Sunwoda and Dongfeng Motor to Jointly Invest RMB 12 Billion in 30GWh Power Battery Manufacturing Project – EQ Mag Pro
The global power battery market is growing rapidly thanks to the boom in the global EV market. At the same time, the demand gap for power batteries continues to widen. In view of this situation, battery suppliers have partnered with carmakers to develop power battery manufacturing projects. This type of joint venture is gradually emerging as a major trend.
In China, major power battery supplier Sunwoda established a joint venture with Geely Auto in 2021 to set up production capacity for power batteries. Now, Sunwoda has extended this business model to include Dongfeng Motor.
On September 15, Sunwoda announced that its subsidiary Sunwoda Electric Vehicle Battery has signed an investment agreement with Dongfeng Motor and Dongfeng Hongtai Holdings Group. Together, they will build a 30GWh power battery manufacturing base in Yichang, a city in China’s Hubei Province. The total investment in this project is set around RMB 12 billion.
According to Sunwoda’s announcement, the Yichang base will be implemented in two phases. The first phase will set up 20GWh and entail an investment of around RMB 8 billion, and the second phase will complete the remaining 10GWh and entail an investment of around RMB 4 billion.
The project will be carried out by a joint venture, which is now in the process of being established and registered. As for the shareholding structure of this new entity, Sunwoda Electric Vehicle Battery will control the majority stake of 51%. Dongfeng Motor and Dongfeng Hongtai will own 35% and 14% respectively.
Established in 2014, Sunwoda Electric Vehicle Battery is Sunwoda’s holding subsidiary for the production and sales of power batteries. The company offers a complete range of solutions including cells, modules, battery management systems, battery packs, and assembly and testing service. Besides serving customers in the automotive industry, Sunwoda Electric Vehicle Battery has also entered the market for energy storage systems.
Sunwoda Electric Vehicle Battery has already been receiving orders from carmakers like SGMW and Dongfeng Liuzhou Motor for power batteries deployed in various new vehicle models. At the same time, it is forming business relations with many other carmakers such as Geely Motor, Renault-Nissan, etc.
In August this year, Sunwoda Electric Vehicle Battery completed a fundraising round and netted around RMB 8 billion. The lead investors were Broad Vision Funds, Shenzhen Capital Group, Source Code Capital, and the National Green Development Fund. China’s Ministry of Finance and Ministry of Ecology and Environment, together with the government of Shanghai, formed the National Green Development Fund.
Moreover, Sunwoda is reportedly to have been planning for a spin-off of the Sunwoda Electric Vehicle Battery since the end of 2021. Once it becomes a separate and independently operated company, Sunwoda Electric Vehicle Battery will launch an IPO sometime during the 2023-2024 period.
Established in 1969 as the Second Automobile Works under the third Five-Year Plan, Dongfeng Motor has been under the control of the Chinese government. Headquartered in Wuhan, Hubei Province, Dongfeng Motor provides a complete range of commercial vehicles, passenger vehicles, new energy vehicles, and key automotive parts and components.
Like many other carmakers around the world, Dongfeng Motor has been aggressively building up a presence in the EV market over recent years and undergoing an accelerated process of electrifying its vehicle fleet. An electric version of its off-road vehicle series Mengshi has been developed and will be launched in 2023. Moreover, Dongfeng Motor has introduced a new marque or brand called “Voyah.” Under this brand, the carmaker will be offering premium EV models. As for Dongfeng Hongtai, it is Dongfeng Motor’s subsidiary for supplying automotive parts and “low-carbon” technology services.
Under the latest three-party agreement, Sunwoda Electric Vehicle Battery will provide the joint venture with the designs of battery products that meets certain specifications. The joint venture will manufacture these battery products, and Dongfeng Motor and Dongfeng Hongtai will be given top priority in terms of procurement.
Commenting on the agreement, Sunwoda said the joint venture will contribute to the scale-up of its power battery production, the optimization of its business portfolio, and the rounding out of its growth strategy. Sunwoda added that the partnership with Dongfeng Motor will not only improve its and its subsidiary’s competitiveness but also meet its various needs as it expands into the market for new energy solutions.
Before entering the power battery market, Sunwoda mainly supplies batteries for consumer electronics. Only in recent years that the company has started to develop and market power batteries used in EVs. From 2021 to the present, Sunwoda has poured billions of yuan into power battery production facilities across China. The locations of its power battery production sites include Nanchang (RMB 20 billion, 50GWh), Zaozhuang (RMB 20 billion, 30GWh), Zhuhai (RMB 12 billion, 30GWh), and Shifang (RMB 8 billion, 20GWh).
The latest data from the China Industry Technology Innovation Alliance for Electric Vehicle (CAEV) show that Sunwoda’s power battery installations totaled 4.04GWh during the period from this January to August. Its corresponding market share came to 2.5%, giving it fifth place in the ranking of domestic power battery suppliers by installation capacity. CATL was at the top of the ranking with 76.9GWh, following by BYD in second place (35.96GWh), CALB in third place (11.38GWh), and Gotion High-Tech in fourth place (7.98GWh).
Regarding financial performance, Sunwoda’s revenue for the first half of 2022 totaled RMB 21.718 billion, showing a year-on-year growth rate of 38.49%. The company’s power battery business generated RMB 4.2 billion in the half-year period, showing a massive year-on-year growth rate of 631.92%. The gross margin of the power battery business reached 8.76% for the half-year period as well, up 2.37% year on year.
It is also worth mentioning that Sunwoda announced this June that it will be issuing GDRs. Furthermore, it will be applying for listing at the SIX Swiss Exchange and the London Stock Exchange. At the start of this September, the SIX Swiss Exchange approved Sunwoda’s application, thereby allowing the company to issue no more than 172 million of A shares as GDRs.