Timing your Entry into China’s EV Market
In the shift from conventional to electric cars, battery makers play a key role in pushing the energy efficiency of vehicles up and their cost down. Heitkamp & Thumann (H&T) is part of this technological drive. Already a leading producer of battery components for the consumer electronics market, the German-owned company is looking to become a major supplier for lithium-ion batteries used in hybrid and electric cars.
To achieve this, timing their entry into different markets is key. In 2016, H&T opened a large plant in Nevada to supply a leading electric carmaker. In China and Singapore – despite having a strong presence and two production facilities – the company is not yet supplying the EV market.
Reinhard Scholle, Managing Director for Technology and Manufacturing for H&T Group in Asia Pacific, spoke to us about the importance of keeping an eye on China’s EV industry developments to identify the right moment and most suitable partners to step into the market.
How does the EV market in China differ from that of the USA and Europe?
China’s EV market is the largest in the world, and it hasn’t taken off yet. There is vast room for development. Until now, it has been driven by government subsidies, which have created a highly fragmented EV landscape with several domestic OEMs and battery suppliers operating on a regional level and small scale. Chinese manufacturers of electric buses and cars use varying battery formats, sourced from several suppliers in small volumes. This makes it difficult for global component suppliers like us to produce for the Chinese market in sufficiently large volumes.
What opportunities will the Chinese EV market hold for global component manufacturers in the middle to long term?
Once there is further consolidation and chemical standardisation in the Chinese EV industry, it will become more attractive for large international suppliers. In the near future, it will be key for us to observe how the industry structure develops and to identify the right timing and the right partners. Meanwhile, our China business is focusing on alkaline components for consumer electronic batteries.
In the middle term, we do expect China to become an important market for our lithium-ion battery components. This is not only due to its sheer size, but also due to favourable conditions. The government is pushing strongly for e-car adoption and usage through subsidies, tax incentives, and institutional buying patterns. The question facing the market is whether demand will stay strong now that subsidies are being scaled down.
H&T manufactures a wide range of battery parts: from cylindrical and prismatic cans, to sub-assemblies and components for emission-reducing hybrid car batteries.
How challenging is the competitive landscape for global EV suppliers in China?
In terms of technology and know-how, Chinese competitors lag behind. There is much to catch up on in chemical materials and process technologies for rechargeable batteries. For example, lead acid batteries are still being used. These are an older, more cost effective, but less power dense storage alternative to lithium-ion batteries.
Even so, the market is dominated by Chinese OEMs that are either producing their own battery technologies, or are tied to domestic suppliers. Government regulations are creating hurdles for global players trying to make their way in. The best example is that some global players failed to obtain government certification for their EV batteries last year.
What is H&T’s strategy to take on a leading role in the production of key technologies for lithium-ion batteries?
Continuous innovation and heavy investment in the global market for rechargeable batteries are elements of our core strategy. Both investing in our new plant in Nevada, and working with a leading EV manufacturer for the US market, are major milestones towards building up our production capacity and specialised technology. We are confident that once the Chinese EV market consolidates and opens up to larger, global OEMs and battery producers, we will be ready with the technology and know-how to ensure a successful entry.
Contact our China Consulting team at contact@fiducia-china.com for market intelligence support when entering or expanding into China’s e-mobility market.