Haibos Creative Leads Energy Storage Pricing

In the rapidly evolving landscape of the global energy industry, few names have emerged as powerhouses quite like Contemporary Amperex Technology Co., Limited (CATL), a Chinese battery manufacturer that has not only established itself as a leader but is now making bold predictions about the future of energy storageThe company's chairman, Zeng Yuqun, addressed delegates at the 2023 World Power Battery Conference, asserting that the energy storage market is set to surpass 1 terawatt-hour (TWh) by the year 2030. This statement comes in conjunction with predictions that the energy storage sector will become the most lucrative sector within the renewable energy industry by 2024.

The distinct advantage of the energy storage market lies in its comparatively stable demand for services, especially when measured against other sectors like photovoltaics, lithium batteries, and electric gridsNotably, energy storage is progressing at an unprecedented paceGiven this trajectory, it is paramount for companies to invest early and secure a strong foothold in a field that is expected to yield considerable dividends in the near future.

CATL was quick to realize this potentialBy 2021, the company had already begun to ramp up its energy storage operations significantly, generating revenue of approximately 13.62 billion yuan from energy storage systems alone, positioning them as the undisputed leader in global shipmentsIn the grand scheme of the energy storage marketplace, CATL has solidified its position akin to that of a shepherd, guiding the herd forward.

There’s a notably curious aspect to CATL's situation—despite its leading position, there are times when it must defer to clients, such as Haibo Sichen, an energy system integratorThis agreement has opened up a window into a dynamic that contrasts sharply with traditional supplier-buyer relationshipsOne might ask: are there any companies bold enough to postpone payments to CATL? The answer, as illustrated through Haibo Sichen, is a resounding 'yes.'

Haibo Sichen occupies a unique space in the supply chain, specializing in electrochemical energy storage systems

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This company has not only been CATL's largest supplier but has also assumed the role of its largest debtor over the past three and a half yearsNotably, transactions between the two reveal that a staggering 40% to 60% of purchases made by Haibo from CATL were carried out on credit.

It was only in the first half of 2024 that Haibo began to settle its outstanding debts to CATL, likely due to a substantial reduction in their transaction volumeThe audacious spirit displayed by Haibo raises a vital question: what drives a company to borrow from an industry titan such as CATL?

One reason lies in the competitive landscape of energy storageJust like CATL, Haibo Sichen has capitalized on first-mover advantages, a significant factor considering the current industry financing landscape that has reached approximately 1.88 trillion yuan as of 2024. It is important to note that even though many firms have succeeded in attracting investment, a paltry few seem to have viable initial public offering (IPO) plans.

Take the energy storage sphere in China as an exampleBy mid-2024, the number of registered energy storage companies had ballooned to over 191,000. In the midst of this saturation, Haibo Sichen distinguished itself as the first integrated energy storage company to go publicAs per the latest updates, the company is set to initiate its subscription procedures, which would allow it to emerge as the 'first stock in energy storage integration' following a successful listing.

In addition to strategic first-mover advantages, Haibo Sichen enjoys significant competitive leverage in the domestic independent storage market, currently ranking first in market shareRemarkably, even one of its subsidiaries stands third in the rankings—highlighting just how well-positioned Haibo is in a flourishing industry.

Given that Haibo has demonstrated impressive capabilities in the sector, one cannot help but question why it opted to extend debts to its suppliers like CATL, risking disruption within its own supply chain

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The answer is that industry price wars necessitate aggressive market strategies.

The fundamental driver for the future growth of the energy storage sector hinges on the concept of achieving parity between photovoltaic power and traditional fossil fuel power generationEnergy storage manufacturers are striving to make their products competitively priced, and the quickest path to market dominance is often through reducing prices.

To illustrate, in 2023, Haibo Sichen offered energy storage systems priced at 1.11 yuan per watt-hourComparatively, other competitors like Sungrow and Pylontech came in much higher at 1.70 and 1.73 yuan per watt-hour respectivelyIt’s clear that Haibo's aggressive pricing strategy has taken a toll on their profit margins, evidenced by their declining gross margin between 2021 and the first half of 2024.

Despite these declining margins, Haibo has still managed to secure contracts with significant clientele including the China National Nuclear Corporation, State Power Investment Corporation, China Resources Group, and China Huaneng Group, amongst othersThe total order volume from these clients exceeds 5.36 billion yuan, further demonstrating the efficacy of a low-cost strategy in securing a competitive foothold.

Moreover, Haibo’s revenue figures underscore the financial impact of this approach; in 2023, it achieved a staggering income of 6.98 billion yuan, amounting to a remarkable 1787% increase since 2020, while net profits soared to an astonishing 145-fold increase within three yearsThus, it's clear that lower pricing strategies are proving fruitful.

On top of that, Haibo is embarking on an international expansion, which is essential for any energy storage manufacturer aiming to stay relevantGlobal market demand for energy storage solutions shows a robust upward trend, with significant growth seen in the U.S., Europe, Latin America, and Australia, where large-scale projects are catalyzing competition and investment.

Additionally, overseas markets continue to offer substantial premiums, with average prices running about 0.2 to 0.6 yuan per watt-hour higher than their domestic counterparts

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