vehicle industry chain, it increased its investment in Jiangsu GFY to acquire relevant power pack technology so that it could expand from the single battery business to the other parts of the industry chain such as batteries and BMSs (battery management systems) and provide total power systems (power battery packages) aiming to interconnecting the upstream and downstream of the whole new-energy vehicle industry chain.

After Dynavolt, Camel Group announced in July 14 that it would raise no more than 2 billion yuan to consolidate its position on the new-energy vehicle industry chain. Of the fund, it would earmark 1 billion yuan for its power lithium battery project. To expedite the application of lithium batteries in the downstream of the industry chain, it invested 200 million yuan in establishing Camel Group Financing and Leasing Co., Ltd., which is involved in electric vehicle leasing operating business (buses, logistics vehicles, and commuting vehicles).

In fact, both new-energy vehicles and energy storage are at the initial entry phase of the market, leaving plenty of room for domestic enterprises to develop. Some powerful enterprises are making preparations in terms of resources at the critical parts on the supply chain and will finally develop their competitiveness in production scale, product performance, price, etc.

Nonetheless, the deployment made by these listed companies on the industry chain poses stringent requirements on them in capital, business management, and so on. Li Zhenqiang, an analyst with GGI, pointed out that if they did not do a good job in acquisitions & mergers and market deployment in terms of target enterprise selection, setting of production scale, internal management, etc., they would likely be exposed to greater market risks during their transformation.